I Have Some Questions for the Democrats Who Want to Run California

Introduction

0:00Hi, I'm Juliette from New York Times Games, and I'm here talking to fans about our games. So you play New York Times Games. Yes. Do you have a favorite? Connections. It just scratches an itch in my brain to be out of the box thinking with that game. I play with my husband every night. I refuse to let him play it without me. He will always get the purple first, and I always get the fun ones that he doesn't think about. I love that it's like a real-life connection while you guys play Connections. Very sweet. I promise I didn't play that. You can play all New York Times games at nytimes.com slash games or on our app.

Forum Introduction

0:34On Friday, I moderated a forum with the top five Democratic candidates for governor in California. We invited the Republicans too, but they didn't show up. On housing costs and housing affordability and what can actually be done about it. I think if you're in California particularly, but even if you're not, seeing how the Democrats running to lead the largest state in the nation with arguably the worst housing crisis in the nation, seeing and hearing how they're thinking about actually trying to solve it

1:04is really, really instructive for where our politics might be going. Enjoy. It is my total honor and privilege to introduce to you Mr. Ezra Klein and the candidates who are participating in this event.

1:34All right. Hello, Oakland. Oakland. Oakland. Oakland. Oakland. Oakland. Oakland.

1:40All right. Welcome to the beautiful Calvin Simmons Theater. We are thrilled you're here. The candidates on the stage tonight are, according to the polls, the five top Democratic candidates in this race. Tom Steyer, Javier Becerra, Katie Porter, Matt Mahan, and Antonio Villarigosa. Give them a hand. Thank you. I should say we invited the top Republicans, too.

2:11Unfortunately, they could not make it tonight. There have been a lot of debates lately, a lot of debates this week. This is not one of them. What we're doing here tonight is a forum and on one topic, a topic that deserves 90 minutes of our attention, which is California's housing crisis. We're going to have three sections. Each section, I'm going to spend about six minutes talking with each candidate in turn. I'll ask follow-ups if we have time. I want to give people the opportunity to hear all of you thinking through these issues aloud.

2:43At the end of that six minutes, a bell will sound like this.

2:49That bell slightly breaks my heart. I'm a podcast host. I want to give you all 90 minutes each. But you're going to get very mad at me if I don't keep this fair. So we're going to try to keep it very fair. We are asking candidates not to jump in or interrupt each other. You are free to criticize each other in your answers. But if you do it, that candidate you criticize is going to get a minute to respond and you are not going to get more time. So strategize accordingly.

3:16And to the audience, please hold your very much merited applause here until the end. Candidates have not seen the questions here in advance nor have any of the organizations that are co-hosting the event. With all of that out of the way, let's get to the reason we're actually here.

Housing Crisis

3:32Governor Gavin Newsom came into office in 2019 with a promise to build millions more homes. And in the years since, dozens of pro-housing laws have passed, some of them written by heroic legislators in this very room. And yet the number of new homes being built in California is basically the same as when Newsom took office. Housing is a slow and hard problem to solve. That some of these bills may just take time is true, but we've also seen that they will take leadership

4:02and courage, that even good laws that we need encounter resistance and headwinds along the way. So all of you want to build more homes. You all have detailed plans to do so. So the question of tonight is what has to happen to convert these good intentions into homes that people can live in? And how do we protect those in need or at risk in the meantime? We're going to begin by taking on something you all identify as a problem, the very high cost of construction in California.

Construction Costs

4:33And Mr. Starr, we're going to begin with you. A RAND study found that the cost per square foot of constructing an apartment in California is over twice that of constructing it in Texas. Why do you think that is? And what would you do about it? So I know that, in fact, what's driving that up is the way that we construct the cost of labor, the cost of materials, and the cost of financing. And for us to drive down the cost per square foot of housing

5:03to a place where we can afford to build these houses and people can afford to buy them, we're going to have to make some real changes in the way we're going about this. So let's talk about two of them, which is one about the construction on site. And we are building houses and we are building apartment buildings the way we have been doing it for 100 years. And there is new technology to do this where you basically construct, manufacture the parts of the house off-site

5:38the way you'd construct or manufacture a car. And then you assemble it on site. And the estimates that people have, both from the real world of having done it, but also projecting what they think they could do, start at 20%. And they go up from there. And these are real things. And these are companies that are like manufacturing companies. So therefore, they need revenues and orders. And the state of California can do that. And it can change the building codes.

