Planning to Fail

On June 18th, the Association of Bay Area Governments (ABAG) announced their plan for how many homes the Bay Area must build over the next 8 years. This number is less than half of what we actually need. ABAG is planning to fail. We must take action to push back now.

By Sara Ogilvie and Sid Kapur of YIMBY Action

What does giving up look like? In the San Francisco Bay Area, our regional governance body is committing to a plan that fully admits they don’t plan to curtail overcrowding, they don’t plan to address our housing needs, and they don’t plan to make the Bay Area affordable.

The Association of Bay Area Governments (ABAG) and California Department of Housing and Community Development (HCD) recently announced their initial housing needs target for the next eight-year cycle. If the proposal stands, starting in 2023, cities in the nine-county Bay Area region will need to collectively zone for around 440,000 new housing units, of which 114,000 would be reserved for very-low income and 66,000 for low-income households. These may sound like big numbers, but the data tells us that this is about half what we’re going to need.

We’re not all sour grapes. It is true that thanks to recent legislative reforms, this represents a significant improvement from previous housing planning cycles. In the last cycle, the Bay Area only had to plan for 187,000 homes, despite having one of the strongest regional economies in the country. While this new proposal is certainly a step forward, it is simply not enough, especially in light of ABAG’s own regional forecasting. We have already lived through one cycle where our plans were wholly insufficient for the housing demand that arose. We can’t make the same mistake again.

YIMBY Action and several other housing activist coalitions are calling upon ABAG to appeal this number and apply a higher number that matches the scale of the racially, socioeconomically and generationally charged housing shortage in the Bay Area. As we show below, for each input ABAG asked for the bare minimum number to comply with the law, and as a result the final number is much smaller than what a reasonable and forward-thinking body would choose. This is planning to fail.

We recommend ABAG President Jesse Arreguín choose a target of 1,000,000 new homes for this housing needs cycle.

Link to source of table: https://docs.google.com/spreadsheets/d/1WTABrau_Wxsj94UNfrme-uR_rVYcFum2nSm6xacJj7A/edit?usp=sharing

Calculating New Housing Needs

The Regional Housing Needs Allocation Law, known as RHNA (pronounced “ree-na”), dictates that every seven years, the HCD and councils of governments for each region (ABAG in this case) work together to plan for housing growth over the next cycle. The first step in the process is the “Needs Determination,” the total number of housing units each region needs to build. The law requires them to use the following factors to calculate this number:

• Expected amount of jobs and population growth over the next seven years
• Number of households spending more than 30% of their income on housing
• Rate of overcrowding, defined as households living with more than one person per bedroom
• Vacancy rates of housing in the region; the Bay Area, for example, has a rental vacancy rate below 3%, well below the rate for a healthy housing market, typically around 5–8%.

This cycle, HCD designed a formula that takes into account each of these factors. While the formula is mostly set in stone, the inputs to the formula are not. ABAG and HCD have a lot of latitude to determine which exact inputs to use when applying the formula:

Number of households in the year 2030 = population in 2030 / number of people per household

Overcrowding adjustment = current overcrowding rate - target overcrowding rate

Vacancy adjustment = current vacancy rate - target vacancy rate

Cost burden adjustment = current cost burdened rate - target cost burdened rate

Housing needs target = (1 + overcrowding adjustment + vacancy adjustment + cost burden adjustment) * 2030 households - current households

Over the last few months, HCD and ABAG staff members discussed which inputs to use in this formula, but their choices were not revealed until this week. Adjusting these inputs to be more realistic causes this number to be as high as 900,000 or even above 1,000,000 (where “population in 2030,” “number of people in each household,” and “target cost burdened rates,” are the most impactful factors).

Population Projections

The “population in 2030” and “number of people per household” figures that HCD used are based on the California Department of Finance’s economic forecasts, which estimate what each county’s population will be over the next 60 years assuming no change in housing policy.

Once you dig into them, these projections seem almost dystopian:

• They forecast fewer immigrants will move to the Bay Area next decade than this past decade, and that net domestic migration will stay at basically zero — meaning each person that moves to the Bay Area causes an existing person to be displaced out of the region.
• They assume birth rates will keep falling, as tens of thousands of people in their late twenties and early thirties continue to move to other parts of the country to raise a family. Deaths will outnumber births in San Francisco, San Mateo, and Marin counties by the end of the decade; the number of children in the region will fall by over 100,000 in ten years.
• They use status quo assumptions about the average household size in the Bay Area, meaning they expect people to continue living with parents or housemates well into their twenties, families to live in SROs and small apartments, laborers to live 6 to a room at much higher rates than in the rest of the country.

The California Department of Finance (DOF) is aware of this. In their documentation, they explicitly warn that these estimates do not account for “changing economic conditions … or planning decisions,” that they “do not account for … the existence of pent-up demand in today’s market,” and that “projections of future housing and housing needs are the responsibility of HCD and may use differing assumptions and methods.” As ABAG staffer Paul Fassinger admitted, “The DOF forecast is basically a status quo forecast, where the Bay Area gets even more expensive every year going forward. So, a continued housing cost burden for our residents, a continued set of challenges that constrain growth and really double down on this polarization between high-income and low-income and a declining middle class.” This is planning to fail.

Plan Bay Area 2050

These state generated predictions are not the only population estimates available. State law requires ABAG to also develop its own population projections, as part of its sustainable transportation planning process Plan Bay Area 2050 (PBA), and requires ABAG and HCD to consider both sets of numbers when choosing the final housing needs goal. Yet while ABAG has spent three years, and millions of taxpayer dollars, on PBA, it has decided to ignore its population predictions in the Housing Elements process.

