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Jan. 15, 2021 - Epoch Times
24:35
How California Laws Make it More Difficult to Build Affordable Housing | Don Wagner
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And that's getting added to the housing cost that when people go and buy and get a home or get a rental unit, they have to pay for that.
The developer has to make his money back or he or she doesn't end up building the project.
And so all of those costs go into the bottom line, what the homeowner is going to pay, what the tenant in the apartment complex is going to pay, what, it's like anything, you the individual are going to pay.
It's not the businesses that are paying, it's the individuals.
So this is affecting the individuals?
Checkbooks, pocketbooks.
Oh, absolutely.
It's why we have a housing crisis in California, and it's one of the reasons why we have a housing crisis, and it's one of the reasons why the cost of housing just is so high in California.
Don, it's great to have you on the show.
It's a pleasure to see you again and good to be here.
Thank you.
So I want to learn about housing.
Is there a shortage of housing in California based on what you've seen?
Oh, absolutely there's a shortage of housing in California.
The numbers that the local governments, the Southern California area, are hearing is something like a million or a million and a half units below where we ought to be for the population.
So the answer is yes.
There very much is a housing shortage in California.
Lots of reasons for it.
But no question, we do need more housing here in the area.
And what are the reasons, in your opinion, of this shortage?
Well, right now we make it too difficult to build.
And that's probably the thing that ought change the most.
The state of California has got all kinds of wacky environmental rules.
It's got a law called CEQA, the California Environmental Qualities Act.
And it allows anyone who has an objection of a particular project to sue it, to slow it down, to stop it, to make it more expensive.
And a lot of times what we find are the builders, the developers, are just saying, you know, it's either too expensive to build in California or I need to build in other less desirable areas of California.
Or we're just going to walk out of the market completely because we can't come up with units that are in a price range that the majority of people can buy.
Lots of complicating problems.
You mentioned CEQA will make it more expensive.
And how does that work?
What it does is it allows somebody who wants to stop a project to file a lawsuit to stop the project.
Often you can slow it down, if not stop it completely, but in any event, what you end up doing is driving up the cost of building the particular units because before I can build, and I may go through the permit process, I may have everything done.
So you've done everything legally according to the law?
I own the land.
I have all the permits I need.
I've got my architects and everybody ready to go.
They're ready to turn the earth and start building.
And there's a lawsuit that says stop.
And we know these lawsuits can be extraordinarily expensive and they can take years to work out.
And sometimes you'll lose the lawsuits because the law is very favorably written towards the environmentalists.
And so if you lose that lawsuit All the work preparing, all the work buying the land, getting the loan, getting the architects and the builders all lined up goes away because you don't have a project you can build.
Could you give us an example for our audience to know what kind of lawsuits can come the way of these developers?
Well, they're generally environmental lawsuits.
An argument might be, oh, there's an endangered species over here that this project will either threaten further or that you didn't study when you did the environmental impact report, you didn't study this particular problem as closely as you should have.
Or you'll say, for example, that there is a larger impact on traffic that will cause more Pollution that needs to be studied more and wasn't studied enough, and until it's studied appropriately, the project is on hold.
And it does seem like the law is very favorably written for the claimants in those cases, and so these projects are always fraught with uncertainty.
Doesn't the government permitting process already cover these issues?
No.
Okay.
It does not.
The permitting process, depending on the jurisdiction that you're building in, for example, a city.
I used to be the mayor of the city of Irvine.
If you're trying to build in Irvine, you go through Irvine City Hall to get all of the permits, and you get an approval from the city that says, yes, you can build there.
And what you plan to build there works for the city.
It's within our master plan, for example.
And then CEQA comes along, and that's a state law.
And until you get the CEQA challenge done, the planning that the city of Irvine has done and approved is on hold.
And CEQA itself is a body that will come in, or is it that through those laws, other entities can come and sue you?
CEQA is not a body itself.
It is the acronym for the group of laws that require all these environmental boxes be checked.
And there is a role to play for CEQA, and there is a role to play to make sure that the projects are environmentally sound.
The problem that I have, and I had when I was up in Sacramento where I served as a legislator, And that I continue to have is that it's too easy to bring those lawsuits and to put a stop or a crippling delay on a particular project.