6:11The second thing in order to drive down the cost of housing is about finance. And the state of California has a number of finance programs. In fact, Buffy Wicks is proposing a $10 billion housing bond, which I think is incredibly important. And I should say... Excuse me, excuse me. Hold it till then. And I should say that the nonprofit community bank that my wife, Kat Taylor, and I started in Oakland, California, has financed 17,000 low-income housing units. We need to use finance much more aggressively

6:43to drive down the cost of housing. And the third thing I'll say is this. The cities and counties in California do not want to have housing in general. As someone said to me one time, they'd rather have a used car lot than they would a new housing, you know, a new apartment building. The reason is used car lots don't go to school. Used car lots don't take healthcare costs. And so a real reason that housing is so expensive,

7:14both in terms of the time that it takes to get permits, but also cities and counties will charge very large fees, up to 20% of the cost of the house so that they can sort of preload the cost of having new inhabitants in their community. I've said that I will, on day one, call a special election to close a corporate real estate tax loophole worth over $20 billion to the state of California

7:46so that instead of, when we're talking about a new housing facility in a city or county, it's not an unfunded liability, an unfunded mandate, it's a funded mandate. And we can then work with the cities and counties and they can stop dragging their feet. So we're going to come back to the city and county question, but I want to jump in on modular for a minute. Modular housing has been promised and hoped for for a long time. A lot of politicians have hyped it up. Investors have invested in it and been disappointed. The big companies in the space

8:17have often failed. Katerra raised $2 billion in private capital, went bankrupt. Veeve failed. Intecra failed. Factory OS, which is the biggest one in California, was recently rebranded and recapitalized. So this is pretty central to the way you think about housing. Why do you think it will be different? Why do you think they failed, actually? And what have you learned that would make it different now? Well, let me say this. There is a reason they failed and there's a reason that most startups fail, which is they don't have revenues and they don't have orders. And so the question is,

8:48A, does the technology work? B, does it drive down costs? And C, do they have enough orders so that they're making money and able to sustain themselves and then to finance themselves into much bigger enterprises? And the answer is, the state of California can change the building codes, the state of California can give those orders, and we can actually drive this business so that in fact, not only do they do what they say they can do, but they can get economies of scale going forward

9:19to get the kind of size that it needs so that we can really get what they say they can do. Because the estimates right now are we can drive down the cost per square foot by 20%, but I can tell you because I've talked to them that the people who run these companies see that as a first step and they can think they can go much further than that. And let me say this. There are 40,000 units in San Francisco, California that are permitted, that are zoned, that are not being built because they can't afford to build them to a price that people can afford

9:49to buy them. So this is actually the ability to drive down this cost is an absolutely critical part of building, you know, multiples of what we've been building for the last four years and in fact, solving the housing crisis and putting it in a place where working people, working families can afford to buy. So it's really getting this right is a critical part of the mix. Thank you, Mr. Steyer. Mr. Becerra, yesterday you released a comprehensive housing plan. You say in it that it costs too much to build a home in California.

