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OC LEADER BOARD

The Southern California Association of Governments (SCAG) recently mandated its six-member counties and 191 member cities build 1,341,849 new housing units by 2029.

Orange County’s share is 182,000 units.

In other words, state bureaucrats are expecting Orange County to build 20,200 new housing units annually for the next nine years—more than twice the current run rate.

It matters because jurisdictions must adopt a plan according to the methodology approved by SCAG.

If a jurisdiction does not comply with the allocation or does not have enough sites, it is subject to legal action. It may also be ineligible to receive certain grants and funding opportunities from the state.

Under state Senate Bill 102, which is pending the governor’s signature, jurisdictions with non-compliant housing elements may be subject to fines by the courts. Additionally, the jurisdiction may also have to implement a hasty four-year housing plan instead of an eight-year plan.

Fantasy Housing Goals

SCAG’s staff initially recommended that OC’s mandate be 108,000 residential units by 2029. The 12,000 annual mandate is a hefty stretch goal from current production levels of around 8,000 units.

Then SCAG, in a substitute motion approved last October, increased the mandate by an astounding 69% to 182,000 units. These motions resulted in lower mandates for Riverside and San Bernardino counties, which is hardly any consolation as those counties are expected merely to double their output instead of tripling it.

SCAG’s new mandate of 20,200 new homes annually in Orange County is a fantasy—and that’s putting it mildly. In the Inland Empire, even the reduced mandate is ludicrous.

The folly of these machinations can be seen in Charts 1 and 2 that show the initial staff recommendations by SCAG’s staff as compared to the substitute motion.

Secret Sausage Making

While it’s difficult to figure out how sausage is being made by central planners, we figure that SCAG’s hierarchy realized that tripling the Inland Empire’s production quota from around 13,400 in 2019 to 46,300 for every year from 2021 until 2029 might be thought absurd by reasonable people. The result is that the Inland Empire’s reduction forced SCAG to increase Orange County’s mandate.

The change will be difficult to implement.

To achieve the Orange County mandate of 20,200 new housing units per year, our conservative estimates suggest we’d have to increase the number of construction workers in the county by 39% from about 108,000 to 150,000. That increase of 42,000 construction workers doesn’t even include all the new workers needed in finance and real estate to move these new homes to the market.

With Orange County’s unemployment rate already at a low 2.5%, where will all these workers come from? If we attract them from other states by paying mega wages, who will be able to afford the homes or apartments at a new and higher price point to justify the higher wages? Meantime, where will all the new workers live?

If we imagine that they will find affordable housing in the Inland Empire and expect them to commute to Orange County, that too will be impossible. With the Inland Empire hard-pressed to double its own rate of housing production, it will have its own fish to fry.

The Clear Solutions

It would be nice to simply ignore these nonsensical mandates and chalk them up to another example of government folly. One could scratch one’s head in dismay over state or county mandates that don’t hit close to home.

However, now that SCAG’s housing mandate is shifting from the county to the cities where we live, there’s a good reason everyone is up in arms.

Why some cities in Orange County were foisted with higher mandates than others remain a mystery. What’s not a mystery is the consternation felt by the people in those cities who face these mandates, particularly Garden Grove, Huntington Beach and Costa Mesa (see Chart 3).

If it’s any relief, we believe that SCAG’s ambitious plans will probably come to nothing, other than the pain and grief it causes along the way. Just like the old soldier, blunt force social planning initiatives that ignore the forces of the free market never die, they just fade away.

What makes all this especially ironic is the abrupt pivot in statewide central planning. After all they’ve done over the years through regulatory policies to decrease the supply of housing and increase its cost, the central planners now seek to undo the damage by increasing its supply and decreasing its cost via governmental decree.

What then can state and local governments do to make housing more affordable? For starters, they can identify the most irrational Nimby and environmental regulations and fees currently on the books and eliminate them. Then get out of the way, and let the free market do its thing.

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