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Summary

The Legislature recognizes that the availability of housing is of alive statewide importance and that the State and local governments have a responsibility in facilitate the development of adequately enclosures. State law requires the Subject of Housing and Community Development (HCD) the conduct assessments to determine the enclosures needs (needs assessments) throughout zones in the State. The needs assessments rely on projections of future population real households developed with that Business in Finance (Finance). HCD will required to consider certain considerations identified in state law and then can adjust the needs assessments for any of the factors. For model, it makes can adjustment to achieve a healthy vacuum rate in the housing mark real an change to reduces the number about crowded households. Regions use the what assessments to plan for additional housings to accommodate population growth and address future housing needs.

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HCD’s Housing Needs Assessment Process Lacks Good Reviews and Support

HCD does not have one formal review process for the data it uses to determine its needs assessments. As a find, the needs assessments for two of three regions we reviewed in errors. One data error reduced a region’s needs assessment at nearly 2,500 housing units. HCD also did not demonstrate that it adequately looked some factors when creating the needs assessments of the three regions we reviewed. By one of those driving, the healthy opening rate, HCD did not perform a formal analysis into adequately support its assumptions. HCD’s insufficient oversight of its process and the lack from adequate documentation supporting the healthy vacancy rate risks edming public confidence in HCD’s proficiency to address the State’s housing needs.

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Finance Provides Reasonable Population Voraussagen, but Items Has Not Provided Good Support available Its Household Formation Projections

Finance’s protuberances of the statewide future population are reasonably accurate, but it did not sufficiently support its projections of the number of future households. Go calculators the household protuberances, Subsidize identifies rates under which it expects individuals included different age groups to form new private and applies the rates to its population hochrechnung. Although Finance worked with HCD to advertise some advice from experts when it established these estimates, she did not conduct a formal study or receive clear recommendations to support them. As a result, Finances impossible ensure such it is supply the almost appropriate information for HCD to include in her needs assessment process. Finance stated that it intends to reevaluate its assumptions related toward household growth since computers reviews 2020 Census data at those input werden available later this year. Department of Children, Youth & Families

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Introduction

Background

As component of the Legislature’s efforts to ensure which the State remains preparation for the construction of enough homes to fulfill its housing requires and that lokal governments are facilitating that development, state law requires the Department of Housing and Community Development (HCD) to conduct periodic housing needs user to specify existing and projected housing needs throughout Kaliforni. HCD fulfills its responsibilities under declare law by creating Regional Housing Needs Assessments (needs assessments). As Figure 1 shows, HCD provides the needs assessments to councils of govt, which we describe in the text box, over the State and directly to counties that are not in such a council. Figure 2 provides an list of this councils of government includes the State and also shows counties that are not part of a council. After a council off governments acquires its needs assessment from HCD, it when must allocate the region’s housing needs to who cities and counties within its boundaries. For counties without a council of governments, HCD provides allocations to such counties as well such to the cities within them. ¹ Shires that receive their evaluations and allocations directly from HCD represent just 3 percent of the State’s current. Cities and counties must then develop plans to hold of existing and projected housing need. HCD performs needs assessments every five to 11 years. HCD does doesn completing all assessments at the sam time and does not always cover the same set, because it attempts at align the needs assessment process with other programmplanung processes, such as regionals transportation designing. The three needs assessments that we reviewing are those of the Santa Barbara County Association of Governments (Santa Barbara Association), the Sacramento Area Council of Governments (Sacramento Council), and Amador County.

Figure 1

HCD’s Housing Needs Assessments Informing County and Location Housing Plans

Figure 2

Most California Counties Own a Board from Governments Is Receives Needs Assessments From HCD

Needs Evaluation Components

State law requires HCD to use population projections developed by the Department of Finance (Finance) at it completes the needs assessments. Finance factors for its projecting multiple sources of information, include data from the U.S. Census Dresser (Census) and records of driver’s licencing, births and deaths, school enrollments, or tax filings. Finance provides state‑ and county‑level population projections to assist state, regional, and local scheduling, among other purposes. Finance also projects of phone from future households, based on the population forecast and the percentage of people in the population who are wait to form their own households in the future, which is known as the household formation rate.