10:21You also say in it that you want more union labor in home building and higher wage standards. For Democrats, there's a pretty wrenching trade-off here. An analysis from the Turner Center found that those kinds of standards, notably paying prevailing wage, increase the cost per unit of housing by about $94,000. How do you both cut the cost of housing and increase the wages behind it at the same time? Well, I think the legislature and Assemblymember Wicks took the first measures that we need to get us to that point where we can do is make sure that we are building we're building with men and women

10:52who are skilled and we're doing it at a price that we can afford. And so, as we've seen, if you do infill housing and you make sure that if you have housing units that will be up to a certain height, up to usually about eight stories, if you're going to do that, then you have the right to be able, as a developer, to try to get the labor that you need and try to negotiate a good price. If you go beyond that, you're talking about major construction, prevailing wage will be the standard. I think that's a good approach. And then what we do is provide to those that are in the lower

11:23height housing the opportunity to go out and do private actions if you find that there are violations of labor laws. But I will tell you this, we should not believe that we have to build homes by making it so it's impossible for the carpenter who builds a home to never be able to afford to buy it. I'm going to make sure that those workers who are building those homes can actually think about buying those homes themselves. And all it takes is for us to work together to make sure we are dropping costs. It's far more than just labor. There are a lot of things that are involved here

11:54and we would tackle those. So I take that point, but tell me then about how you balance the cost because what you are describing here, if you begin paying prevailing wage, you begin paying higher wages, you do increase the cost structure. We all want to see higher wages. I take your point very much that people who build a home should be able to buy a home. There's nothing to disagree with in that. But you have to cut the cost of construction somewhere. You've got financing, you've got labor, you've got materials. If you are increasing a cost driver, what are you decreasing and by how much?

12:25Well, if we could get rid of the Trump taxes, the tariffs that are now being found illegal, that would help us reduce the cost of building materials. If we could stop going to war in foreign countries... But cost of construction in California was high before Donald Trump. It was high, but not as high as it is now. And we can lower those costs. Transportation and building materials is very expensive. And so let's not disregard that we need Washington, D.C. to be helping us. But to your point, and remember, again, labor costs for most homes that are going to be built will not be based

12:56on simply the highest rates that you have in the large mega projects. The legislation that was passed by Assemblymember WICS provided different ways to do this, which would make the labor costs affordable for developers. We also have to deal with financing. We have to have a stable source of financing. We can't just do it one time. I think the measure that Assemblymember WICS is going to try to put on the ballot is good. I think the measure that former Assembly Speaker... Can you describe what that measure is just for people not following? $10 billion

13:27of bonding financing so that you can start building affordable housing. The 40,000 units that Tom mentioned that are ready to go except the financing, that $10 billion would be readily available to get those shovel-ready projects up and running, which helps give confidence to the California families that are looking to get into a place. But what is bringing the cost of construction down here? I'm hearing new bond programs, but the cost of construction is too high. That's what your plan says. What brings it down? So, one,

13:58you go after the red tape. So we try to streamline, and again, the legislation that the legislature passed over this last year helps reduce some of the red tape that you have at the state level. We have to attack it at the local level because of the high fees that are imposed. You have to also make sure that they aren't trying to use their ordinances to try to prevent us from being able to build. Remember that most home, most housing that's built today is reserved for single-family homes. Very little construction

14:28is done with apartments and condominiums. Very little to buy other than single-family homes. We're never going to reach the number we need if we continue to only build single-family homes. And that's why the legislation that allows us to really build out, do the infill, where we know we have transportation, will give us an opportunity to increase greater amounts of housing at affordable rates for people who need to either buy or rent. And I think that if we do that and come up with a stable source of funding into the future so it's not just a one-time housing bond

14:58that people can count on, developers will begin to have confidence that we are looking to give them a predictable means of being able to finance these projects and have them pencil out.