But CEQA itself is a body of laws that allows the plaintiff to go into a court and get a judge to say, hey, wait a minute, we're going to take another look at this or we're going to stop it.
And the cost of fighting these lawsuits is actually getting added to the housing cost.
Oh, absolutely.
The cost of fighting these can be in the multiple millions of dollars.
So you have not just the out-of-pocket expenses.
You've got to pay the lawyers.
If you lose a CEQA lawsuit, you often have to pay the lawyers on the other side.
But even if you win, you've had to pay your own attorney's fees, which as I say can be in the millions of dollars, plus there is of course just the delay cost.
A project that was supposed to start on such and such a day and costs X dollars starts maybe two years later.
Building costs have gone up, labor costs have gone up.
Just the delay itself is part of the punishment and part of the problem.
And that's getting added to the housing cost.
Certainly.
When people go and buy and get a home or get a rental unit, they have to pay for that.
The developer has to make his money back or he or she doesn't end up building the project.
And so all of those costs go into the bottom line, what the homeowner's going to pay, what the tenant in the apartment complex is going to pay, It's like anything, you the individual are going to pay.
It's not the businesses that are paying, it's the individuals.
So this is affecting the individuals, checkbooks, pocketbooks?
Oh, absolutely.
It's why we have a housing crisis in California and it's one of the reasons why we have a housing crisis and it's one of the reasons why the cost of housing just is so high in California.
Did the development drop as a result of these laws when they came into play?
Do you know the stats on that?
I'm unaware of the stats on that, but anecdotally we've been hearing for years about how developers are less willing to build in California, much more willing to invest the time, the resources, To build out a state than they are here in California.
And in talking to businesses around the state, they will tell me CEQA is one of, if not the biggest reason, for the housing costs in California.
And now the state has a plan to overcome this issue of shortage.
What is the plan?
Well, I'm not sure the state has a plan.
I'm not sure the state has a plan.
Government out of Sacramento told me they had a plan.
I'd look at it very closely because I'm not sure I trust them.
The idea, and I think what you're talking about here is what's called RHNA, R-H-N-A, Regional Housing Allocation.
And it's a requirement from the state.
Every eight years we go through what's called the RENA cycle and every eight years the state of California for each of the various regions in the state say you in the region will plan for X new apartment or residential or dwelling units of some sort.
I'll get into the details a little bit.
In Southern California, the RHNA number is about 1.3 million new dwelling units that we in the Southern California region are supposed to create, plan for at least, over the course of the next eight years.
The region that this applies to It's basically from Ventura County down to Orange County and out into the desert in the San Bernardino area and then down into Imperial County.
All of that is called the SCAG, Southern California Association of Governments Region.
There's six counties, there's 191 cities.
Those cities collectively are to come up with 1.3 million housing units.
According to the state.
San Diego's got its own.
Northern California's got its own.
The Central Valley has its own numbers.
But here in Southern California, that SCAG region, 1.3 million units, and the units are supposed to be low income, middle income, high income.
Various levels of affordability, single-family units, apartment units.
There's a wide mix.
But the state has said, not that you've got to build them.
That's the curious thing about RHNA. Not that you have to build them, but you have to plan for 1.3 million units.
Each city in the jurisdiction gets a number, and they're supposed to plan, set aside, have land for, and allow for that sort of development.
You don't have to build it, but you do have to plan for it.
You have to plan for it.
Is it practical, this number?
It's not.
Why is it impractical?
The first thing to know about the number is it's, in my mind, completely made up.
Sacramento does this a lot on a whole host of issues.
It basically says, here's what we would like.
Some number of units.
There isn't, to my knowledge, a market study that says that's how many we need.
There isn't any sort of metric that says this is how many we're short.
There isn't any realistic plan how we're going to get there.
They just say, we'd like for...
The state of California and for each of these regions, these numbers.
It's a lot like what we see, for example, with our air quality numbers.
You are supposed to get This much clean air, particulates out of the air by such and such a day.
It's what Sacramento did with respect to electric cars.
We want so many electric cars on the road by such and such a day.
They make the numbers up.
Numbers that sound good, they aren't realistic goals.
And forcing the local jurisdictions to plan for them is...
Unfortunately, I am afraid in exercising futility, but it certainly is not a wise use of resources to plan.
What we ought to get, and I serve on the SCAG board, and I said this last week when I was up at the SCAG meeting and we were talking about this, what we really ought to get is Sacramento is serious about fixing California's housing shortage.
