Q&A by Seth Sandronsky
Michael Strech helms the North State Building Industry Association, an advocacy group for the greater six-county Sacramento region’s homebuilding industry. As BIA president and CEO, he has insights on the relevant actors and factors affecting this industry, locally and statewide.
The North State BIA has been around for nearly 80 years. It works to educate elected officials and other policymakers about the need for more housing in our region, Stretch says. “That includes our input from a business perspective about government regulations and the high fees that significantly increase the costs of building a home.”
Solving Sac spoke to Strech about how his organization is helping to address the local housing affordability crisis.
What do you see as the major factors driving the housing crisis in the Sacramento region?
It is a great question and sounds easy to answer. However, the answer is more complicated. We got ourselves in this quandary by not building enough housing the past 30 to 40 years. It has taken a long time to get into this situation and will take us a while to get out of it. The simple answer is a lack of housing supply. We have not been building enough apartments and homes to meet the demand for the region’s growing population.
It takes a long time to build in California, sometimes more than a decade, even a quarter of a century to build a master plan community. We have to get many approvals at the federal, state and local levels. Eighty percent of land-use decisions are at the local level. It is a painstaking process.
Meanwhile, much of the region is off-limits to developers, which increases the prices of developed lots. In the Sacramento area, fees run $95,000 to $100,000 [from design requirements to infrastructure such as libraries, recreation facilities and schools] per new home. This is where we need to focus our efforts.
What do you see as the most promising solutions to lack of affordable housing?
We need to build enough, large and small, apartments and homes to meet the need we have in Sacramento and statewide. There has been talk about moving forward with creative ideas concerning legislation to help grow the housing stock. That is good. However, anything short of allowing builders to address the supply problem is just nibbling around the edges of how we pay for things such as prevailing wage requirements around subsidized housing. We also need to look at reforming the California Environmental Quality Act [CEQA], a state statute that GOP Gov. Ronald Reagan signed into law in 1970 that increases building costs.
What evidence exists to show the effectiveness of streamlining the regulatory process?
This is one of the most important questions. We need to go to the strategies that have worked in other locations, and replicate those that make sense. The median price of new and existing homes in California is north of $800,000. In Texas, the median price for new and existing homes is $325,000. We need to reduce costs to balance out the supply problem in California. If we build affordable homes, the market will work itself out once we make land-use decisions that green light homebuilding through reducing the transactional costs, and unnecessary litigation.
What does Texas do to reduce homebuilding costs relative to California?
Texas has streamlined approval processes, and an open for business policy when it comes to growth. Texas does not have CEQA, and allows more decisions at the local level without multiple stops along the way and additional oversight. Texas also has different funding mechanisms for infrastructure that do not increase builders’ pass along costs to homebuyers.
What limitations around these approaches exist?
NIMBYism in California is a problem for increasing the supply of apartments and homes. Public opposition to more dense housing due to a fear of lower property values is unwarranted. We have to be more open-minded and pragmatic. We have to have a pace for folks to live.
What if any impact will Gov. Gavin Newsom’s recent effort to motivate local officials to do more to help builders increase the supply of apartments and homes?
While the governor’s efforts on accountability relating to the homelessness crisis is commendable, it has little impact on the fundamental issue of the lack of homes produced. Until the state and local government remove barriers to produce homes, affordability and availability of housing will continue to be a serious problem for Californians.
This Q&A has been edited for length and clarity.
This story is part of the Solving Sacramento journalism collaborative. In 2023, we are focusing on finding solutions to the lack of affordable housing in the Sacramento region. Solving Sacramento receives funding from the Solutions Journalism Network. Our partners include California Groundbreakers, Capital Public Radio, Outword, Russian America Media, Sacramento Business Journal, Sacramento News & Review, Sacramento Observer and Univision 19.