While the state numbers rely on status-quo demographic trends, PBA uses a much more sophisticated computer simulation of job creation, transportation infrastructure, household movements and housing development over time. At its heart is the assumption that future job growth is the key determinant of population growth, but it also takes into account demand for housing as well as zoning constraints that “provide a balance of community and regional goals.” While the state numbers predict that the population will grow only 5.7% between 2020 and 2030 — significantly less than the 9.0% growth the Bay Area saw last decade — PBA makes a much more optimistic prediction, of about 10.1% growth, by 2030. Switching to this higher population projection alone increases the total regional housing needs number by around 160,000, to 600,000.

Cost-Burden Adjustment

The other major issue with the numbers is the calculation of the cost-burden adjustment. As UC Davis Law professor Chris Elmendorf explains, the comparison areas HCD used in setting the “cost burden target” include slow-growth metros like New York, Denver and Boston and ignores affordable, high-growth metros in the South and Southwest. By setting our target based on high-cost, housing-constrained coastal areas, they concluded that only around 9,000 Bay Area households are overly cost-burdened.

Because we are comparing the Bay Area to other high cost metros, the current ABAG goal is that 66% of Low Income Households will be cost burdened. California Renters Legal Advocacy and Education Fund (CaRLA) Organizer Victoria Fierce points out, “ ABAG should aim for zero rent burden, instead of deeming some level of it acceptable.”

If HCD had instead used a national average cost burden percentage, as they did in Southern California’s housing needs calculation, we would have received a much larger figure of around 115,000 units. Using this more reasonable cost burden target combined with the PBA population projection above would bring the total number to over 700,000 units this cycle.

Jobs-Housing Imbalance and Other Adjustments

While we have emphasized the two changes mentioned above because there is strong precedent for ABAG and HCD to make those changes, they are not the only improvements that could be made. The statute calls for HCD to take into consideration “any imbalance between jobs and housing,” yet HCD has not added any factors in their formula to account for the roughly 200,000 people who commute from the Central Valley to the Bay Area. Finally, as mentioned above, the “number of people per household” figure HCD used (2.68 people per household) is based on the crowded status quo in the Bay Area, and should also ideally be replaced with the national average, which is 2.52.

The Commentary

YIMBY Law Executive Director Sonja Trauss and several housing coalitions and activists organized to attend the ABAG remote public hearing and petition the Directors to appeal to the higher Plan Bay Area RHND number. Thanks to remote public comment, initiated in response to the pandemic, five dozen attendees were able to participate in the hearing via Zoom. For over an hour, attendees flooded the lines urging ABAG to appeal.

CA YIMBY Organizer Aaron Eckhouse, who was live tweeting the event, capturing attendees’ comments, expressed he’s “disappointed this number rejects the brighter future of Plan Bay Area and accepts a higher than necessary level of rent burden and reduced family formation.” Jonathan Singh of East Bay for Everyone said, ”Our region needs to plan for more population growth because we’ve done a poor job of planning for the people already here, let alone more people moving to the Bay Area.”

YIMBY Action Board Member Steven Buss stated he was “disappointed that these numbers are not higher; California has a 3.5 million home shortage and this just isn’t enough. We are kicking people out of the state in order for people to move here and that shouldn’t be how we run this region.” Landscape Architect Adam Nugent implored, “If our plan is to extrapolate the past decade out based on other regions facing a housing crisis, we will lose another decade treading water. My San Mateo neighborhood is rapidly gentrifying and there are almost no young Black people left here.”

YIMBY Action Member Charles Whitfield compared ABAG’s regional planning to running a cursed grocery errand, where someone constantly runs out of milk every week but uses that problematic milk-buying history to determine how much milk to purchase on their next shopping trip: “Let’s see, every week for the past month I bought ½ a gallon of milk, and every week I ran out of milk after 2 days. Based on this data, next week I’ll need … exactly ½ gallon of milk!” David Watson of Mountain View YIMBY, a father moved by Mr. Whitfield’s analogy, agreed: “Take your own advice [ABAG] and use the analysis that shows we need far, far more housing.”

“In less than 24 hours, advocates from all over the Bay wrangled dozens of people to give public comment at ABAG stating that the new housing needs assessment number is far too low. Not a single board member even acknowledged the comments,” observes Jordan Grimes, Peninsula for Everyone Lead. “Really says a lot.”

The Call to Action

Perpetuating housing disinvestment and scarcity is tantamount to perpetuating illegal practices such as housing discrimination. ABAG and HCD are cynically choosing a future where people will still be crushed by higher rents and less opportunity, where children will become an endangered species and fewer families can afford to live here. It’s a future empty of hope and full of despair.

ABAG staff knows the DOF forecast does not comply with the intention of Housing Elements Law and should not knowingly subject the constituents they serve to higher rents, worsening overcrowding, and more racial and economic exclusion. ABAG has a legal and moral obligation to appeal the underwhelming state government generated RHND number and apply the same smart growth numbers presented to the federal government for transit investment as generated by the taxpayer funded Plan Bay Area 2050.

How you can help

Sign this YIMBY Action Petition asking every member of ABAG to appeal to the higher number of housing units for the Bay Area. Reach out directly to the members of ABAG at [email protected] or (415) 820–7900 and inform them that the current housing numbers are a plan to fail. Email ABAG SF Bay Area President Jesse Arreguín at: [email protected] and let him know Plan Bay Area demands more homes! Ask for 1,000,000 more units for this housing cycle. Our region’s future is at stake!

Can’t take action but want to sponsor someone who can? Make a donation at yimbyaction.org/give. Your dollars will help us fight for 1,000,000 homes.