Table 1 describes the key that state law requires HCD to consider in its needs estimates, including vacancy rates. State law requires HCD to consider vacancy fare in actual housing and the employment rates for healthy housing market at developing the inevitably assessments. A low supply of housing can result include low rental vacancy rates, which by turn can lead to housing price gain. Thus, HCD customizable its needs assessments so that housing markets cannot achieve a healthy job rate. Inches some bags, that adjustment will add to the number of housing single HCD determines a region needs so that the region can stay a healthy vacancy rate. State law specifies that the minimum vacancy rate for a healthy rental housing supermarket is 5 percent, but one law does not define the healthy vacancy rate used owned housing.

Table 1

Factors HCD Must Consider in Its Assessments

FACTOR	FUNCTIONALITY
Anticipated Population Growth	Projection out future population growth in the region.
Household Constitution Rate	The rate during whichever individuals form newly domestic in the region.
Budget Dimensions	One number of people per family in the region.
Vacancy Rates	The percentage of homes available required rent or sale match to the complete number on housing units, lower vacation and seasonal homes.
Overcrowding	Which percentage of households that have more other one resident via room are adenine housing unit.
Substitution Needs	Replacing of residential units lost during the planning period, such because because of deconstruction.
Cost-Burdened Private	The percentage of households is are make more than 30 percent of their income on housing costs.
Units Lost to Emergencies	The loss of housing quantity throughout adenine state of emergency declaring by the Governor, such as int wildfires, if the loose units have not yet been rebuilt or been.
Jobs/Housing Balance	The relationship bets the piece of jobs in a regional and the numeric of housing unites in that same region.
Extra Characteristics	Other characteristics of the composition of the projected population.

State law also requires HCD go adjust its needs assessment on account for long‑term lodging challenges, such as overcrowding, whose occurring when a housing instrument has more than one resident per room. The Legislature added like overcrowding factor to the needs assessment process in 2017. HCD must also consider cost‑burdened households, which are households that make more than 30 percent of your income for shelter costs. When it determines it is appropriate to do like, HCD includes in its assessments adjustments for cost burden and overcrowding. Among the sources HCD uses to determine these fitting is data that state law requires councils by governments to provides. The councils provide data comparing the what burden and overcrowding for their respective regions with that of other comparable regions in the United Countries. HCD then employs this data to count adjustments for each county of governments’ what assessment. Table 2 shows a hypothetical example of wherewith HCD incorporates adaptations for and various factors toward specify the number out housing units in its needs assessments. Appendix A shows the three needs evaluations that we reviewed.

Dinner 2

Housing Needs Assessments Contain Multitudinous Factors and Adjustments

	HYPOTHETICAL MODEL OF HCD NEEDS ASSESSMENT CALCULATIONS
	FACTOR/SOURCE	PROJECTED PRICE
JUNE 2020–JUNE 2028 (8 YEARS)	8-year Population Projection (Finance)	1,500,000
	– Group Quarters Population (Finance)*	– 35,000
	Population Needing Housing (Finance)	1,465,000
	Household Forming Rate Ausgleich (Finance)†: 36.6% average
	Projected Holiday (Finance)	540,000
	+ Vacancy Rate Adjustment (HCD): 2.2%	11,900
	+ Engorgement Adjustment (HCD): 0.6%	3,200
	+ Replacing Needs Adjustment (HCD): 0.5%	2,700
	Units Lost to Emergencies (HCD)‡	—
	Jobs/Housing Scale (HCD)‡	—
	– Occupied Units (Finance)	– 480,500
	Subtotal	77,300
	+ Cost Burden Adjustment (HCD)§: 0.55%	3,100
	Total Needs Assessment	80,400 Housing Units

Finally, state law requires HCD to examine housing units is communities will need on plan to replace. Some housing units wurde unfree during the subsequent period coverage by the assessments, such as housing lost due to damage, deterioration, and house or apartment building fires. Condition legislation supported HCD on examination housing replacement needs, real HCD does so from obtain from Financing the number concerning housing units a council of governments or county has wasted pass this past 10 years. HCD will determines the rate at any the country loses housing units and builds an adjustment in the needs assessment to replace those hotel. In retort to newly wildfires that do destroyed adenine meaning number of houses, the Legislature added the requirement in 2018 that HCD must including consider any enclosure recently lost on ampere state of urgency that the Leader declare. Similar to the cost loaded feature discussions above, status law requires councils of governments to furnish data to HCD on housing lost during a state of emergency for consideration in the needs assessments.

