NMS Properties, Inc.
Neil Shekhter - Californians Suffer From Multimillion Unit Home Shortage

Californians Suffer From Multimillion Unit Home Shortage -- What Can Be Done Now?

 
 

POST WRITTEN BY

Neil Shekhter

Neil Shekhter is the CEO and Founder of NMS Properties.


The gap that exists between the number of homes demanded in the state of California and the number of homes supplied has widened rapidly in recent years and continues to grow. The housing shortage has reached surprising proportions:

• Senator Scott Wiener (D-San Francisco), a supporter of pro-development bills, told the LA Times that the shortage may be well over 4 million homes today.

• Nonprofit organization California Housing Partnership Corporation released a report that estimates an affordable rental housing shortage of 1.13 million in Los Angeles alone. 

• According to research conducted by Next10, for every 1,000 residents that moved to California, only 209 new units (net) were added between 2011 and 2016.

One look at the present trajectory, and it is obvious that a drastic change of course is needed to stimulate more homebuilding. How can the real estate industry create the dramatic pivot necessary to improve the housing supply? Unfortunately, it seems that California lawmakers are married to many of the practices that have caused the housing deficit in the state.

California legislators did approve two housing bills recently before returning to their respective counties until next year: Senate Bill 828 and Senate Bill 2939. By the time each of these was approved, they had been edited (arguably, diluted) so much that they could not possibly accomplish their original intent.

The first, Senate Bill 828, was designed to increase the regional housing needs allocation (RHNA) to 200% (modified to 125%), which in effect requires communities to set clear targets for increased homebuilding. The original bill also intended to provide legal authority to influence this outcome and would allow enforcement if the municipalities didn’t meet required goals. The bill that was eventually passed contains no increased housing target that would make the needed difference and is void of the compulsory factors that would motivate communities to act.

Rather than requiring corrective action, the bill now requires cities to track vacancy with a target “healthy” vacancy rate of 5%. Simply put, there was little difference between this bill and the advisory measures already in place that had been ignored repeatedly by California communities.

The second, Senate Bill 2923, began with the ambition to rezone more than 20 Bay Area Rapid Transit (BART) stations to accommodate residential development. According to the Senate Bill analysis, BART would be able to develop over 20,000 new units of housing, 7,000 of which would be affordable, and 4,500,000 square feet of office space. These developments would occur on top of 27 BART stations in key submarkets.

The bill was approved without a vital original component that would allow approval to be streamlined for projects that met all other criteria. This deprives the bill of the strength needed to make a major impact. And, a clause was added in the bill that made the new allowances for homebuilding nonapplicable after 10 years. This leaves tremendous exposure from opposing Bay Area officials to delay progress while running out the clock.

While both passed bills do provide some degree of progress, that progress is now likely to be much more incremental than originally intended. Senate Bill 828 ultimately added another requirement to monitor the housing crisis that publicly already exists without adding the legislative teeth needed to enforce change. Senate Bill 2923 added a major loophole allowing BART to “try” for 10 years, but not be held accountable for the results (or lack thereof). Time and money will be spent, but results may not be enforced.

Yes, compromise is a major part of the political process, but I don't believe that maintaining a failed status quo should be. It may have even been more beneficial to accept a temporary loss in a fight that could have been revisited next year than to claim a victory that is one only in name. If legislative bodies want to truly fix our housing crisis, they must be bold and embrace both the opportunity and consequences demanded in being an agent of change.

As one of the largest affordable housing developers in Santa Monica, I call on local municipalities to embrace development, whether single-family, market-rate or affordable housing. Remember, housing prices are always priced based on supply and demand — i.e., the less supply and more demand, the more expensive housing will be. Municipal residents, I call on you to attend your local council meetings and share the word. We need policy-makers to do the work so that housing can be built and this crisis facing Californians can be subdued. Only a couple million homes to go…