California Takes a Legislative Response to the Affordable Housing Crisis

The pandemic exacerbated California’s housing affordability crisis. From March 2020 to March 2021, housing prices increased 24% in the state, forcing legislators to take action. Now, the state has proposed three new housing bills to help combat the rampant housing affordability crisis. If passed, SB 6, AB 115, and SB 15 will drive housing development in the state.

Also known as the Neighborhood Homes Act, SB 6 would allow residential development in commercial and residential-zoned areas, as long as the project is not adjacent to an industrial use. According to Joe DiStefano, CEO of UrbanFootprint, the bill would “increase market-feasible capacity by as many as 2 million new homes.” If this came to fruition, the net fiscal benefit to the state’s jurisdictions could be $6 billion in annual revenues, adds DiStefano.

Under the new bill, UrbanFootprint identified 362,000 commercial properties in California, totaling 466,000 acres that could be redeveloped into housing. This equates to 3% of all development parcels statewide and 0.6% of the state’s overall land area. Of those parcels, 87% would be eligible for redevelopment under SB 6. The organization also estimated those parcels could support a maximum of 14.2 million new dwelling units statewide. Only 14% of those units will be market feasible, or a total of 2 million units. Much of that is low-intensity housing units, such as townhomes and walk-up apartments.

The good news is that the majority of this development would take place in metro areas. UrbanFootprint found that 80% of the market-feasible capacity would happen in San Francisco, Southern California and San Diego. Unfortunately, many of these units would miss low-income areas. High-resource areas had more than double the market-feasible unit capacity with 960,000 units across 148,000 acres. Lower income markets had only a capacity for 538,000 units over 134,000 acres.

Overall, UrbanFootprint commended the bill’s ability to generate market-feasible capacity while also stimulating fiscal benefits at both the state and the local level. However, it also made some recommendations, including a suggestion that lawmakers incentivize location-efficient housing growth within existing urban areas and setting higher minimum densities to generate more intense housing development.

The affordable housing supply shortage is a national issue, and one that will require a multi-pronged solution. While California State legislators are looking at ways to adjust zoning to support more housing development, other organization are investigating financing options. A report sponsored by Capital One from the Terner Center for Housing Innovation at the University of California Berkeley highlights the fragmented nature of affordable housing and calls for more streamlined alternatives.