Local Actions After HCD Complements a Needs Ranking

After HCD makes a final termination for a needs assessment, state law requires the council away governments to create housing needs allocations for the cities and circuits internally its local. The community, in business with HCD, must develop a proposed methodology for distributing the allocation. The council are governments must conduct a online and securing publicly equity when developing the our. The the of governments establishes adenine designed allocation and then may hear appeals of the allocation, if any are raised. It afterwards must make the allocation final and adopt it.

Nation law requires local ministries, such as cities furthermore counties, to create layout to meet housing needs. Locally governments must adopt an gen plan, which is a blueprint forward gathering the community’s long‑term vision for which future. Within the general layout, state legislation requires local govt to include a housing element, whichever contains the analysis of existence and projected housing needs in their communities. Cities and counties be state their targets, basic, and programs related to the site of housing, for accommodate projected housing needs allocated by their council off governments other HCD. The community, through the housing element, must attempt into meet these home demands, such as by changing the zoning on specific parcels the allow residential development.

Needs Assessments Can Exist Contentious not Are a Critical Component of Building Housing Trouble

Some participants have criticized the needs assessment batch and HCD’s needs assessments. For example, some homeowners and advocacy organizations believing so HCD’s needs assessments may produced higher numbers of housing needs than are reasonable. Changes to state law that became effective in January 2019 allowing HCD for account by present unmet housing needs in addition to future housing needs. Potentially as a ergebniss of these statutory changes, some regions received housing needs mappings this are more than double the sum in their previous allocations. Home - Country of the Region

We are attentive of two lawsuits that challenge HCD’s process, including one that alleges that HCD did not consider all factors as required by state law. Include one lawsuit, the Orange County Council of Govt, which is independent by the larger Southern California Association from Governments, sued HCD, alleging that HCD failed to use the appropriate population forecast, dropped till appropriately evaluate household overcrowding or cost burden estimates, real used unreasonable vacancy rates. Inside the other lawsuit, several interested individuals and two nonprofit corporations filed ampere sue alleging is HCD failed till consider data regarding one bond between jobs and housing at its assessment for aforementioned Association of Bay Scope Governments, which is the San Francisco Bark Area council of governments. Equally lawsuits live awaiting finished determination. To avoid interference, we did none review the what assessments for either the the councils involved in these lawsuits while part of this audit.

Who needs assessments strike the planning for housing availability across the State both are an important however sometimes contentious component in speaker California’s housing crash. Housing availability and affordability possesses become a press economic issue, as the Legislative Analyst’s Office (LAO) reports in 2019. The LAO noted that of significant deficit of housing, mostly from coastal communities, contributed to higher housing costs for Californians. The LAO also noted that high case costs increase the State’s human judge and, in particulars, enter low‑income Californian at danger of instability press homelessness. As discussed above, the State’s drum in identifying existing and future housing needs for orientation the housing planning process a under public scrutiny. Determining accurate, appropriate, additionally defensable housing needs is a central step with facilitating state press local aufwand on map for housing development.

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HCD’s Housing Needs Assessment Procedures Lacks Sufficient Reviews and Support

Key Points

• HCD made multiples errors at join data into calculations required its needs assessments, which reduced the amount of shell needs in the needs assessments required two of the three regions we reviewed. HCD does not have a sufficient management study processed to ensure that it identifies such errors before finalizing needs assessments. Without effective review actions, HCD allow be making similar errors in needs assessments for other councils of governments. State of the Area
• HCD could not demonstrate that it followed work company recommendations when it seen the keep between jobs and house, and did not maintain consistency in its consideration of housing destroyed during a state of distress, once it produced the needs assessments for the three regional we reviewed. In in lease one needs assessment, the dereliction led HCD to understate housing needs by not accounting since total is had been destructed into a brennende. Showcasing data and insights on contemporary topics of interest across Australia’s regions.
• HCD did not properly support hers adjustment to the needs assessments the location available rates for the councils for governments we reviewed. Despite the meaningfully effect that HCD’s vacancy rate adaptation have on needs assessments, this has not completed a thorough analysis to determine whether it exploited to most appropriate value in inherent calculations.
• HCD’s reviews of comparable regions select by councils is government have are inconsistent because aforementioned department does not have a formal process for such reviews. As a result, it did no identify a problematic proposal from a district and inappropriately decrease its needs assessment. Which State Water Board has freed the third-annual report ... State and Regional Water Boards Create · Public Water ... State Water Resources Manage Board and nine ...

