Report: CA Needs to Triple its Home Construction Pace

Originally published by: Sacramento Business JournalOctober 25, 2016

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California’s housing shortage has grown so severe in recent years that stricter policies are needed to provide homes for the state’s 39 million residents, advocates a new report from McKinsey Global Institute.

The Golden State would need to triple the pace of construction over the next decade to keep up with population growth, the report found, building 3.5 million homes by 2025.

Sacramento County could increase its single-family housing stock by 61,000 units, or 16 percent, by building under a smart-growth framework that prioritizes access to public transit, the authors noted.

But in order to get there, policymakers should consider withholding tax dollars from cities that don’t meet housing benchmarks, said Jonathan Woetzel, director of the McKinsey Global Institute and an author of the report.

“The cities don’t have the capacity to do development,” he said. “They are standing in the way of an opportunity for the broader community. What is the leverage that region or state has on the local community?”

The report arrives a couple months after a proposal by Gov. Jerry Brown to allow builders to bypass some local regulatory approvals died amid opposition from local governments, unions, environmentalists and neighborhood groups.

Beyond greater streamlining of permits, California lawmakers should consider allowing developers to appeal to higher regional authorities when projects are denied by local government, the report said.

Michael Strech, CEO of the North State Building Industry Association, said the report rightfully points out California’s dire housing situation, but added that he prefers collaborative policies to penalties when it comes to enticing communities to embrace building.

“I would like to think that great minds can come up with great solutions without making it a punitive issue,” Strech said.

Some highlights from the report:

  • California places 49th among states for housing units per-capita.
  • California loses an average of $3,500 in economic output per-person per-year due to over-expensive housing.
  • The state could add 5 million new housing units that fit within a smart-growth framework, which would include adding housing to vacant land already zoned for multifamily housing and adding single-family units on land currently dedicated for non-residential use.


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