Candidate Discussion

15:09Thank you, Mr. Becerra. Ms. Porter, you've often said on the trail here that time is money, something I hear from developers too. The RAND study I mentioned found that it takes about 27 months to complete a multifamily housing project in Texas, 37 months to complete it in Colorado, and 49 months in California. Why does it take so long here and what would you do about it? So first, I love that you're talking about this RAND study because this is the second time that we've had a housing event where we were asked essentially,

15:39what makes construction costs higher? And I think some people still haven't read the study because what the study... Do you believe that? I have read the study. What the study point... And we got asked about it before and nobody read it and it doesn't seem like they have since. The study is very, very clear that the speed is the driver. Now, that's not to say there aren't a lot of things that were mentioned that contribute to the speed. But if Colorado... If we could be 22 months faster, which is what Colorado does,

16:10which does care about the environment and does have good worker standards, then the estimates are we could take 10 or even 20% off the price and that was market rate. So, yes, we need more housing but we also need that... More housing is a tool to less expensive housing. And so, I think it's really important to think about all the different tools in your toolkit. I strongly support the pending legislation that would create one uniform statewide permit, making it easier for everyone to have the same permit, easier for the state to monitor those denials.

16:42I also think it's a really good idea to limit how many sort of last-second add-ons can come. So, I think right now you ought to have to... If you're a city and you get a permit, you should have 30 days. That's the proposal in the legislature. You could argue it could be 45 or 60 to say, this is what the fees are going to be. This is your contribution for sewer. This is your contribution for school. And then you cannot do what we see now, which is just a little bit more and a little bit more and a little bit more, which is a little bit more delay and then a little bit more cost

17:12until pretty soon the project is unaffordable. So, those are just a couple of ideas. I also do think there are innovations in architectural design, particularly for multifamily, that could be really helpful, especially smaller multifamily, where we're seeing things that are four units have to apply the same standards essentially as something that's 400 units. So, that also adds to the time unnecessarily without providing much benefit of those smaller unit projects, which we need a lot of. Yes, we need all of the big units too,

17:42but we've got a lot of different geographies in California. They're going to solve this problem different ways, but they all need to do it much faster because time is money. There's a difficult irony you see not only in that study, but it comes up again and again in my own housing reporting. There is no form of housing that Democrats feel more strongly about, support more unanimously than affordable housing. Affordable housing costs more to construct per square foot than market rate housing does. When you look at that same study that we are hyping up here on the stage,

18:12what you see is that it costs about twice per, it costs twice as much to construct a square foot of market rate housing in California's and Texas, four times as much to do a square foot of affordable housing as market rate housing in Texas. Now that affordable housing is being built partly on the public dime. Why is it so much more expensive here to do affordable housing than market rate? What do you do about it? This is not a surprise because look, affordable housing projects face more delays. They face more obstacles. They face more community resistance.

18:43They face more restrictions on zoning. People don't necessarily want them in a lot of our communities. And so the other piece of this is that land becomes more expensive every time you have uncertainty about whether something is going to happen. The costs go up. The other issue is that affordable housing developers are piecing together financing from seven different pools of money that are all designed to make a contribution. And you just as soon get the seventh thing and you're ready to go and then the seventh one expires or you lose that funding or someone changes the term of a program.

19:13So one consolidated, bigger pot of money, which is more similar to what market rate's using, right? They're going to Wall Street, they're getting the money and they're using it. One consolidated pot of money would help. The other thing is the state should be putting land up for affordable housing. That is one of the major factors. It's one of the hardest ones to solve. You can actually solve labor by not going backwards on housing in labor policy, which the other candidates both have. I think we ought to be

19:44trying to drive down the cost of construction, but the land is a tricky piece. The state should contribute land for affordable housing. When you say the other candidates are going backwards on labor, what do you mean? So I have not, I have said that I do not think today or now is the time to do prevailing wage and residential. And when we were in front of the labor fed, I was the only candidate, I don't believe you were in front of the labor fed, so I just want to make it clear. But those of us who were in front of the labor fed, I was the only one who said, I'm not doing skilled

20:14and trained in full today for residential housing because it's going to drive up the cost. And I took the heat from labor. I stood up to labor and I, Lorena Gonzalez got, you know, it was right there. And I am not scared of anybody because I've got three teenagers that I do not want living on my couch. and you all seem very lovely, but I don't want you living on my couch or a street corner or in someone's attic. I want you to all have housing where you can flourish.