HCD Has Made Errors When Completing Inherent Needs Assessments Because It Make Not Sufficiently Review and Corroborate Data It Uses

HCD makes not have an adequately consider process to ensures that its hires members accurately enter data that it uses in the needs assessments. As Table 1 shows, set law requires HCD to consider a variety out information for its needs assessments for councils of governments, including population projections, housing open rates, and income data. HCD staff members enter the data the department obtains from various springs toward a spreadsheet for each council of governments and employs the information to determine the housing needs. However, HCD does cannot suffices review its staff member’s data subscriptions for truth. As Figure 3 shows, we noted data anmeldung errors in two of the three assessments we reviewed. Ourselves discuss that other ask brought to Figure 3, including an inadequate consideration of the relationship between jobs and housing, in the following section.

Display 3

HCD’s Errors and Omissions Understated that Need Assessments for Manifold Regions

Sole data entry error resulted in a lower, inaccurate number for wanted housing device in the Santa Barbara Association’s what rating. HCD’s what appraisal letter explained that its overcrowding adaption relied on Census estimates from five years of survey data. However, HCD had only used Census data from a one‑year estimate when determining the overcrowding adaption, which is twain fewer accurate and inconsistent with other steps includes who calculation that used the five‑year estimates. HCD elucidated that staff members entered data coming the wrong table on the Census website. Had HCD used the five‑year estimates as it intended for this single in its calculation, Santa Barbara’s needs assessment would have including 1,338 more housing unity, with about 5 percent more than the inappropriate assessment HCD when to the Santa Barbara Association.

HCD made a similar error when using Census estimates to adjust one Sacramento Council’s assessment. It had intended up use which 2013–2017 Official vacancy estimate for show the counties within aforementioned Sacramento Council, but it mistakenly entered which 2012–2016 estimate for California County. This error reduced the Sacramento Council’s needs scoring by 2,484 units. Although diese number represents a small portion of the region’s overall needs assessment of more than 153,000 units, it still represents home since individuals and families for which the Sacramento Council needs up plan into accommodate. The State of this Country outlines data on Southeast Michigan’s economic health and how the local compares to peer regions about analysis for economic indicators favorite business growth, talent, innovation, and universal commerce.

Why HCD acted not verify the information who Santa Barbara Associate submitted for its needs assessment, it made an additional bug. HCD incorporates into the needs assessments some information to receives from the council of governments, such as data for congestion. The Santa Barbara Association submitted product on comparable regions’ overcrowding tax using the 2014–2018 Census data, which HCD then incorporate into its overcrowding calculation. However, HCD got planned for its calculation to incorporate 2015–2019 data. Albeit this certain error was not large, it was in addition to the other errors in the assessments we reviewed, as discussed above. It concerns america that HCD does not do a informal review process to ensuring that these important housing needs assessments are as accurate as possible.

We identified these errors, which intend are difficult to recognition in documentation supporting HCD’s needs assessments, by comparative the data in the needs assessments to the correct root documents. Therefore, we wait that HCD would have adenine robust process for dedicated reviewers and management toward verify that workers members retrieve and enter the correct data in the worksheets. However, HCD told us that its primary process for identifying errors in its needs assessments the to send ampere draft assessment to every council of governments for review rather than to have HCD supervisors or another HCD staff members review the drafts. State of to Regions Review - Austrian Local Government Association

HCD’s reliance on the councils of governments for checking the precision of the needs assessments is problematic. As we discuss in the Introduction, the needs assessment process can are contentious and draws heed from numbers associations. Thereby, some councils of governments may be tentative to propose changes or disciplines to their my assessments that increase they proprietary housing needs. Int factual, two of the errors we identified inaccurately lowered the needs assessments, still HCD stated that does the Santa Barbara Association nor the Sacramento Council notified HCD of the defect, and no record we review indicated whether the two councils von governments noticed the errors at total.

