In California, Development Bills Are The 'New Sexy.' Here's Why Housing Doesn't Get Built

To many legislators, addressing California's housing needs has become the latest hot item.

In Sacramento, there are hundreds of housing bills from various politicians examining ways the state could build more housing, especially affordable housing.

But some of them lack any clear and reasonable direction, housing experts said. 

"The challenge for us is that there are so many bills that are being supported, it's what I call the 'new sexy' for our legislators," Innovative Housing Opportunities CEO Rochelle Mills said. "Everyone is throwing bills together and some of them are contradicting each other."

While Mills applauds the efforts of state legislators and local politicians, she and others would like to see more focus on meeting the housing needs for everyone and not just the homeless or low-income. 

"We [have] a housing crisis that includes the homeless, the missing middle [class] and special needs and other homeowners," Mills said. "Let's try to figure out how to get some or all of this going and get as much happening as fast as possible."

Mills was one of several speakers discussing Orange County's construction and development climate Thursday at a Bisnow event at the Irvine Marriott hotel in Irvine. More than 250 people attended the event.

Panelists including Wincome Group's Asset Manager and CEO Paul Sanford, Trammell Crow Residential President of Construction Tony Ditteaux and Architects Orange partner RC Alley discussed Orange County's and surrounding regions new hotels developments under construction, affordable housing and modular construction.

When it comes to building more affordable housing, the power lies in the hands of local officials, experts said. 

"The local city councils have the green and red buttons to build more housing," Building Industry Association of Southern California Orange County chapter CEO Steven LaMotte said. "They are probably the most important body to approve more housing." 

However, there is a big "but," LaMotte said. 

For example, last month in Anaheim, hundreds of people attended a city council meeting to protest the development of a proposed 58-unit condominium development to replace a commercial lot in Anaheim Hills. Despite the outrage, the majority of the city council tentatively approved the project and changed it to 54 units, including low-income housing. But during the second reading, the development was ultimately quashed.

"The council voted 3-3 on a second read of a zoning change for the project on Tuesday, Feb. 11," Anaheim spokesman Mike Lyster wrote in an email to Bisnow. "The 3-3 vote effectively means the Planning Commission’s Oct. 28, 2019, rejection of a zoning change stands, which means the project cannot go forward."

LaMotte said what happened in Anaheim is a great example of how public outcry can squash a much-needed residential development.

"You don't realize those crowds are swaying the planning commissioners and city councils," LaMotte said.

Much like several large cities across the state, Orange County and Los Angeles are facing significant housing issues. In San Francisco, construction of multifamily buildings is down 62%, according to CoStar. Across the state, production of housing units is down 7%, LaMotte said. In Orange County, land is lacking, construction costs are skyrocketing, and the average resident can't afford the median $730K price of a home, Architects Orange partner RC Alley said.

Gov. Gavin Newsom says he wants to see the production of 3.5 million units across the state by 2025. But that is unlikely, LaMotte said. If that were to happen, California would need to build at least 500,000 residential units per year. The state has never produced that many units in its history, LaMotte said.

Even if the governor lowered his goal to building 1.5 million housing units by 2025 or about 300,000 units a year, the state has only ever constructed that many units twice, once in the 1960s and again in the 1980s, LaMotte said.

"It's just very, very difficult," LaMotte said. "Development fees are high, political landscape, traffic is bad, parking is bad, we're aging in place, we're losing millennials, and there is a labor shortage ... There's a long list all contributing to what we are talking about today."

Mills, the CEO of Innovative Housing, said there needs to be a multipronged approach from state and local leaders to tackle the state's housing issues.

At the moment, there is no viable solution in sight. One proposed  solution, SB-50, an initiative that would would have allowed the development of multi-unit residential buildings on single-family lots near transit lines, did not garner enough support from the state Senate last month. 

Mills said when it comes to building more housing, there are three key issues that politicians and decision-makers need to address to ramp up developments: streamlining the entitlement process; reforming CEQA or the California Environmental Quality Act, which educates local politicians, city officials and the public about the environmental impacts of a proposed development; and providing more tax credits. 

"There is a lot of great opportunities to increase the amount that is put aside from tax credits," Mills said.

Mills also emphasized the need to build mixed-income projects.

At the moment, many cities and state officials have set aside money to only build housing for the homeless population. But Mills believes the best thing to do is to place the homeless, low-income and others in a mixed-income environment with support.

"We are chasing these new sexys but we're not having any comprehensive solution to the housing crisis," Mills said. "There are a lot of benefits growing up in a mixed-income environment ... that way people can rise to the highest."

"If the residents are unemployed or underemployed, it could be a hopeless situation. Everybody's habits are the same. No one is learning better habits."