Marin Forum/Teliha Draheim

There is a shortage of affordable housing in California, but there is no shortage of expensive homes. In their flawed assessment of how to solve housing needs, the State manufactured a crisis. Cities were blamed for not producing enough housing. Yet, California towns and cities don’t build housing, developers do.

Developers complained to the State that local governments interfered with construction by having too much control over what was built. The State legislature responded by passing new laws to speed up the approval process for multi-family developments, forcing local authorities to re-zone for greater density, ignoring existing local zoning, and often without environmental review and public input.

The State also shifted the responsibility of assuming private developers’ risk to local taxpayers. In place of impact fees, or the fees paid by the developer to municipalities to offset the cost of new infrastructure and environmental damage, California proposed that the costs of new infrastructure be absorbed by “the full pool of homeowners”, and that “fees could be distributed among a broad base of users” with requirements such as “utility billing assessments, vehicle license fees, parking permits, road tolls or sales taxes.” In addition to encouraging high-density and mixed-use growth, California is attempting to reduce automobile use by minimizing parking requirements or eliminating them altogether. Projects which qualify as “affordable” are streamlined. That’s the code for making the approval of these projects “ministerial,” which eliminates environmental review and other discretionary public processes.

How does the State justify these actions? By claiming there will be a huge future population growth in California, a claim which has been questioned by many authorities and disproven by the State Department of Finance, which predicts population growth will be largely flat through 2060.  

RHNA, or Regional Housing Needs Assessment, determines the number of housing units assigned to an area by the State. The allocation numbers for each municipality are determined by the California Department of Housing and Community Development (HCD). The total number represents California’s predicted housing needs over the next eight years. The HCD claims California will need 2.5 million housing units by 2031. The California State Auditor found that this number was determined by imprecise methodologies and not reliable or reproducible, yet the audit result was ignored by HCD and the State refused to adjust its RHNA calculations.

RHNA’s 6th cycle, covering 2023-2031, is different from all previous cycles. The numbers are much greater. Marin County’s RHNA went from 2,298 (5th Cycle) to 14,405 (6th Cycle). Fairfax went from 61 units to 490. Though these growth numbers may seem shocking, they’re only the tip of the iceberg on development plans for California.

Every municipality in Marin County is required to create a Housing Element, a plan documenting where all the new housing units can be built. Multiple outside consultants were hired to develop a plan, necessitated by the increased numbers and new reporting required. By fall of 2022, Fairfax had only completed 20% of the Housing Element which was due by Jan 31, 2023.

In October of 2022, Fairfax Town Council hired consultants, Dyett & Bhatia, to complete the process, submitting a delinquent plan by May 31, 2023. Fairfax’s Housing Element was rejected by the State. Had this plan been submitted on time, Fairfax would have had 36 months to comply with the re-zoning. Now, out of compliance, Fairfax only has 12 months to re-zone to be in compliance. According to town records, Fairfax has paid approximately $1,661,000 dollars in consulting fees and subject Fairfax to Builder’s Remedy penalties for a delinquent submission. The plan is currently being revised by consultants, Dyett & Bhatia, while the process continues to drain town resources.

This is serious business. Why weren’t project milestones established? The California Attorney General, through his Housing Strike Force, has the authority to sue towns that do not develop an acceptable Housing Element and further penalize towns not in compliance with the affordability requirement.

How does this pencil out for the developers? Since developers typically lose money on building low-income units, many new laws offer developers density bonuses and other incentives to encourage them to add 10% – 20% of “affordable units” (combination of moderate, low, very low income) to their projects. 

RHNA is divided into income categories, each of which needs to be fulfilled exactly at mid-cycle and end-cycle reviews, or the city is judged out of compliance. For example, Fairfax will be required to build 490 new homes, 306 of which need to be affordable housing.

The percentage of affordable housing included is called the inclusionary rate. At 20% inclusionary rate, 20 affordable units (below market rate) are added for every 80 market rate units. The highest percentage of affordable units likely to be added is 20%. This makes it very difficult for the city to reach the 306 units in this category. At 20% inclusionary, to arrive at the requisite 306 affordable units, Fairfax will actually need to build 1,530 total units (1,224 market rate and 306 affordable).

If Fairfax lowers the inclusionary rate from 20% to 10% it means Fairfax will not only be building the required 490 units required by RHNA, but building 3,060 new units in Fairfax—2,754 of them market rate in order to achieve the requisite 306 affordable units. And, Marin County has recently revised its inclusionary percentages so they may be as low as 5% inclusionary rate, which Fairfax may choose to align with. 

That’s the State’s hidden agenda: adding market rate housing, not affordable. If California doesn’t need 2.5 million new units, why is this excessive new construction being forced upon us? Marin County has no shortage of expensive homes. State mandates, fortified by new housing laws, encourage private, for-profit developers. We’re going to see a huge increase in the production of high-end, market-rate homes.

And what is considered affordable? In Marin County, the annual area medium income (AMI) for a family of four is now $175,000. The AMI for a single person is $122,500. That means to even apply for low-income housing as a single person, you must earn $98,000/year to buy, and $79,650/year to rent. For low-income housing, a family of four must earn $140,000/year to buy, and $113,750/year to rent.

For the first time, cities will be severely punished if the required number of homes in each category is not constructed. In addition to fines, most punishments give more control to developers and less authority to local governments. These penalties are steep. Courts can fine jurisdictions up to $100,000 per month if a jurisdiction’s housing element continues to be out of compliance, multiplied by a factor of six, if fines are not paid. 

Fairfax has until the end of January 2024 to re-zone. If the housing element isn’t in compliance by then, the State may start to impose these fines to illustrate their lack of confidence. Fines can bankrupt cities and force them into receivership, requiring cities to defer all zoning control to the State. The State then determines which public lands will be donated or sold for housing projects. Is this a set-up for all Marin cities and all municipalities in the State—to fail? Has this move by the State, towards more centralized government control over land use, been the plan all along?

Many municipalities have appealed to the State with claims of added hardship including lack of infrastructure, lack of buildable land, environmental concerns and lack of emergency evacuation access. The appeals were denied. 

California legislatures have determined that decision-making regarding land use must be centralized without local input and that project timelines are to be streamlined without environmental reviews. Local tax payers are now being asked to unrealistically absorb all of the government and private developers’ risk for real estate investment. These unguided mandates are supposedly unconstitutional.

Many factors contribute to delays in construction and are hard to predict. Financing remains a major obstacle. Interest rates rising from 3% to 7% will cause a 57.8% increase in overall financing costs. Developers and landlords know rental income will be limited by the percentage of units designated for affordable housing. In addition, higher construction costs, labor and supply shortages, high flood and wildfire risk and changes in insurance underwriting, may slow development. But the State doesn’t care. Do you?

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