Berkeley Talks transcript: Talk Policy to Me: The California housing crisis

Bora Reed: [00:00:00] Welcome to Berkeley talks. I’m Bora Lee Reed, a Cal grad and the communications director at the Goldman School of Public Policy. And today I want to introduce you to Talk Policy To Me, a podcast built by public policy students in partnership with the Berkeley Institute for the Future of Young Americans. I’m very proud of this podcast not only because it’s interesting and relevant and nuanced, but because the students working on it are really smart, compassionate, and genuinely dedicated to the public good – all things that I believe capture the spirit of UC Berkeley. Take a listen to this episode on the cost of housing in California, and if you like what you hear, consider subscribing to Talk Policy To Me at TalkPolicyToMe.org or wherever you find your podcasts. And now, without further ado, here’s Talk Policy To Me.

David Chiu: [00:00:54] We have seen just a wonderful irony during this housing crisis of local leaders and community leaders who say on the one hand we have to solve the housing crisis we have solved the homelessness crisis, oh isn’t it a shame that we don’t have enough housing. And as they’re wringing their hands they are pointing their finger at projects that they are opposing.

Spencer Bowen: [00:01:29] That’s California assembly person David Chiu. We all know we’re in a housing , but lots of us still have questions like How did we get here? What are we doing about it? And why is David Chiu and others at the state level so frustrated with local leaders? I’m Spencer Bowen. Let’s talk California housing policy. California doesn’t have enough housing, and the housing we do have is really expensive.

Ophelia Basgal: [00:02:13] So, of the top 10 one bedroom median rent prices in the country, five of the highest top 10 are in California.

Spencer Bowen: [00:02:21] That’s Ophelia Basgal, a visiting scholar at Berkeley’s Terner Center for Housing innovation. She also used to be a regional administrator for HUD, the Department of Housing and Urban Development.

Ophelia Basgal: [00:02:32] If you dive deeper and go into the top 25 cities, 13 of them are in California.

Spencer Bowen: [00:02:38] Yikes. What does that mean in dollars and cents?

Ophelia Basgal: [00:02:42] You need an average wage of almost thirty three dollars an hour to be able to afford a two bedroom rental home in California. And that means you need to work one hundred and nineteen hours a week at minimum wage of eleven dollars.

Spencer Bowen: [00:02:58] It’s a dangerous cocktail: too little housing that costs too much, and it’s a bunch of years in the making. So how did we get here? Geography plays a big role.

Ophelia Basgal: [00:03:15] For example, San Francisco is forty nine square miles. You know so just the fact that you have that limited geography to build on is indicative of a part of the reasons that it’s so expensive to build in San Francisco. We see also the costs higher in coastal areas.

Spencer Bowen: [00:03:31] There’s also a mismatch between job growth and housing production, especially in the Bay Area. Silicon Valley is a hotbed for this trend.

Ophelia Basgal: [00:03:40] There are 100,000 Santa Clara residents who leave the county every day to work in surrounding counties while two hundred thousand workers come into the county.

Spencer Bowen: [00:03:53] Conservatives often point to construction costs as a key to our housing problem, and they aren’t wrong. California has a bunch of strict building regulations.

Ophelia Basgal: [00:04:03] The current estimated cost to build a one bedroom unit is six hundred thousand dollars. There is a clear connection between high housing costs and state and local regulations.

Spencer Bowen: [00:04:15] But some of the costs stem from bigger, slower moving forces.

Ophelia Basgal: [00:04:20] Basically what we need to know is we’re still building the same way we’ve been building since the 1940s. The bulk of costs that’s associated with building is labor and materials. On the labor side, young people, like 25 years and younger don’t want to work in construction anymore. The number of workers between – that are younger workers in the construction industry – between 2005 and 2016 declined by 30 percent. There’s a labor shortage.

Spencer Bowen: [00:04:48] Climbing costs for everything from lumber to nails have been made worse by trade wars and tariffs. And we’re living through a seemingly constant stretch of natural disasters that pull construction away from the parts of the state lucky enough to not suffer from floods and fires. All of it drives cost. A lot of the problem also has to do with how we do planning in the US and how much power local governments have to restrict how buildings look and feel.

