State Administrative Review of Local Constraints on Housing Development: Improving the California Model

Starting in the 1970s, the West Coast states coalesced around roughly similar responses to the problem of excessive local restrictions on housing supply. Local governments were charged with making plans to accommodate projected population growth, subject to review and approval by a state agency. In California, a city’s housing plan must also analyze, mitigate, and remove “constraints” to the development of housing in general. This component of the plan has received little attention, and, according to a recent report of the State Auditor, it hasn’t accomplished much. We argue that it could accomplish much more—if the state housing agency develops practical strategies for dealing with information asymmetries (the agency’s limited knowledge of local regulatory practice) and the substitutability of constraints (knock out one, and another can be deployed in its place).

Our response to these challenges runs on two principal tracks. First, we recommend that the state rebuttably presume that local governments in expensive areas have substantial regulatory constraints if their rank by housing price (rent) exceeds their rank by rate of housing production. These local governments would be expected to provide regulatory accommodations when actors with better information about constraints—namely, developers—show that sites that the local government has represented as available for development are impractical to develop at their nominal capacity. This is a way for the state to achieve mitigation of constraints even when it’s very hard for the oversight agency to see or evaluate them.

Second, to pinpoint sources of constraint and assess compliance with applicable benchmarks, we propose that the housing agency establish several new reporting and analytical requirements. The cumulative effect of local constraints should be assessed by simulating the entitlement of “prototype projects” on a random sample of parcels. Local governments also should be required to upload standardized, geocoded zoning layers and parcel characteristics; to track and report legally salient milestones for actual development applications; and to complete a questionnaire about certain types of constraints that the other approaches are likely to miss.

A workable framework for constraints review and mitigation could reduce the stakes of the state’s “housing need” determinations and provide a model for other states seeking to liberalize the supply of housing in expensive, high-opportunity metro regions.