20:45And so you cannot, there is a pathway to keep building that workforce. There is a big need, a huge need to enforce labor violations and abusive labor practices, which unions have often been very helpful at doing. You could also do that through actually having government oversight of wage violations and workforce violations. And that would be my approach. Thank you, Ms. Porter. Mayor Mahan, San Jose has been able to approve over 20,000 new homes for construction, most of which did not get built because the economics

21:15didn't work out. What could Sacramento do to get those 20,000 homes built? Well, thanks for doing this, Ezra. There's no more important issue. Just want to say good evening to everyone. It's great to be in Oakland. Thank you all for coming out and being pro-housing. This issue is very personal for me. I grew up in a house remembering my parents argue about how we were going to pay the mortgage and we were lucky to have a mortgage. My sisters have since moved out of state because they couldn't afford the cost of living here.

21:46So you asked about the state and first let me, as I come around to what we can do across the board, let me just share what you've done in San Jose because I came into this problem of we've approved 22,000 homes and they're not getting built. So we're saying yes and we're celebrating the beautiful rendering and it's in the paper and everybody's excited except the neighbors who say we don't want it and it doesn't matter because we don't break ground. And if you look at the RAND study, its time and its fees are the two big levers we have control over and the state

22:16can impose upon cities some standards and requirements and caps that can hold us accountable. Now we didn't wait for that in San Jose. In the last two years, we have moved our multi-family housing approvals in our downtown, all of our planned growth areas along all of our transit corridors to what's called a ministerial approval. I mean, it's essentially by right. Doesn't go to the planning commission, doesn't come to the city council, it's just a weekly hearing in the planning department and you get told to go. It actually exempts CEQA.

22:48So you're just, you're building by right if you conform with what we've zoned and we've zoned for dense multi-family housing in these areas. We have dramatically reduced the timeline for building. So I am deep in this right now as a mayor of a big city. We just had a 560 unit project get approved in no time. Came in, got the approval, they're ready to go. So that's speed. Now the state can impose those standards and set deadlines and use its ability to basically impose

23:19effectively a builder's remedy by right and say, if you don't meet these turnaround times, city or county, the developer is going to by law have the right to build a conforming project. On fees, we have accumulated, I mean, I can tell you in my city over 10 pages worth of fees that look good on paper. It's to mitigate every imaginable. It's traffic and park fees and affordable housing fees and they all sound good. On their own, they're all justifiable and they're well intended

23:49but you stack them up and they're adding 10 to 20% to the cost of housing. We had a really tough conversation on our city council. I came to our council and said, we've got to cut the one-time fees in order to get the housing in the ground. And the good news is if we build the housing, we make up the revenue over time. We have more property taxes, more sales taxes, more workers, more jobs, more dynamism. We eventually in the long run are better off. But it's a tough trade-off to make

24:20because you get yelled at by the park advocates, by the affordable housing advocates, by every other advocate you can imagine. We had a council member literally lose his seat not long ago in San Jose and our last mayor lose his council majority over a fee reduction because it was framed as a giveaway to developers. But there's still a number of big projects that have not been able to go forward because the economics aren't working for you. What could you do as governor to make it work for cities like San Jose? So to finish the point, Ezra, we cut the fees

24:51by over two-thirds and 2,000 homes got under construction last year. Another 2,000 are securing financing as we speak and we'll break ground. And what the state can do is cap local fees. A lot of these fees are not really fees. We allow these bogus nexus studies that employ a cottage industry of consultants, no offense to any of the consultants in the room, that the nexus is pretty loose. Nobody's getting $65,000 worth of value out of the neighborhood park.

25:22I'm sorry. I love our parks. But I think what we ought to do is cap fees at a much lower level, a top-down policy, and require that a city that wants to impose a higher fee actually produce to the state a feasibility study that shows that the project can still pencil because this is the problem. We don't control interest rates. We don't control the cost of timber. But timelines at the local level and all these fees are completely levers within our control.

25:52And we've made excuses for far too long. And it's blocked tens of thousands of units in our cities.