Staedler: Newsom’s proposal is bold. Let’s get even bolder.
In this Monday, Jan. 7, 2019, photo, California Gov. Gavin Newsom holds his son Dutch while giving his address at his inauguration in Sacramento, Calif. Newsom gets his chance this week to show how he'll resolve a central tension in his platform: advancing expensive new programs while maintaining robust savings. (AP Photo/Eric Risberg)

As we look for movement in alleviating the housing crisis, Gov. Newsom delivered a solid and thoughtful proposal with a serious amount of cash to back up his resolve.

It’s getting a fair amount of press, but in case you missed it, here is a summary of his proposal from Newsom’s website.

An unprecedented and historic effort to incentivize housing production: To address California’s housing affordability crisis, the governor’s budget proposal includes $1.75 billion to spur housing development and promote economic growth. The budget allocates $500 million for incentives for localities that create new housing and $250 million to provide technical assistance to cities and localities to responsibly ramp up zoning and permitting processes.

The budget also invests in housing solutions for the missing middle class that too often cannot find affordable housing near their jobs. This includes $500 million for tax credits and $500 million for home construction.

Developing affordable housing on state lands: Gov. Newsom signed an executive order to develop affordable housing on excess state lands. The executive order directs the Department of General Services (DGS) to take an inventory of all state-owned lands for potential development no later than April 30.

The Department of Housing and Community Development and Housing Finance Agency will be directed to develop new screening tools to evaluate state lands and, where appropriate, state agencies can consider exchanging excess state land with local governments for other parcels, for affordable housing development. DGS, in consultation with the Department of Housing and Community Development, can accept proposals from developers of affordable housing interested in entering into low-cost, long-term ground leases of parcels on the priority map.

Working with the Legislature to address the rising cost of rent: The governor appears to be committed to increasing protections and relief for renters. Newsom said he looks forward to working with the Legislature to find common ground on efforts to prevent rent spikes and create stability for renters.

This was presented at a roundtable discussion in San Jose with city residents alongside Mayor Sam Liccardo in South San Jose. “The California Dream is in peril if we don’t act to address this housing crisis,” Newsom said. The governor made it clear that he was determined to make every effort to achieve his “stretch goal” of 3.5 million units over the next seven years.

His quote of “We are not playing small ball with housing” got me thinking. In my personal opinion, I don’t think he’s going big enough. His intentions and desire is to encourage change, but he is leading a state that’s the fifth largest economy in the world.

Not the fifth largest in the country — the world — and we need to act like it.

The state needs to tackle underlying reasons for high rents and not just throw money at the problem. Besides the NIMBY attitudes across the state, one of the biggest issues is the cost of construction. It has continually increased and has been an excuse by housing developers for not starting projects as quickly as needed.

I fully support the current proposal and the governor, but here’s my bold proposal to take it a step further.

California needs to act like a nation state and negotiate trade deals for housing construction commodities such as timber, steel and concrete. We’ve all seen the benefits of buying in bulk at Costco, let’s have the state buy in bulk with a capital B — in billions — and then sell it at cost for affordable housing development.

I’m not talking about opening an account with Lowes.

I’m talking about soliciting proposals and having countries and large corporations compete to provide large quantities of materials which then would be sold at cost to affordable housing developers.

This could be overseen by Housing & Community Development (HCD) and Finance Department. It’s hard to quantify the savings, but on the face of it, it should provide significant savings. This would cut out two to three levels of intermediaries and have a direct impact on the bottom line of affordable housing developers.

With affordable housing developers not competing with market rate development, it should lower their cost as well. You could create a separate market rate purchasing program for market rate housing with the savings.

With the fifth largest economy also comes the ability to go get cheaper financing than traditional bond debt in the past.

The Governor could simply go to the international bond market and have them compete for providing the money needed for his proposal and my “buying in bulk” proposal. Foreign banks would love to work with California in creating a financing platform. Don’t be surprised when those banks show interest in undercutting the traditional U.S. bond market. It is music to their ears when they underwrite “sovereign guaranteed” backed debt.

I discovered this desire when I went to Dubai in 2015 and met with a bank that was desiring to do business in California refinancing bonds at much lower rates. But when a certain U.S. Presidential election in 2016 shocked the world, they decided to look elsewhere.

What I learned is that the world recognizes the strength of the California economy and wants to be part of its ongoing success. After the Wells Fargo and JP Morgan scandals, it might make sense to start looking elsewhere for new bond debt.

This all goes back to the governor’s “not playing small ball” mentality. I fully believe that he wants to solve this crisis and has the will to get it done. The state Legislature needs to step up and back his aggressive funding request. We need to take a moment and remember that while federal politics is not likely to become civil anytime soon, we as Californians are a resilient and innovative bunch. Unfortunately, California has never received the level of resources deserved from the feds in return for our contribution to the U.S. economy.

Let’s ignore the partisan politics and be the California powerhouse and act like the powerhouse that our economy has become. This should be taken as encouragement to the governor, not a rebuke. His proposal is a good start. Onward and upward, that’s where we go from here.

San José Spotlight columnist Bob Staedler is a principal at Silicon Valley Synergy, a San Jose-based land use and development consulting firm. His columns appear every first Monday of the month. Contact Bob at bob@svsynergy.com or follow @BobStaedler on Twitter.

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