By Samuel Trachtman, Senior Researcher, BESI

On March 11, BESI, in partnership with the Berkeley Center for American Democracy (BCAD), hosted Yoni Appelbaum and Jerusalem Demsas to discuss their newly published books on America’s housing crisis. Appelbaum’s book, Stuck: How the Privileged and the Propertied Broke the Engine of American Opportunity, examines how restrictive housing policies in prosperous regions have reduced economic mobility and reinforced social inequality by limiting opportunities for Americans to relocate. Demsas, in her collection of essays titled On the Housing Crisis: Land, Development, Democracy, argues that excessive local control is a fundamental barrier preventing necessary infrastructure, especially housing, from being built.

Though neither author focuses specifically on California, their insights resonate strongly with the ongoing political and policy debates here. Decades of underproduction have resulted in massive housing shortages and high costs across the state. This shortage has blocked lower- and middle-income residents from accessing opportunities in California’s most prosperous metro areas, pushing many to move to lower-cost states. Consistent with Demsas’ diagnosis, exclusionary zoning and burdensome regulations imposed by California’s local governments are the primary reasons for this persistent underproduction.

Following the talk, BESI hosted a dinner discussion exploring the political barriers to increasing California’s housing supply and potential paths forward. In attendance, alongside Appelbaum and Demsas, were leading academics and practitioners from institutions such as UC Berkeley’s Political Science Department, UC Berkeley’s School of Law, the Goldman School of Public Policy, UC Davis, as well as representatives from a number of leading California organizations involved in state housing policy.

The conversation affirmed Demsas’ central point: meaningful progress on California’s housing crisis will require significant state-level involvement in housing policy. Local government officials face powerful political incentives to cater to constituents, often vocal NIMBYs, who oppose new housing. Indeed, all around the world, when planning authority rests primarily at the local level without higher-level intervention, the result is underproduction of housing. The reason is simple: local residents disproportionately bear the perceived costs of new development (like increased traffic or reduced parking), whereas the benefits–such as greater housing affordability and economic mobility–are shared more broadly.

Yet, even with state-level involvement, California has struggled to pass effective housing production reforms. Since 2017, pro-housing advocates, notably Senator Scott Wiener, have championed numerous legislative measures intended to boost housing supply. Despite these efforts, major tangible results have largely been limited to Accessory Dwelling Units (ADUs), which experienced significant growth following policy reforms starting in 2016. Beyond ADUs, housing production remains stubbornly low. Factors like high interest rates or labor shortage cannot fully explain this outcome–states like Washington have successfully expanded housing production during the same period.

Why has California fallen behind despite passing numerous pro-housing laws? There is no straightforward answer, with different practitioners around the table offering different explanations. But a major factor, in our view, is the interest group politics. Efforts to mitigate opposition from powerful interest groups, particularly unions and environmental groups, often result in legislation that is politically viable but practically ineffective at increasing housing supply.

A notable example is SB35, a 2017 bill designed to streamline approvals for housing projects in cities failing to meet production targets. To gain support from organized labor, SB35’s includes provisions mandating prevailing wages and, for larger projects, a “skilled and trained workforce” requirement, which essentially mandates union labor. According to the Terner Center’s analysis, only 156 projects used SB35 between 2018 and 2021. The vast majority were deed-restricted affordable housing developments built with public subsidies, primarily in the Bay Area and Los Angeles. This isn’t coincidental: affordable housing projects are often required to meet labor standards like prevailing wage anyway, and high land values in these regions make it more feasible for developers to absorb the added costs of union labor.

But to meet California’s immense housing need, we need to be streamlining both affordable and market-rate housing production statewide. Relying on deed-restricted affordable housing alone is unrealistic: the levels of public subsidy required to meet demand through affordable development far exceed current spending–and the state is now entering into a period of greater fiscal constraints. This dynamic defines much of California’s recent pro-housing policy: laws that promise streamlining, but are constrained by affordability or labor requirements that make them financially infeasible for many developers. As a result, we get policy reforms, but limited impact. One notable exception is ADU policy. Streamlining of ADU production through state law has driven real production, in part because it avoids prescriptive labor and affordability requirements.

We don’t believe the answer is completely ridding labor provisions from state-level housing production bills. Such policies are unlikely to make it through the legislature, anyways. At a basic level, it should be possible to come up with effective housing reforms that work for unions, environmental groups, developers, and a public that is desperate for lower housing costs–though some level of compromise will be needed. 

There are reasons to be optimistic about the potential for more effective housing production policy moving forward. For one, the politics of housing in California have shifted in a pro-growth direction. More legislators are arriving in Sacramento with a mandate from their voters to take action on housing affordability. Structurally, too, many interest groups could benefit from expanding the housing supply. Unions and their members could theoretically gain from the jobs created by large-scale housing construction, not to mention lower housing costs. Environmental groups, too, have a clear stake, given the climate and air quality benefits of infill development over sprawl. On the business side, large employers will have greater access to the workforces they need if more housing is built in metro areas. 

That said, as we discussed at the dinner, building effective coalitions to drive policy progress remains complex and uncertain. Several challenges came up in conversation: the reflexive opposition among some environmental groups to streamlining market-rate housing; the fact that certain influential unions that oppose housing bills don’t represent a large share of construction workers, but wield outsized political power; complex internal dynamics within organized labor; and the lack of strong engagement from the business community on the pro-housing side.

Broadly, the discussion reinforced BESI’s commitment to understanding these political dynamics through our work on California’s political economy. Across many policy areas, identifying helpful policy reforms is often the easy part–it’s overcoming the political barriers to enactment and implementation that proves most difficult.

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