CA May Sue or Fine Localities that Fail To Add Housing Capacity

It’s no surprise to anyone that many California cities are struggling with severe housing shortages. There is simply not enough supply to meet demand, causing housing values and rents so spiral out of control. Unaffordability of housing is contributing to everything from homelessness to gridlock on freeways.

In a proposed solution, brokered on Thursday between Governor Gavin Newsom and the California legislature, many cities may be hit with lawsuits and steep fines for failing to meet their goals to produce new housing.

Increasing supply is a critical component to stabilizing rents and home prices, but many communities aren’t moving fast enough to greenlight new development. In an effort to provide an incentive to cities to act faster to alleviate housing shortages, the Newsom and state lawmakers used the issue to break a stalemate over the new state budget. In the agreement, the state of California would be allowed to sue cities for falling short on their housing goals, and provides financial penalties that could be levied by the courts, should the State prove their case. Those penalties could range from $10k/mo to $600k/mo.

Cities found to be negligent would have 1 year to get building started in their locations before the penalties begin. In addition, the compromise sets aside $1B to reward those cities that aggressively add housing capacity.

Newsom, Assembly Speaker Anthony Rendon, and Senate President pro Tem Toni Atkins, declared in a joint statement:

“The high cost of housing is chief among the affordability and quality of life challenges families face. Importantly, we have come to agreement on a package of housing measures, one that creates strong incentives—both sticks and carrots—to help spur housing production across this state, all while providing significant levels of funding to fight homelessness.”

San Jose Mayor Sam Liccardo is on board with the plan.  “We’re at a point in this crisis where we need more than just carrots. We need sticks.”

The proposal must still be approved by both chambers of the state legislature.

Full details are not yet available on how the proposal will be implemented.

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