As tens of thousands of lower-income Californian renters have been displaced from California’s growing job centers over the past five years, a debate has been raging about whether governments should do more to promote investment in affordable housing or instead focus on unshackling the private housing market. The latter theory, promoted by institutions ranging from the Legislative Analysts Office to capital market providers and even a conservative renters’ organization, has been that if governments only removed enough regulation, private developers would produce enough new market-rate apartments such that rents would decline and become affordable again.
A new study by two researchers at UC Berkeley finds that while production of market-rate homes can have a helpful effect on lowering median rents at a regional level, investing in the production of new affordable rent-restricted homes is twice as effective at reducing displacement. In so doing, the study criticizes the LAO’s flawed methodology, which excluded data on subsidized housing, as well as some of its conclusions.
Study Implications for California Budget Negotiations
What do the new study’s findings imply for the state budget negotiations currently underway? Here is the key finding: “producing market-rate housing alone will not improve affordability for low-income households,” says Miriam Zuk, who heads the project based at UC Berkeley’s Institute of Governmental Studies along with UC Berkeley city and regional planning professor Karen Chapple.
My conclusion is that California needs both more investment in permanently affordable homes for our lowest income families, seniors and especially the homeless and more market rate production that includes a percentage of the homes priced at levels affordable for lower and moderate income households. That’s why the California Housing Partnership is supporting both the State Assembly’s call for investing $650 million in new affordable housing production, which will be voted on today, and the Governor’s proposed by-right legislation, with the caveat that the latter needs to be tweaked as follows:
- Recognizing that research has shown that placing affordable homes near transit has the greatest potential to lower GHG emissions as well as to improve the odds of success for lower-income households, make the affordability threshold for urban infill developments 20% of the homes for property located near transit.
- Clarify that to qualify, developers must set their rents to be affordable to households earning no more than 50% of the area median income, not 80% as currently proposed, which is appropriate for home ownership but not rental housing.
- Stipulate that the by-right affordability targets do not override stronger existing requirements. In other words, if a local government has a stronger affordability standard that has been regularly applied in the past five years, developers must meet that standard to claim the by-right exemption from discretionary approval reviews.
– Matt Schwartz, President & CEO