Is sequel relief and is relief from some of these other rules and regulations that are crippling us.
Another rule, for example, we've got the Coastal Commission.
Coastal Commission has done a very nice job making sure that our coasts remain nice and pristine and accessible.
Some people, me included, argue it goes too far.
Prohibits too much development that could be allowed.
And if it is allowed, it helps us reduce the housing crisis that we have in California.
A whole bunch of reasons why it's tough to build in California.
If Sacramento wants to fix the problem, give us that kind of relief.
I see.
So they're trying to force a way of housing on these cities without really looking into the demand of what the people want in those communities.
They do that all the time.
It's top-down planning and it's wrong.
We really ought to look at the way people are using the resources that are available to them and where they want to live and why they want to live there and allowing relief.
to people where they want to be rather than try to force them into something.
I'll give you a quick example about this.
There is a bill up in Sacramento called, right now it's called SB 50.
I think the number will change.
It's been proposed several times and the idea is that Sacramento decides rather than the local jurisdictions decide Around transit hubs, bus stations, but mostly train stations, that Sacramento can decide what sort of housing units go there, as opposed to letting the locals decide.
The idea being that Sacramento can force us By putting housing around our transit stations onto that transit.
Well, they completely forget that if I've got to commute to my job, for example, and it may be great I live next to a train, but is my job next to a train station?
Well, if it isn't next to a train station, how am I going to get From my station on the destination end to my employment, how am I going to get back?
And so they're not thinking the problem all of the way through with something like SB 50 that takes away local control.
Really won't solve anything.
They're trying to social engineer people out of the cars and into the bikes and into the trains and all of that rather than dealing with the problem that's caused by people living their own lives.
And that's trying to fix the transit that we want to use rather than force us into some other sort of transit.
So they're not looking at if the people are willing to use the public transportation.
They're actually going and saying, we're going to put the housing there and then hopefully they will use the They're of the mindset that if they build it, we'll use it.
And I don't think that's a realistic mindset.
And has the public transportation been effective for people?
Are people using it today?
Well, the answer depends on where you are, but overwhelmingly I'm going to say it's no.
Let me give you an example.
In addition to serving on the SCAG board, I serve on the Orange County Transportation Authority Board of Directors, which is responsible for the bus service in Orange County.
Well, we had buses in South County.
The city's basically from Irvine on down to the Orange County San Diego border and almost all of that bus service has been dialed back.
There's still a little bit down there but nowhere near as robust as it used to be.
Why?
We weren't getting the ridership.
It wasn't paying to have the buses down there.
There are other parts of the county, the north and some of the central cities, where ridership is much more robust.
Even so, the taxpayer underwrites every single ride.
They don't pay for themselves.
Fares don't pay for the cost of the actual trip.
And so, we are continuing to subsidize bus ridership.
We are in Santa Ana building a $100 million a mile, you heard that right, $100 million a mile streetcar project.
I don't think the taxpayers are getting the bang for their buck out of that, but yet government continues to try to force people into these alternative modes of transportation rather than recognizing we are a society that grew up on cars, we are not easily going to give up our cars, and what we really ought to be doing is making transit more accessible for folks where they're actually trying to use it, which is on our streets and highways.
Now, what's the push behind this public transportation model?
Is there any concern to the environment?
My guess is it's almost entirely environmental and it's also this sort of do good or we know best mentality That permeates Sacramento.
And again, I served for six years up there.
I've got a lot of friends on the other side of the aisle.
But overwhelmingly, the sense I get from Sacramento is we know best, and you folks living down in your Own counties in your own cities.
You don't have the big picture view and we're just going to tell you how to live.
And I am of the absolutely opposite philosophy.
The government that governs best is the one that governs least and closest to the people.
So don't take away from the cities Like they try with SB1, the ability to do planning.
Don't say, I'm from Sacramento, I know best, because often Sacramento doesn't know best.
How much studies have been done on the demand from the community if people are going to use this kind of public transportation before going and spending the millions on the project?
The truth is there's no shortage of studies.
And it's a lot like economists.
You can line them all up end to end and they won't reach a conclusion.
You've got different studies that just say different things.
Unfortunately, to my mind, it is a lot less driven by real academics as it's driven by wishful thinking.
