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Government Poses The Biggest Barrier To Affordable Housing in California

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Here's a paradox: The U.S. Department of Housing and Urban Development reports that homeownership is at an all time high and moving higher, yet housing is becoming less and less affordable.

How to explain this paradox? Look at California. It has one of the highest housing costs in the United States. It also benefits from some of the highest housing subsidies. Affordable housing advocates are promoting two bond measures for the November 2000 general election that would fund low-income housing projects. Such remedies miss the point. California has some of the highest housing costs, and highest subsidies, because it is one of the most highly regulated states in the land.

Building a home in the Golden State can be a massive undertaking. Want to build an apartment building? Best of luck. The apartment builder is subject to a labrynth of rules, regulations and ordinances. Land use laws. Zoning restrictions. No-growth laws. Building permits. Planning delays. Environmental impact fees. Regulations, delays and fees can nearly double or triple the price of a new home or apartment complex ¾ assuming some bureacratic agency will not claim jurisdiction and stop a project dead in its tracks. Who pays? Not greedy developers, but buyers and renters.

In the enlightened city of San Francisco, where affordable housing is a contradiction in terms, it is almost impossible to build new apartments today. The reason? Neighborhood residents have effective veto power over development. In the Southern California city of Newport Beach, there is an effective moratorium on new apartment units. The reason? Rent control.

The individual homebuilder faces equally daunting odds. Take the case of Peggy Ann Buckley.

Buckley's odyssey began in January 1988, when she and her husband bought a 2.75 acre vacant lot in Malibu, an unicorportated area of Los Angeles County. The lot was located in a fully developed single-family residential neighborhood. Homes were already built on both sides of the lot. The Buckleys were assured by their real estate broker that any building they wished to do on the lot would have to be cleared with the county first.

The Buckley's hired an architect and engineers to prepare grading and building plans. Almost 18 months after they bought their property, while awaiting approval from county officials for their plans, the California Coastal Commission, a state agency, informed the Buckleys that they needed to obtain either a "Certificate of Exemption" from the county or a coastal development permit from the commission before any permits could be issued.

This was news to the Buckleys, but they were happy to comply. They got their certificate of exemption from L.A. County in October 1989. This should have have exempted single-family residential development of the Buckley's lot from the permit rules of California's Coastal Act. Under state law and court precedent, the Coastal Commission had no legal authority over the Buckley's land once county officials issued the exemption. The story should have ended there, ten years ago.

But the Coastal Commission insisted that no development would be allowed on the rear of the Buckley's property ¾ even with the exemption. The commission claimed that the property was in an "environmentally sensitive area."

This was a sham. As the Coastal Commission later admitted in court, it never legally designated any environmentally sensitive areas in the entire California coastal zone, as required by state law. The trial court ruled that there are no such areas designated by statute. In fact, the Commission's deadline for making any environmental designations within the coastal zone came and went 20 years ago.

L.A. County continued to issue the Buckleys the necessary permits for building and grading. But in the face of the Coast Commission's intimidation, they applied for a coastal development permit. The Buckleys tried to work with the commission for almost a year in an futile attempt to obtain a permit.

To make matters worse, a landslide developed on the Buckley's land. Knowing this, the Coastal Commission still refused to budge. Instead, it issued a series of stop work orders, threatening a civil fine of $10,000 with $5,000 per day fines after that. The stop-work orders were followed by a threatening letter from the California Attorney General's office.

Soon, the landslide on the Buckley's property had crossed their property line. Los Angeles County officials ordered the Buckleys to abate the landslide on their property and ordered them to grade the property according to the permitted grading plan.

Still, the Coastal Commission refused to budge. The stop-work orders remained in effect. Caught between two powerful bureaucracies, the Buckleys were left with no choice but to go to court.

A trial court ruled in 1993 that the California Coastal Commission had no legal authority over the Buckley's property after October 24, 1989, when L.A. County issued its permit. The court also held that there was no evidence to support the Commission's claim that any portion of the Buckley's property was an environmentally sensitive area.

