Effective Affordable Housing Strategies for California Municipalities

California’s affordable housing crisis is among the most pressing governance challenges for state and local governments. Our state is not alone: major cities around the country are grappling with how to create policies that will ensure access to quality housing for all residents, not just those in the upper income brackets.

Tackling the affordable housing challenge is difficult because the underlying causes of the problem are enormously complex and interrelated. Shortages of supply can themselves have many origins, from outdated zoning restrictions to environmental concerns and political resistance to development. On the demand side, local high unemployment, an aging population, and shifting income demographics can all play a role in creating uncertainty for policymakers.

Settling on a path forward isn’t easy. City leaders need to balance a host of considerations with any policy option. Housing intersects with a complex network of interconnected issues: a city’s economic vitality, public health and safety, transportation, utilities, and law enforcement, to name a few. A city council could spend years analyzing their choices, but when voters demand action elected officials often feel compelled to reach decisions.

In practice, achieving results with affordable housing requires a multi-tiered approach. For most cities, a single “silver bullet” policy solution simply shifts problems around. Broadly speaking, these are some of the policies that cities around the country have tried:

  • Using land use policy and regulation to increase supply and control costs.

The problem of housing supply stems in part from the incentive structures that motivate property developers. Absent limits imposed by local government, a developer may prefer to build a neighborhood of million-dollar homes rather than a collection of more affordable condos. That can be true even if some of those high-priced homes will struggle to find buyers.

Zoning rules, land use restrictions, and building codes tend to have been crafted with the goal of enhancing property values within a city, which over time has worsened the affordable housing dilemma. It is often impractical to make sweeping adjustments to these regulatory regimes to encourage affordable housing development. But localized adjustments can form one part of a broader strategy.

Rent controls also fall within the scope of land use policy. California’s statewide rent control law, the Tenant Protection Act of 2019 (the TPA), went into effect on January 1, 2020. The TPA restricts certain landlords’ ability to increase rents in a variety of circumstances. Where it applies, the TPA restricts rental increases to no more than the change in the locally applicable regional cost of living index plus five percent. Municipalities are allowed to set stricter rent control limits, subject to the Costa-Hawkins Rental Housing Act.

Rent control has been shown to be effective in helping moderate- and low-income families to stay in their homes, which has a number of positive social and economic benefits for the community as a whole. Elderly, disabled, and other disadvantaged individuals also benefit from rent control policies. But rent control is not without significant downsides. Developers may decide not to build where rent controls will cap their long-term rate of return. Landlords gain extra incentive to raise rents whenever they can, potentially raising the overall cost of rental units in the area and undermining the goal of achieving greater housing affordability.

  • Subsidies for renters.

Local governments can have access to state and federal programs to allocate public funds into programs designed to offer direct payments to renters as a means of offsetting the economic imbalances that create the affordable housing shortage. Compared to regulatory changes, direct cash subsidies may be relatively simple to implement and may have fewer unintended side effects.

The demand-side argument for renter subsidies is straightforward: the public program helps families afford to stay in homes they would otherwise need to leave. A component of the program’s logic is the idea that alternative housing may not be available to a family that is already struggling to afford rent in a high-cost area. Subsidies also provide landlords with adequate income to pay for upkeep to their properties.

For cities, rental subsidy programs alone can be a frustrating mix. Federal and state programs can be subject to recurring budget uncertainty and may come with complex red tape. Perhaps worst of all, such programs are outside city officials’ control. Cities with the financial resources to finance programs of their own have had some success with emergency rent subsidy programs, such as those implemented in response to COVID-19 unemployment, but creating long-term programs is often not a budget priority.

  • Supply-side subsidies.

Various federal and state programs also provide local governments with resources to provide incentive to developers to build affordable housing options. A program like HUD’s HOME Investment Partnerships Program can provide a local jurisdiction with resources to offset the financial sacrifice that otherwise would accompany choosing to build affordable housing instead of a more profitable alternative.

These programs have played an important role in supplying affordable housing across the country, but the current crisis offers proof of their limited efficacy in California. Concerns about the concentration of low-income housing in isolated pockets of cities need to be addressed to avoid building housing stock that has limited appeal and may serve to stigmatize residents, rather than building a sense of community.

Jones & Mayer will be your agency’s guide

Every policy option for addressing California’s shortage of affordable housing requires a careful consideration of legal requirements. Each of the strategies we’ve outlined above raises a host of administrative, regulatory, and legal concerns. Our team can help your agency make sense of it all and craft affordable housing strategies that are sustainable, robust, and professional.

How is your city addressing the affordable housing crisis? We’d love to hear from you. Reach out to Jones & Mayer Partner, Kimberly Hall Barlow, at (714) 446-1400 or by email at khb@jones-mayer.com to get a conversation started.