Lee Ohanian at the Hoover Institute has typed out a post about California’s RHNA system in an attempt to dunk on it from the right as some kind of Soviet central planning exercise. Ohanian’s piece makes a series of basic factual errors about the Housing Element update process, which we will correct here.
Since 1969, California has used Soviet Union–era central planning methods to try to increase its housing supply. And what California has shown in these 50-plus years is what we have always known about central planning: It always fails. And miserably so.
Top-down command-control programs fail because they violate the basic market forces of supply and demand and because they suppress individual freedoms. California started down the command-control rabbit hole regarding housing with a 1969 state law that created the Housing Element and Regional Housing Needs Allocation (RHNA) program. This program mandates that every California community must plan for its housing needs, regardless of income.
Leaving aside the question of whether RHNA actually is a “top-down command-control program”—cities are given extensive local control over how they plan for growth!—it does not require cities to plan for housing needs “regardless of income.”
Rather, the housing element process requires cities to explain how they plan to expand their supply of housing, specifically including housing affordable to lower-income households, over the next eight years.
Further, much of the RHNA process is designed to force cities to relax their “top-down command-control” land use regulations that legally forbid property owners from building anything other than a detached single family house.
California bureaucrats have tried to figure this out by giving every community a mandatory housing quota every eight years. California’s median state home price of nearly $775,000 demonstrates just how badly this program has worked.
California housing prices are high because we have a lot of high-paying jobs and not enough homes. (We are 49th in the nation for housing units per capita.) One reason we don’t have enough homes is that until 2 years ago, the housing element update process was a bogus paper exercise with very lax standards and no penalties for noncompliance.
Atherton happens to be the home of San Francisco Warriors basketball star Steph Curry and his family, which is why the town was all over the news last week as it was rushing to come up with a plan to submit to the state for its mandated 348 homes to be built between now and 2031.
Where did the quota of 348 new homes come from? The Community Development Agency is supposed to base its quota on its prediction of the number of new jobs they expect in each new community.
Mr. Ohanian does not appear to know how California’s housing needs allocation (RHNA) system actually works.
The RHNA methodology, which was recently changed, is not solely set by the number of new jobs expected in a community, but by a variety of factors including unmet need from past cycles, the vacancy rate, overcrowding, and the need for housing at different price levels.
But there is one big problem with this approach when it comes to Atherton: the town has no businesses, per se. Most of the town doesn’t even have sidewalks. Besides its 2,200 or so homes, Atherton has eight public parcels of land, consisting of schools, a small college, a park, a town center that houses the library, the mayor’s office, the town council chambers, the police department, and a fire station.
Atherton may not have businesses, but it certainly has jobs. Who does Ohanian think is cleaning all those mansions, maintaining the landscaping, and looking after the children? Where are the police officers, firefighters, and teachers supposed to live?
Further, the city of Atherton is not a remote island, it’s a rich suburb in the middle of Silicon Valley. The city is a mile and a half from the Stanford campus, 4 miles from Facebook headquarters, and 3 miles from the major tech companies in Redwood City.
So where does Steph Curry enter the story? Curry wrote a letter to the city expressing concerns about his family’s safety and privacy regarding the town’s consideration of allowing the development of 16 townhomes at a site near Curry’s single-family home as part of its plan to meet its quota of 348 new homes. […]
Curry was decried in some media articles as another member of the “Not in My Backyard” (NIMBY) crowd. But Curry and his family have legitimate safety and privacy concerns. A potential 16-unit multistory complex at 23 Oakwood Boulevard could create a paparazzi’s dream opportunity to take photos of Curry and his family. Celebrity photos now fetch as much as $85,000, and if those living at 23 Oakwood Boulevard didn’t have the photographic equipment or skills to take such photos, they could charge a hefty fee to professional photographers to use their homes for that purpose.
The state requires cities to plan for housing growth: Soviet-style command-control overreach. The city outlaws townhouses so Steph Curry doesn’t have to build a fence or plant some trees to protect his backyard privacy? Totally cool!
If Atherton doesn’t come up with a plan, it exposes itself to “the builders remedy,” which forces cities and counties that are out of compliance with their state planning mandate to approve any housing anywhere in the community provided that 20 percent of a project’s units are set aside for low-income renters and buyers.
So, just what does Atherton do? It is stuck between the proverbial rock and hard place. Nearly 90 percent of Atherton’s homes are occupied by their owners, and the town can’t force its residents to convert their single-family homes into duplexes or fourplexes or condominium complexes. They can’t tear down their schools. They can’t use their 22-acre park. They can’t tear down their fire station.