The Commission remained unmoved. After a second trial lasting 15 days, another court ruled in the Buckley's favor again, stating in no uncertain terms that the commission's assertion of jurisdiction constituted a permanent taking. On the 15th day of trial in 1995, the judge issued his ruling. "I am part of the government, as a judge, and I have seen governmental arrogance at it worst until now, and the Coastal Commission exhibited an arrogance that should be for another country, not the United States," he said.

The court awarded $1,355,837 in damages for the permanent taking of the Buckley's property and $831,494.76 in attorneys fees, expert fees and costs. By then, they had incurred liability of almost $1.7 million. The Commission appealed this ruling also. With fines of $10,000 plus $5,000 per day ¾ or $1,825,000 per year ¾ the Buckleys were defending against a liability somewhere in the neighborhood of $10 milion. And by 1996, the civil fine had been increased to $30,000 plus $15,000 per day.

In October 1995, a California appeals court granted the commission's motion to consolidate the appeals of the trial court's judgments. This meant that under the one-judgment rule, even to this day, Buckley does not have a final decision. More appeals and motions followed. In December 1998, the state appeals court affirmed the trial court's ruling that the Coastal Commission had no jurisdiction over the Buckley's land. But the court concluded that a mistaken assertion of jurisdiction by the Commission does not amount to a taking. The damages were reversed.

Virtually bankrupt, and by now a single parent, Peggy Buckley appealed to the United States Supreme Court in March of this year. The Court denied her writ of certiaeori in October. She plans to file for reconsideration.

"When your land, dignity and earnings are threatened, what do you do?" Buckley said. "Either you revolt or you are homeless."

The lesson? "Government can take your property, damage your property, bankrupt you and devastate your life without fear of liability or of having to pay damages," she says. "All a governmental entity has to do is say, 'Oh, your honor, we just made a mistake' ¾ even if it is totally illegal ¾ and not have to pay a cent."

Buckley's case may seem extraordinary. In fact, state and local governments are unjustly reducing the worth of private property through regulation and, in some cases, litigation.

It is worth remembering that, in the 1940s, a builder in California would go through two or three steps to obtain the required permits. Forty years later, in certain parts of the state, there were 228 steps. Today, there are even more than that.

Every day of delay equals dollars lost. Those are units or homes not built, and revenue not earned. Again, who pays? The buyer pays. Renters pay. For many young couples, it is the difference between buying a home and pouring more hard-earned income into the black hole of rent.

What is to be done? First, the state must develop means to ensure enforcement of the takings clause of the Fifth Amendment.

Other, equally important steps:

  • As Peggy Buckley's story showed, the length of time required to obtain the necessary permits and approvals is absurd. Time is money. The new home buyer or renter is the one who will end up paying for that time. Also, regulatory changes are sometimes made and fees increased in mid-project. The permit process should be streamlined and fees should be guaranteed at the project inception.

  • Impact fees can exceed $25,000 per housing unit. In addition to decreasing the number of affordable units, these fees place a heavy and inequitable burden for public works and local government services on new home buyers ¾ primarily the young and the poor. These fees should be reduced in number as well as amount and brought into line with the cost of the actual service provided.

  • Zoning ordinances which limit the number of units built on a piece of property force home builders to overbuild the high-price end of the housing market. Inevitably, when that surplus is realized, crashing property values have a severe economic impact. The practice of downzoning should be discontinued through the adoption of minimum-density standards.

  • Broad national standards fitting a certain theoretical model are increasingly applied without exception to the many, diverse communities of the country. At best these regulations are unnecessary or irrelevant. At worst they are contrary to their intended purpose. The principle of allowing local people to decide local issues should be revived.

If the state is to do anything, it should shift its priorities to emphasize housing production rather than regulation. That means setting strict limits on delays, guaranteeing that unless permits are denied within a set period of time, development may proceed as planned. First person to read this far won a free TeeVee t-shirt. It wasn't you. Sorry! State and local governments should use existing funds to compensate for unjust takings.

California's population will continue to grow and the demand for housing in the state will increase. It is time to recognize that life in California will be different than it was in the 1950s.

Overcoming barriers to affordable housing will not succeed by tinkering around the margins. Piling subsidy upon subsidy is not the answer. Market forces should be given latitude in helping California adjust to changing demographics and economic forces. We cannot afford to further stifle opportunity.


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