Oh, it ought to be this way.
Let's push people this way and we'll make it that way.
And my experience is that doesn't work.
So the hope is that people will use this public transportation and they will live in these urban areas by transportation hubs.
What if it doesn't work out?
What's the cost?
Well, look, if it doesn't work out, the cost is an awful lot of planning and an awful lot of building and an awful lot of living areas that are underutilized or lying fallow, and you still will have the problems that you said you've tried to solve, because if people aren't living there, they're living somewhere.
Hopefully, we're not allowing them to live on our streets.
We aren't increasing homelessness.
But we're seeing here in Orange County, it's curious, more people actually commute into Orange County than live here.
Commute into Orange County to work every day and commute out to go home.
So it's true, actually, that LA and San Bernardino and all the surrounding counties, Riverside County, are bedroom communities of Orange County.
People work here and go out there.
Well, they're living out there.
And so what we need to be doing is making it easy for them to get to their jobs here.
Make it as easy as possible for us to have a successful business community here in Orange County.
I do believe we do need more housing in Orange County.
I'm not saying when I complain about the arena allocation that there's no place for more building in Orange County.
There absolutely is.
I am firmly of the belief that if you stop building, Then you start atrophying.
You start dying.
We need to have a robust housing market, a robust business climate, and Sacramento gets in the way of both of those.
And RENA doesn't fix it.
RENA is, to my mind, just a lot of wishful thinking.
If these developments happen, is there enough planning?
What if people don't use the public transportation site?
Is there enough planning for other ways of transportation?
I'm going to say probably not, but that's going to be a decision...
Well, the answer to that question is going to depend on the particular cities that you're talking about.
My old city of Irvine, I'm going to say, plans very, very well.
I mean, it's world-renowned for its planning.
So my guess is that city will, in fact, be able to deal with these issues as they roll out and as Rhina numbers aren't met and as...
The state comes down harder and harder on people for not building.
Whether that's true in every other city in Orange County or in the entire SCAC region, I don't know.
I would hazard a guess and say some of them will be in some trouble for this.
I mean, we are seeing already that the state of California is suing the city of Huntington Beach over its housing plan.
Now, that's A lawsuit, Huntington Beach is not a city that I'm privileged to serve, so it's not in my district.
I haven't followed the lawsuit particularly well, but we do know the government is trying to force the city of Huntington Beach into compliance, and so I would expect other cities to find themselves...
Really having to answer some tough questions or some tough lawsuits from the state, which is unfortunate because, as I say, it's the state that's causing the problem, it's not the locals.
So now, how do we solve this housing issue?
How do we build more and what do you recommend?
Well, I would certainly start with an overhaul of CEQA. Take a look at CEQA and fix the problems with it.
It's too easy to sue.
You can sue and keep a case going for years.
You can sue on virtually anything you want.
And just to clarify, is anybody can sue under that law or is it separate organizations?
There are requirements.
I mean, you need to have standing, but it's very easy to come up with the standing.
And the environmental groups that are out there using them or the local neighbors that end up using them generally are going to have standing.
So what I would do or I tasked with this is take a look at CEQA and say there are things here that are important.
Environmental protection is important.
Let's make sure we do studies and we do know the ramifications of a particular project so that we can decide whether or not to go forward with that project.
But once those decisions get made after the studies get done, I would put a real limit on who can sue and when they can sue.
And right now those limits don't exist.
That's one of the first things that we need to do with CEQA to make it easier in California to get out of this housing crisis.
I would also Make sure that the state is doing things to encourage, through its fiscal policy, through its tax policy, the people who are trying to solve the problem, mostly the developers, but also encourage the local jurisdictions to, in fact, allow for development.
Too often A bunch of residents can get together and they can put political pressure on a couple of council members and get a decision to flip.
And I think we ought to protect the political process from being so easily manipulated.
We're going the wrong direction in the state of California.
We're seeing a whole bunch of cities that are formally allowing for what's called at-large elections, where the entire city votes on the entire city council.
They're going to districts now, which makes it very much easier for Really for a balkanization of an entire city.
Get rid of that trend and I think you'll find it more easy to do responsible development, not just no development whatsoever.
There is a place for responsible development in California.
Okay, excellent.
Thank you.
Thank you for being on the show.
Pleasure was all mine.
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