Housing Caps: A Growth Control Mechanism that Won't Go Away
When voters in Tracy approved an annual "cap" on new housing construction last November, it was the first time since the late 1980s that a California municipality enacted this venerable — yet controversial — method of restricting growth. After grinding through 1,000 to 1,500 residential building permits annually for the last several years, the San Joaquin County commuter town will now have to restrict itself to 750 permits in any one year — and an annual average of 600.
Until the passage of the Tracy housing cap, it seemed like the housing cap was a dying mechanism — a vestige of an earlier era of suburban growth, now limited mostly to older suburbs in coastal metropolitan areas like Sonoma, Ventura, and San Diego counties. After all, housing production has been off dramatically in California ever since the latest economic upturn began in about 1996. Thus, the caps had not really come into play. Most of the towns that have them are inner-ring suburbs that are now adding more jobs than housing. And the growth management tool of choice these days seems to be the growth boundary, not the growth cap — a decision to focus on geography, not quantity.
Yet in the last couple of years, a number of cities have voted — either by initiative or council action — to renew their housing caps for another decade or two. These jurisdictions include Simi Valley and Camarillo in Ventura County, and several communities in San Luis Obispo County. At the same time, several cities have actually bumped up against the annual cap for the first time in many years. And the successful
Tracy initiative suggests that the caps might move inland in certain parts of the state, especially in San Joaquin and Stanislaus counties, where Bay Area-style growth restrictions might reasonably be expected to follow Bay Area-style growth.
All of this means that, whatever its limitations as a growth management mechanism, the housing cap has not gone away.
Housing caps emerged in the Bay Area in the early 1970s, when burgeoning suburbs such as Petaluma found themselves in the same position that Tracy is in today — suddenly accessible to growing job centers (in Petaluma's case, because of the completion of Highway 101) and therefore attractive to starter-home developers. Indeed, Petaluma was the test case for housing caps in California; after imposing a restriction of 500 houses per year in the early 1970s, the city fought a long, hard — and, ultimately, successful — battle against the building industry to affirm the constitutionality of
the restriction. (Construction Industry Association, Sonoma County, v. City of
Petaluma, 522 F.2d 897 [9th Cir 1975].)
Once the courts upheld the constitutionality of the housing cap, it quickly became popular — especially among growing suburbs in the Bay Area, in Ventura and San Diego counties, and in communities along the Central Coast. In Santa Cruz, Monterey, San Luis Obispo, and Santa Barbara counties, the mechanism was often a "population cap," but it was still implemented as a restriction on the construction of new housing units. By 1992, according to a report by UCLA researchers Madelyn Glickfeld and Ned Levine, about 60 cities and counties in California — more than 10% of all jurisdictions — had a limit on housing or population that restricted construction. Almost all of
the caps were in coastal counties.
Over time, the implementation of housing caps became a tool not simply to restrict the overall growth of a community, but also to increase the quality (and cost) of development as well. Once you restrict the number of houses that can be built, then you have to come up with an allocation process. Most communities chose to use what came to be known as a "beauty contest" — a competition in which developers often sought to outbid each other in offering up community benefits. Most jurisdictions have a laundry list of desired items; and while some of them involve basic community infrastructure (sewers, water, roads), many city councils and boards of supervisors also give high priority to upscale suburban amenities, such as parks and equestrian trails. As a result, some communities have successfully used the beauty contest to transform themselves into desirable, upper-middle-class suburbs with high home prices. But have they successfully used housing caps to restrict or manage growth in any kind of useful way?
That is a tough one. There is no question that housing caps have given local politicians and local voters the illusion of control. In fact, however, from Petaluma's experience forward, housing caps have usually been set high, in response to a crisis. So, in most years and in most communities, the number of proposed housing units has not come close to the ceiling. In Petaluma, for example, the annual 500-unit cap set in the early 1970s seemed low compared to the 900 units that were coming through the pipeline at that time — but it was much higher than the historical 200 to 300 units per year the city had been getting. Similarly, Tracy's cap of 750 seems low compared to the 1,200-1,500 permits the city has processed in recent years. But it's worth noting that during the recession a few years ago, Tracy had imposed such high impact fees that most projects there did not pencil out and hardly anything was built.
Indeed, research by planning professor John Landis of University of California, Berkeley, has found that virtually all cities with housing caps imposed them during the middle of a boom, and set them at such high levels that the city hardly ever hit them again. And when comparing overall residential growth, he found there was hardly any difference between communities with housing caps and those without. (In his analysis, he used "matched pairs" of similar communities, one of which had a cap and one of which did not — Upland and Redlands, for example, and Turlock and Lodi.) It did not really matter whether the builders were stopped at the ballot box in November or nickel-and-dimed before the planning commission every Tuesday night. The result was more or less the same.
Ironically, a housing cap no longer seems to be a sure way to restrict a city's population any more — largely because household sizes are increasing throughout the state. For example, in Ventura County, Camarillo — which has had a housing cap for almost 20 years — recently renewed its ordinance. This led the local newspaper to extol the virtues of housing restrictions by comparing Camarillo to its blue-collar neighbor, Oxnard. In fact, however, Camarillo's population grew faster during the 1990s, even with the housing cap, than Oxnard's did without a cap (21% for Camarillo to 12% for Oxnard).
Maybe this is why many suburbs with housing caps have gone one step further during the last few years and adopted urban growth boundaries. Housing caps may dampen demand in the occasional white-hot real estate market — not such a bad thing, actually — and they may encourage developers to build bigger houses in order to pay for all the amenities demanded by the local "beauty contests." But it's not clear whether they truly shape or manage growth.
Of course, most cities in California really do have housing caps embedded in their general plans. It's called the "build-out" scenario, and it's a long-term restriction on growth, rather than a short-term restriction. Instead of holding a community to 500 units annually, the general plan build-out may impose a limit of 10,000 units over 20 years. This is probably a better way to handle things — allowing for a few ups and downs in the market and managing growth according to a more cohesive overall vision than simply requiring a few equestrian trails.