Ohanian spends multiple paragraphs whining about how the RHNA numbers are not fair because Atherton just doesn’t have any vacant land to develop.
This displays a basic misunderstanding of what the housing element process requires. The city does not have to build the new housing itself or compel homeowners to redevelop. They just have to change zoning to allow homeowners to do so if they want to, and show the state that they have zoning capacity to accommodate growth.
Atherton is only “between a rock and a hard place” because they refuse to allow new housing in their rich exclusionary suburb. They could rezone the whole city for townhouses tomorrow and be done with this whole process. They refuse to do so!
They could possibly tear down their town center to build a high rise tall enough to contain those 348 units, probably 25 stories, maybe more. But with an annual city budget of only $18 million, the town could never pull off such a project, which could cost north of $250 million given current costs of building “affordable” housing within the state. And building at this location would involve significant environmental complexities, particularly the relocation of major water pipes that lie beneath the town center. This would add years to the completion of such a project, one that would never be move-in ready within the eight-year state planning horizon.
Again, the city does not have to build the housing itself. They just have to change their zoning to allow 350 new homes over eight years.
To avoid the “builder’s remedy,” Atherton created a plan that it submitted to the state at the 11th hour last week. Most of the new housing (280 of the mandated 348 units) would be from new Accessory Dwelling Units (ADUs), which are small guest houses, at existing homes. Additionally, the Menlo School, a prep school located on 62 acres in Atherton, and Menlo College, located on 45 acres, agreed to build a total of 80 units on their campuses, presumably for faculty, administrators, and other staff. All told, Atherton’s plan would create 453 units, well over the 348 mandated units.
Oh, so they used the state’s approved methodology to project ADU construction and found some realistic sites for new housing? Great! Was that so hard?
As far as the potential 16-unit project at 23 Oakwood Boulevard goes, the town slated four of those units to be set aside for “very low to low”–income households should it be built. For a very low–income family of three, the maximum rent would be $2,056 per month. This rent is probably 60 to 75 percent below the market rate rent of such a unit.
Ironically, this means that the 16-unit project may never be built, given that the other twelve units would need to be priced at a sufficiently high level to offset the large losses on the four subsidized units. For a project that will likely cost $40 million or more to build and that may take years to complete, this means that the 12 market-rate units would need to be priced in the $4 million range to make the project pencil out.
Look, we are always ready for a conversation about how to set inclusionary requirements in a way that maximizes affordable housing while preserving projects’ financial viability, but help us with some math here: is $4 million less than Atherton’s median home price of $7.5 million? Do we think there might be a market for these lower-priced homes in America’s wealthiest ZIP code?
Perhaps there are willing buyers at that price point, but on the other hand, even in Silicon Valley there are beautiful homes that are larger, with much more privacy, and with large private yards, such as this 2,500-square-foot, $3.5 million single-family home in pricey Woodside, a very similar community to Atherton, located next to it.
Ah yes, the famously affordable and housing-friendly community of Woodside, California, which tried to declare itself a mountain lion refuge as a way to avoid letting people build duplexes.
Central planning always fails. It failed in the USSR. It failed in China. And it has failed for the last 53 years in California’s housing sphere. Imposing top down, one-size-fits-all housing quotas on every community in the state is inefficient and ineffective and violates individual and community rights. Much more housing within California would be built if legislators were to rewrite the state’s antiquated environmental laws; reduce regulatory burdens that drive constructions costs on affordable housing projects to levels that exceed those of luxury homes; and provide communities with financial support and incentives where more housing, particularly high-density housing, makes sense, with projects that achieve community buy-in.
It is always striking to hear diehard pro-market capitalists decry “central planning” as a violation of individual rights, then talk their way to “we should have the state mandate single family housing and only allow higher-density housing projects that achieve community buy-in.”
The state is missing an enormous number of residential development opportunities. There are tens of thousands of vacant lots in Los Angeles alone, many of them vacant for over 50 years, that can be developed. There are retail, industrial, commercial, and agricultural locations throughout the state that have greater value today for residential use that could be developed.
Why do they want to build housing in this wealthy, transit-served suburb near some of the highest-paying jobs in the country when we could instead build it on vacant lots 300 miles away, in polluted industrial areas, or on farmland in the central valley?
Reasonably priced housing is ours for the taking, but only with regulatory reforms, a far greater reliance on the market process, and respect for individual and community freedoms. Since 1969, California’s housing politburo has chronically failed. Isn’t 53 years of failure enough?
You are so close to getting it!