Ophelia Basgal: [00:05:18] I always loved the fact that if you try to build something in Santa Barbara it has to have a tile roof. That’s – that adds cost. I have a friend who ran the Santa Barbara City Housing Authority and his development costs when he was doing affordable housing for seniors, families, homeless were just astonishing. And a lot of it was design criteria.

Spencer Bowen: [00:05:39] Cities can also stop housing pretty easily, by just not approving any new projects.

Ophelia Basgal: [00:05:45] Basically we only want our city a certain size.

Spencer Bowen: [00:05:48] Municipalities can also delay projects, making them more expensive by the day.

Ophelia Basgal: [00:05:53] It’s partly due to understaffing cities don’t have enough money. There is, you know sort of a labyrinth of rules that you have to go through, but you know every bit of delay adds to cost.

Spencer Bowen: [00:06:06] What about one of the most infamous policies of all, California’s Prop 13?

Ophelia Basgal: [00:06:21] Started out as a way to sort of at least as it was promoted was to protect seniors who were on fixed incomes who couldn’t afford increasingly property taxes that were going up, so it froze the assessments. You could only get your property would only be assessed on sale. Basically Prop 13 reduced the property tax rates on homes and businesses by about 57 percent after it was passed. And so the tax dollars for schools, police, fire services that’s been hard hit ever since. And what it’s done is it’s created a perverse effect for cities who don’t want to improve housing because it increases service costs. You need more police you need more fire you need more schools. So, basically they prefer businesses, but if they’re going to do housing, then they have to add on fees to address those service costs because they’re not going to pick it up through property taxes.

Spencer Bowen: [00:07:11] Prop 13 isn’t the only law hurting housing. CEQA: The California Environmental Quality Act may be the most frustrating piece of the puzzle. It’s a well-intentioned policy that’s also a huge roadblock to housing.

Ophelia Basgal: [00:07:25] So then we have CEQA or the California Environmental Quality Act, and it was really to establish a statewide policy, made sense at the time. No question about it, wanted to make sure we had good environmental standards. It applies to all discretionary projects public or private which require discretionary planning approval by localities. But what’s happened with it and I love this term is it’s been weaponized by people who want to stop development, and so people will file CEQA challenges that can just hold up developments forever and it can become a waiting game.

Spencer Bowen: [00:07:58] All these policies are layered on top of maybe the toughest hurdle of all: NIMBYism and vocal local minorities against housing, citing changes to traffic, air quality, community character, and a whole lot more. All right. That’s a lot. Let’s review. A bunch of factors drive California’s housing mess. Our diverse geography and limited land especially in the Bay Area doesn’t help. Production hasn’t kept up with a booming job market. Housing is really expensive to build and costs are only growing. Prop 13 and CEQA create perverse incentives and big hurdles. Sometimes people just don’t support housing. And cities have a lot of power. And they often use this power to slow down or block housing despite ample evidence that we need a lot more. After the break, we’ll take a look at how this crisis looks day to day.

Sarah Edwards: [00:09:22] Don’t miss our brown bag lunch series on the California housing crisis and potential solutions, presented by the Berkeley Institute for the Future of Young Americans and the Turner Center for Housing innovation. Grab some food for thought at the Goldman School on the first Thursday of every month as experts talk about one of our state’s toughest policy issues. Learn more at GSPP.Berkeley.edu/centers/BIFYA

Spencer Bowen: [00:10:07] Welcome back. We know that we don’t have enough housing and housing we have is expensive, and we just covered the main factors that got us where we are today. But what does this crisis look like for everyday folks, especially young people? First off, young people aren’t buying homes. We’re mostly renters.

Elizabeth Kneebone: [00:10:27] So millennials, gen Z tend to be more dependent on rentals than other people. But not just than other people, than younger people were in the past.

Spencer Bowen: [00:10:36] Elizabeth Kneebone is research director at the Terner Center for Housing Innovation.

Elizabeth Kneebone: [00:10:41] But here’s the thing about rental housing is that it’s not equally available everywhere. It’s not like this is evenly spread across places or neighborhoods or communities it tends to cluster. And also it’s not just about where rental housing is. It’s about where affordable rental housing is and maybe not surprisingly the places that tend to have less rental housing are also places where rental housing tends to be much more expensive.

