California has a housing problem. Homes in the state are, on average, more expensive than in almost any other state in the country. California also has the nation’s largest homeless population, a problem inexorably linked to the high cost of living. The housing crisis comes with a serious economic cost, as hundreds of thousands of residents leave the state every year primarily in search of cheaper places to live. So, how did things get to be so bad, and what is being done about it?
The crisis is simple supply and demand. Millions have moved to California in recent decades, but the state’s housing stock has increased only marginally in that time, with new construction hamstrung by a myriad of regulatory and economic factors. In the past several decades, cities in California, like in many places around the country, have created a regulatory environment that is downright hostile to the construction of new housing. Many municipal rules call for excessive parking minimums and stringent construction requirements, and most land is zoned for low-density, single-family housing, which is the least affordable and least sustainable form of development.
A wide body of research shows that weakening these barriers and simply allowing more housing to be built would go a long way in easing upward pressures on home prices. But in most cases, the people in charge of these regulations are the same onees that benefit most from suffocatingly high housing costs. Wealthy landowners, who reap the benefits of high land values and high rents, are significantly overrepresented in local government and often the best organized when it comes time to protest new development. These affluent community members have spent decades weaponizing local review processes, historical preservation laws, and even environmental regulations to stop the construction of new housing in cities across California. Just last month, a state court denied an appeal by UC Berkeley to build new student housing, ruling in favor of a group of wealthy neighbors that claimed the potential “social noise” would be a violation of the California Environmental Quality Act. In addition to blocking much-needed relief for students in the high-cost Bay Area, this ruling opens the door for future abuses, further widening the scope of an already-expansive law that has become a favorite tool for groups looking to obstruct development in the state.
Luckily, action is finally being taken to right these wrongs. With cities themselves largely committed to the status quo, the state government has taken a lead on housing policy in recent years. In 2021, the California State Legislature passed a series of bills that, among other things, curtailed local power to downzone already-approved projects; streamlined the process of upzoning and subdividing to build multifamily housing; reduced residential parking requirements near public transit; and limited new zoning restrictions on height and density. In addition to signing this legislation, Governor Gavin Newsom has instructed the state’s executive branch to crack down on the enforcement of existing housing laws, launching a new Housing Accountability Unit within the state housing authority.
These are all significant steps in the right direction and will no doubt ease long-term price pressures on housing in the state. But as these changes are implemented, some of California’s most expensive communities are in need of immediate relief from the climbing costs. That is why much attention in recent months has been focused on a tool called the “builder’s remedy,” an obscure provision of the 1982 Housing Accountability Act that the state could use to get cities to do their part in constructing new housing. California’s Housing Element Law requires local governments to adopt plans supportive of the state’s overall housing goal, which Governor Newsom has ambitiously set at 2.5 million new units by 2030. The builder’s remedy stipulates that if cities fail to get their housing plans approved by the state by the applicable deadline, local zoning powers are essentially suspended, offering developers an expedited approval process for new residential projects at any height or density—as long as at least 20 percent of the units are affordable (meaning they are restricted for individuals at or below 80 percent of the Area Median Income). The deadline for approval has now come and gone, and as of this article’s publication, 46 percent of localities remain out of compliance.
The builder’s remedy, though untested, looks promising. The Newsom Administration is the first to take advantage of its penalties, and this effort has already been fruitful. In Santa Monica, one of the first localities to lose zoning power, 12 projects comprising 3,968 total new units (829 of which were affordable) were submitted under the builder’s remedy in just the first week. These projects alone are expected to meet close to half of the city’s new housing needs for the next decade, all without a dollar spent in public subsidy. Housing policy, California is learning, may be an area where sticks are more effective than carrots.Housing affordability and supply, of course, are not problems unique to California. Fortunately, proposals for modified forms of builder’s remedy are also being advanced in other places, including New York, another state with notoriously high home prices. State and local governments across the country should follow California’s lead, pairing long-term solutions like the deregulation of the housing market with short-term fixes like the builder’s remedy to ease the nationwide housing crisis. Reforms like these will help alleviate cost-of-living pressures and encourage growth in a sustainable and responsible manner, protecting against the mass displacement that plagues high-cost states today, and unlocking a bright future of abundant, affordable housing and expanded opportunity for all.
