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California's Housing Agencies
The State Must Overhaul Its Approach to Affordable Housing Development to Help Relieve Millions of Californians' Burdensome Housing Costs

Report Number: 2020-108

Figure 1

Figure 1 is a depiction of four state agencies' roles in providing financial assistance and ensuring that local jurisdictions support sufficient affordable housing development. The left side of the figure describes state financial resources for affordable housing development: HCD, CalHFA, the Tax Committee, and the Debt Limit Committee provide financial resources such as loans, grants, tax credits, and tax-exempt bonds. The right side of the figure describes HCD's oversight role: in particular, it reviews local jurisdictions' plans for and progress in developing affordable housing, and it can refer jurisdictions to the Attorney General if they violate state law. These two components—state financing and state oversight—culminate in affordable housing development, shown at the bottom of the figure below a cityscape. Specifically, local jurisdictions establish sites and rules for development, and developers then use various financial resources to build and rehabilitate affordable housing.

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Figure 2

Figure 2 is an infographic that describes some of the negative impacts of the State's shortage of affordable homes. The infographic highlights three issues in particular. First, it notes that 1.6 million renter households—98 percent of which are lower-income households—are severely cost-burdened, meaning they spend more than half of their income on housing costs. Second, the infographic highlights that California ranks worst in the nation in renter overcrowding rate, with 13 percent of renter households having more than one person per room. And finally, the figure mentions that California is home to 27 percent of the nation's homeless population, despite containing only 12 percent of the nation's overall population.

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Figure 3

Figure 3 is an infographic that quantifies and describes the housing costs that burden millions of California renters. First, the figure establishes that three million renter households face a cost burden, meaning their housing costs exceed 30 percent of their monthly income; of those three million households, 1.6 million have housing costs that exceed 50 percent of their monthly income—a severe cost burden. As an example, the figure notes that a four-person household earning $4,200 per month would be considered low-income based on California's median family income. For this household, monthly housing costs—rent and utilities—of at least $1,260 would constitute a cost burden, and monthly housing costs of at least $2,100 would constitute a severe cost burden.

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Figure 4

Figure 4 depicts examples of the housing development standards and processes that local jurisdictions can regulate. The figure is centered on a cityscape with skyscrapers in the background, various types of homes in the middle, and grass and cars in the foreground. Around this picture, there are several examples of standards and processes listed that correspond to aspects of the picture. Specifically, examples of aspects that local jurisdictions control include density, or the number of housing units allowed on each portion of land; building height; unit sizes; locations where developers can build; the size of each portion of land on which developers can build; how close buildings can be to streets and adjoining areas; the number and type of parking spaces developers must include; design of buildings and their surroundings; building materials, such as roofing; and broader requirements such as approvals for developers to build, fees that developers must pay, and affordability requirements for the units built.

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Figure 5

Figure 5 is a flowchart that shows the three key stages of HCD's process for overseeing local jurisdictions' efforts to accommodate affordable housing. The left side of the figure describes the three stages: first, HCD assigns housing needs (number of housing units needed) to local jurisdictions, often via regional governments; second, HCD reviews local jurisdictions' plans to accommodate housing needs (such as by identifying sites for the needed units); and third, HCD monitors local jurisdictions' housing progress (such as the number of sites actually developed).

The right side of the figure shows an example of each stage, using the city of Menifee in Riverside County. First, HCD determined a need of roughly 166,000 affordable units for the Southern California Association of Governments—a regional government—to cover the time period of 2014 through 2021; of this need, the regional government allocated about 2,500 affordable units to the city of Menifee. Second, HCD approved Menifee's housing plan in 2014, which included potential sites for development of those 2,500 affordable units. Third, Menifee submitted annual reports to HCD covering 2014 through 2018 that indicated it had issued permits for a total of 24 affordable units over that timespan, according to HCD's data as of June 2019.

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Figure 6

Figure 6 is a checklist that shows some key components of the State's housing plan, along with several necessary things it does not include. Specifically, the figure notes that the State's housing plan establishes the housing units needed annually; includes an evaluation of housing conditions throughout the State; identifies major challenges to housing affordability; and establishes strategies for addressing housing challenges. These points each receive green check marks in the graphic. However, the State's housing plan does not identify financial resources available for all housing agencies; identify how state resources will contribute to meeting the statewide need; identify areas and populations where state financial resources will have the most impact; identify outcomes to measure how well the State has maximized the impact of its funds; or identify how the State will leverage other resources to meet the remaining gap in need. These points each receive a red "X" in the figure.

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Figure 7

Figure 7 lists five key types of barriers that local jurisdictions can create that may limit affordable housing development. The first type of barrier (in alphabetical order) is "approval process standards"—local jurisdictions may have approval processes that delay or prevent approval of affordable housing projects. The second type of barrier is "density standards"—local jurisdictions may limit the number of affordable housing units that developers can build per acre, including through restrictions on building height and other standards that limit density. The third type of barrier is "fees"—local jurisdictions may impose significant fees that add costs to affordable housing projects. The fourth type of barrier is "parking standards"—local jurisdictions may require developers to provide more parking spaces and to build parking garages, all of which can drive up costs and limit the land available for housing. The fifth type of barrier is "zoning standards"—local jurisdictions may limit the amount and quality of land designated for affordable housing.

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Figure 8

Figure 8 is a map of the San Diego area that presents affordable housing information for two neighboring cities: Encinitas (along the coast) and San Marcos (slightly inland). A text box notes that Encinitas has had 29 affordable housing units funded by the Tax Committee and has a population of 62,000, meaning the city has had 0.5 affordable units funded per 1,000 population. The text box shows that Encinitas also has a severe cost-burden rate of 60 percent for lower-income renter households compared to the national average of 33 percent. The text box for San Marcos notes that the city has had 2,287 affordable units funded by the Tax Committee and has a population of 95,000, equivalent to 24.0 affordable units funded per 1,000 population. The text box notes that San Marcos's severe cost-burden rate for lower-income renter households is 35 percent.

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Figure 9

Figure 9 is an infographic that depicts weaknesses in the State's process for ensuring that local jurisdictions follow through with their housing plans. The infographic establishes that a local jurisdiction may fail to facilitate development of affordable housing; for example, a jurisdiction could unlawfully delay or deny an affordable housing project that meets state and local requirements; could take actions inconsistent with its housing plan, such as adding new barriers to affordable housing; or could fail to take actions outlined in its housing plan, such as failing to remove existing barriers to affordable housing. In these instances, the infographic highlights two key weaknesses, each with a red "X": HCD does not proactively identify or investigate all such cases; and HCD lacks authority to ensure that local jurisdictions allow developers to build affordable housing in a timely manner.

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Figure 10

Figure 10 is a flowchart that compares the current approval process with our recommended approval process for when a developer seeks to build affordable housing on a site the local jurisdiction has identified for that purpose. Currently, affordable housing projects may or may not receive streamlined reviews, depending on the site. If they do receive streamlined reviews, local jurisdictions generally must approve projects within two to six months if they meet standards; if projects do not receive streamlined reviews, project approval can take more than a year. In either case, if jurisdictions delay or deny projects unlawfully, the only option to ensure project approval is litigation that can take more than a year.

With our recommendations, all reviews of affordable projects on sites local jurisdictions have identified for that purpose would be streamlined, meaning jurisdictions would generally have to approve projects within two to sixth months if they met standards. Further, delayed or denied projects could be eligible for a subsequent appeals process, such as a state appeals board. Specifically, if developers of certain affordable housing projects that jurisdictions had unreasonably delayed or denied wanted a timelier alternative to litigation, they could appeal to a state board for project approval.

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