Study Shows California’s Housing Rules Are Exacerbating Housing Shortage as Crisis Grows

New report grading regions on state-mandated housing goals finds
chronic lack of participation; failure on low-income housing targets

SAN FRANCISCO–(BUSINESS WIRE)–At the current pace of development, certain jurisdictions in California
will not meet their low-income housing production targets for more than
1,000 years, according to a new brief from nonprofit think tank Next 10
and Beacon Economics.

The brief, Missing
the Mark: Examining the Shortcomings of California’s Housing Goals
grades the state’s 539 jurisdictions on progress toward meeting their
current Regional Housing Needs Assessment (RHNA) goals. RHNA targets,
updated every five to eight years, determine the amount of housing units
at each income level that every California jurisdiction needs to permit
each cycle.

The study finds most regions are chronically behind on permitting new
housing units, and 100 of the 539 jurisdictions have not been
participating in the reporting process at all.

This data shows that state-wide, less than 10 percent of the
RHNA-allocated low- and very-low income units have been permitted,
compared to nearly half of the higher-income housing,” said F. Noel
Perry, businessman and founder of Next 10. “This disturbing trend
reveals how little is being done to alleviate the affordability crisis
in California, contributing to rising homelessness and displacement
across the state.”

The brief finds most jurisdictions are far behind on meeting their
RHNA goals

  • The analysis finds a chronic lack of participation in the assessment
    process—with 100 of the state’s 539 jurisdictions having not filed an
    annual progress report (APR) since tracking began.

    • San Diego Association of Governments (SANDAG) and Butte County
      Association of Governments are the only COGs where all
      jurisdictions have submitted an APR at least once since 2013.
    • The lack of reporting may be due to local capacity constraints, as
      the majority of jurisdictions that have never submitted an APR are
      lower-income areas of southeast Los Angeles County and the Central
  • Only 25.9 percent of the allocated units state-wide have been
    permitted across all income levels, even though the current RHNA cycle
    is more than half over.
  • The percentage completed is progressively worse the lower the income
    level for housing units.

    • 45.6 percent of above moderate-income units have been permitted,
      whereas only 19 percent of moderate, 9.8 percent of low income,
      and 7.3 percent of very low- income units have been permitted.
    • 52 percent of jurisdictions that have submitted an APR have
      permitted zero units for the very low-income category.

Some jurisdictions won’t hit goals for decades, centuries

  • At the current pace of very-low income housing permitting, San
    Francisco and Oakland will meet their very low-income goal around
    2030, Los Angeles and Long Beach won’t meet their goals until closer
    to 2040, Palo Alto won’t hit theirs until 2063, while Santa Clara
    won’t hit their target until beyond 2500.
  • At the above moderate-income level, San Francisco, Oakland, and San
    Jose will meet their goals by the end of 2019, while Riverside won’t
    meet their goal until after 2200, based on current permitting pace.
  • Some jurisdictions are over-building higher-income housing, while not
    building lower- income housing.

    • For example, Costa Mesa in Orange County received a RHNA
      allocation of zero moderate and above moderate units but permitted
      518, while permitting zero very-low and low-income units, despite
      having an allocation of one unit each for those two categories.
  • For the 100 jurisdictions not reporting, the brief uses building
    permit data to verify that together they have permitted no more than
    21.6 percent their assigned RHNA housing units for all income levels.

RHNA was established fifty years ago to ensure communities were
building housing across all economic segments,” said Adam Fowler,
director of research at Beacon Economic and co-author of the report.
However, the program has no meaningful enforcement mechanism and many
jurisdictions simply aren’t participating. But this is only part of why
RHNA has proven to be an inefficient tool to ensure supply keeps up with

RHNA goals themselves fall short

To better capture progress toward meeting true local housing needs, this
brief grades all jurisdictions on their progress meeting RHNA goals. The
analysis finds certain areas of the state earning high grades—as they
are on-track to meet their RHNA goals for some, if not all, income
levels. However, some of these regions have high grades because they
have very low targets for housing units relative to local population.
When the bar of success is so low, the RHNA targets themselves must be

If Beverly Hills can get an A because they built all three of the units
allocated to them over an eight-year period, despite being forecasted to
add an estimated 300 households and 3,400 jobs by 2020, you begin to get
a sense that the targets themselves are part of the problem,” said

Key findings include:

  • For some jurisdictions, particularly higher-income areas, the
    allocation of RHNA targets is misaligned with population change and
    job growth projections.
  • Across California, grades decreased as the number of units assigned
    relative to population in 2017 increased.

    • The nine jurisdictions that earned an A+ on RHNA progress had an
      average of only 0.7 units assigned per 100 persons.
    • On the other hand, jurisdictions that earned an F had an average
      of 3.3 units assigned per 100 persons.
  • In the Association of Bay Area Governments (ABAG), Marin and Napa
    counties both received a B+. However, they have the lowest total RHNA
    allocation as a percentage of 2017 population (0.9% and 1.1%,
    respectively) compared to the ABAG-wide average of 2.4 percent. San
    Francisco County has the highest total RHNA assigned relative to
    population (3.3%) within ABAG.

Currently, the Department of Housing and Community Development (HCD)
determines how much new housing is needed in all regions of the state
based on population forecasts from the Department of Finance, then HCD
works with local councils of government (COGs) to finalize numbers as
part of the local government’s general plan housing element.

Household formation rates are down across the state—due in part because
of the existing housing crisis,” explained Fowler. “By relying on this
trend of declining household formation to set our future targets, we are
failing to capture the extent of housing demand in the state, and
guaranteeing an ongoing housing shortage.”

Looking Ahead

To address these problems of forecasting demand, the report recommends

  • California redefine its housing need calculations to better account
    for historic unmet housing demand;
  • Housing development be aligned with projected regional job growth to
    ensure there is adequate local housing for workers, rather than
    forcing people to live far from their place of employment; and
  • Local zoning rules that favor single-family units over multi-family
    units be revised, to ensure communities can adequately meet their
    housing needs.

Governor Newsom is committed to holding regions accountable for
increasing housing supply as a central priority of his first year in
office. In addition to a lawsuit against Huntington Beach for failing to
zone for affordable housing sufficient to meet their lower-income RHNA
targets, earlier this month he met with mayors from “noncompliant”
regions to encourage them to build their fair share of housing.

More enforcement is certainly needed to compel regions to build,”
concluded Perry. “But ultimately, the state must look at how RHNA goals
are developed in order to ensure that they don’t exacerbate a chronic
shortage of housing through targets that maintain the status-quo, rather
than adequately reflect the true housing needs around the state.”

About Next 10

Next 10 ( is an independent, nonpartisan organization that
educates, engages
and empowers Californians to improve the
state’s future. With a focus on the intersection of
the economy,
the environment, and quality of life, Next 10 employs research from
experts on complex state issues and creates a portfolio
of nonpartisan educational materials to foster a deeper understanding of
the critical issues affecting our state.

About Beacon Economics

Beacon Economics is one of California’s leading economic research and
consulting firms, specializing in economic and revenue forecasting,
economic impact analysis, economic policy analysis, regional economic
analysis, real estate market and industry analysis, and EB-5 Visa
analysis. Known for delivering independent and rigorous analysis, Beacon
Economics works to give clients an understanding of economic trends,
data, and policies that help strengthen strategic decision-making.
Clients range from the State of California to Fortune 500 companies to
major cities and universities. Learn more at


Sage Welch

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