Spencer Bowen: [00:11:06] We’re increasingly renting, especially in the Bay Area and especially among young people. That creates big incentives about where we locate.

Elizabeth Kneebone: [00:11:15] Where rental housing is, where affordable renting housing is, what does that mean for whether you can live close to school, or a job, or other amenities or services that are important or necessary to you? It is fundamental and crafting and shaping where people locate.

Spencer Bowen: [00:11:32] About 20 percent of Bay Area workers spend over an hour commuting. This is a problem up and down the state.

Elizabeth Kneebone: [00:11:39] So those are lengthy commutes that carry their own costs there’s not a lot of research done about how long commutes can affect productivity, can affect retention in jobs, and also the cost of what the transportation is.

Spencer Bowen: [00:11:51] Younger folks drive less but not that much less than older generations. This isn’t great for a state that’s feeling the consequences of climate change firsthand.

Elizabeth Kneebone: [00:12:00] Especially as we think about the importance in California of trying to mitigate the impacts of climate change, trying to reduce carbon emissions. The longer you spend in your car the more at odds we are with those goals and a lot of that comes back to housing.

Spencer Bowen: [00:12:13] People aren’t just moving far away from their jobs. They’re leaving California entirely. We’re seeing significant outmigration to places like Nevada, Texas, Tennessee, and Arizona. Here’s Ophelia again for some context.

Ophelia Basgal: [00:12:27] So if you want to run a truck to go from Las Vegas to San Jose from U-Haul, it’s a hundred bucks. You want to rent from San Jose to go to Las Vegas, these are one way rentals, two thousand dollars reflects the demand. The net domestic migration, based on the California Department of Housing, when you look at San Francisco: close to twenty three hundred people left in the last two years, five years before it was a gain of twenty six hundred.

Spencer Bowen: [00:12:56] Long term we can’t afford to lose a bunch of young, well-educated folks that will fuel our economy for the next 50 years. And then there’s homelessness: the most heartbreaking result of broken housing policy. Although homeless folks suffer from a lot of tough circumstances, many name rent and housing costs, when asked why they’re homeless. In 2017, 13 percent of homeless people in San Francisco had jobs and still couldn’t afford housing.

Ophelia Basgal: [00:13:31] If you’re thinking that people are on the street just because they have mental health problems or drug abuse or alcohol abuse, not that it doesn’t contribute, but just the fact that housing is not available is a major factor.

Spencer Bowen: [00:13:45] It’s easy to forget that this crisis isn’t just about high rents in the East Bay or the homeless population in San Francisco.

David Chiu: [00:13:51] Throughout California we have seen different manifestations of what the worst housing crisis in our state’s history looks like.

Spencer Bowen: [00:13:59] That’s assembly Housing Committee chair David Chiu, who we heard from at the start of this episode.

David Chiu: [00:14:04] From homelessness on encampments in Orange County to Skid Row in L.A. to the impact of wildfires in northern parts of the state to watch what we’re seeing with farmworkers in the Central Valley to the highest cost regions throughout California particularly in our urban areas.

Spencer Bowen: [00:14:26] So how do state level policymakers like Chiu think about tackling an issue this big and this chronic, especially when so much power is at the local level? California lawmakers gave us a hint with a 15 piece housing package in 2017.

David Chiu: [00:14:43] And 2017 reflected the culmination both of an intense interest in needing to do something as well as a lot of policy ideas that finally came together in a 15 bill package that Governor Brown signed in late 2017.

Spencer Bowen: [00:15:01] We’re living through a really interesting experiment. Can state policy help solve a very local problem decades in the making? Let’s take a deeper look at laws trying to address what David Chiu called the wonderful irony of cities complaining about housing, yet not building more. Chiu’s own piece of the housing package, 2017’s AB 73 attempts to streamline local processes.

David Chiu: [00:15:27] AB 73 which was one of the 15 bills that the governor signed would help to spur the production of high density transit oriented housing by incentivizing local governments to to engage in smart growth.

Spencer Bowen: [00:15:41] All right. What does smart growth mean?

David Chiu: [00:15:44] To produce more housing on infill sites around public transportation.

Spencer Bowen: [00:15:49] Seems good. How does the bill try to influence local leaders?

David Chiu: [00:15:52] We as a state provide incentive payments when a city creates what we refer to as a housing sustainability district: that zones with higher densities, next to transit, with a commitment of at least 20 percent of the housing being zoned at affordable levels being restricted for 55 years.

Spencer Bowen: [00:16:12] As opposed to a fine or fee, this bill gives localities a carrot to build dense, well located affordable housing. How do cities receive these benefits?

David Chiu: [00:16:22] What we say to a city is if you rezone with these housing sustainability districts, we’ll provide an incentive payment and then when you actually approve the housing to be built in these districts we’ll give you another chunk of money.

Spencer Bowen: [00:16:37] Chiu’s Bill goes after local reluctance to approve dense housing and the costs to build any housing at all

David Chiu: [00:16:44] And essentially say to a city, if you do the right thing and you rezone more density around transit, we’ll reward you by funding that helps you to defray the costs of infrastructure and the development of housing, particularly affordable housing in that area.

Spencer Bowen: [00:16:58] Although AB 73 is really new, it’s already being used. City supervisors used the bill to incorporate a housing sustainability district into the city’s brand new SoMa rezoning plan to help boost affordable housing. Chiu and his colleagues know that housing is a stubborn problem that requires a lot more work.

David Chiu: [00:17:18] Well I described the 2017 housing package as a good downpayment on the housing problem, but anyone who is a homeowner knows that if you pay the downpayment you’ve only solved 20 percent of your problem. We still have 80 percent of the principal, so to speak, to to solve.

Spencer Bowen: [00:17:40] We can’t lose focus on the housing issue just because the California legislature passed a handful of bills in 2017. New Governor Gavin Newsom seems like he’s taking it seriously. He made housing a focus of his recently proposed budget including more than seven billion dollars across multiple departments and highlighting homelessness in his budget speech.

Gavin Newsom: [00:18:02] And homelessness is not a local concern and a few big urban centers. It’s not just a regional concern in urban metros. It is a statewide concern and everyone has an obligation to step up and step in and do their job.

Spencer Bowen: [00:18:17] Newsom’s asking cities to do more. And in one case he isn’t even asking. He directed the state to sue the city of Huntington Beach because their housing plan doesn’t comply with state standards for affordability. Whether you think it’s a political stunt or a serious battle, Newsom made one of his first major actions as governor about housing. Housing is more than a problem slowly bubbling up beneath sexier and flashier issues. It’s now the center of California politics. Just listen to Governor Newsom’s punctuation of his budget proposal.

Gavin Newsom: [00:18:51] The poverty rate in California, the reason it’s the highest in the country is cost of living. The number one drive of cost of living is housing. Housing. This is the issue.

Spencer Bowen: [00:19:00] San Francisco’s David Chiu agrees. He thinks that housing is more than the hot topic at the moment, more than an interesting policy question about power held at different levels of government. It’s a personal, emotional, and moral crisis.

David Chiu: [00:19:15] It’s about coming together and thinking about new solutions and being willing to do that because if we don’t we are jeopardizing the future of the Bay Area Region, of our cities, and our state. I wonder if my 2 year old will be able to afford to live in the city that I am honored to represent.

Spencer Bowen: [00:19:45] Talk policy to me is a production of UC Berkeley’s Goldman School of Public Policy and the Berkeley Institute for the Future of Young Americans. Visit TalkPolicyToMe.org for show notes, links to Governor Newsom’s budget, and more info about BIFYA’s housing Brownback series. Special thanks to assembly person David Chiu, who had this to say about public policy students at the Goldman School.

David Chiu: [00:20:08] Being out here on the West Coast, I have worked with so many amazing graduates from the school that you are at and I’m a big fan of MPP’s in the state of California how they make a difference.

Spencer Bowen: [00:20:32] Music heard on today’s episode is by Pat Mesiti-Miller.

Spencer Bowen: [00:20:36] Our executive producers are Bora Lee Reed and Sarah Swanbeck. Michael Quiroz is our engineer. I’m Spencer Bowen. See you next time.