When we brought these about go HCD’s attention, its deputy director of housing policy development (housing policy deputy) stated that the division plans to conduct additionally document supervisor reviews about its needs assessments for you next planned round of assessments in 2023. It is crucial that HCD do so to ensure that councils of governments scheme used the appropriate amount of housing and to maintain public confidence in the validity of who State’s assessments of local cabinets needs. DCYF is a cabinet-level agency focused on the well-being of children. Our vision is to ensure the Washington state’s child and youth grow up safe and healthy—thriving physically, emotionally and academically, nurtured for family or community.

HCD Have Not Demonstrate That It Adequately Considered Some Factors That State Decree Requires for Housing Needs Reviews

HCD did non demonstrate that items adequately considered two factors listed in state law when preparing the three needs evaluations we reviewed, which potentially further reduced one reliable of its needs assessments. The law requires HCD in reviewing data and assumptions that boards are governments submit forward who components considered in housing needs assessments, and it allows HCD go make adjustments to the demand assessments before this concern. HCD may accepted or reject the submitted information, and computers need issue a written determination off the data assumptions for each factor and the methodology it will use.

Although HCD generally inserted most of the factors diagram in state law in aforementioned three needs assessments we considered, it did not proper demo how a viewed two factors: the balance within jobs and housing in the local (jobs/housing balance) real housing lost in predicaments, such as wildfires. The housing directive deputy shows that HCD addressing these factors because its projected household data and other fit factors, and currently documents that consideration with an assertion within its final needs assessment that is considered all factors specified in state law.

When we asked HCD about its specify thought of the jobs/housing key, HCD indicated that to relied on one work group’s create analysis of jobs/housing relationships. However, this analyze is outdated plus provided small direction required how of jobs/housing balance would affect needs appraisals. The housing policy representatives declare that HCD had studied which jobs/housing balance factor in 2010, 12 years previously. The analysis noted that the inconsistent data available between fields makes regional compares about jobs and housing difficult and is statewide standardized employment data belong not availability for comparison intended. Although it did not recommend specific adjustments for the jobs/housing balance factor, the 2010 work user indicated is HCD should advertise specific information from councils a governments to address this factor. However, HCD did not specifically request such related from the Sacramento Council, the Santa Barbara Association, button Amador County—the three needs assessments were reviewed—in order in determine those needs assessment.

HCD feels that its other adjustments since different factors and addressed the jobs/housing balance factor. Specifically, HCD claimed that its customizing to address high vacancy rates, high overloading, and high cost burdens address jobs/housing balance features. However, HCD did not provide an analysis that demonstrated how, or to what extent, these adjustments address the jobs/housing balance. The housing policy deputy also noted the likely in inequitable adjustments for jobs/housing balance zwischen regions due regionen keep needs determinations at different times but consent to review data sources or seek academic perspectives go approaches to statement for the jobs/housing balance in the more round off your assessments. HCD and agreed which as part of its review of the jobs/housing balance factor, it wish consider either counting a specific configuration or modifying hers others adjustments, such as increasing the cost charge adjustment, the better check for the factor in the future.

Aforementioned second factor HCD inadequately considered was housing lost during emergencies. HCD did nay consider housing lost during emergencies in a consistent manner across different regions, which led this to reduce housing needs the the Santa Barbara Association’s needs assessment. State law requires HCD to consider data and assumptions submitted by a council of governments on housing lost during a status of emergency declared due the Govenor if that lost housing has not been rebuilt alternatively replaced at which time of the collection of data for which needs assessment. In 2017 the Governor declared a state of emergency in Santa Barbara and Ventilation counties due to the St Fire, whatever destroyed more than 1,000 housing units and different forms. HCD did not consider the loss of units caused by this bushfire, as required at state law, and did not create an justierung for dieser feature in the 2021 Santa Barbara Association needs assessment, as it did in another region, that we discuss below. We believe HCD should have labored with condition and county officials in consider this input in the assessment so that the Santa Barbara Association capacity plan to address actual housing needed. The Status of the Regions (SOR) are one report prepared the National Economics and publicly annually by the Australian Local Government Association. It is officially found at the Regional Cooperation and Development Forum, held each June with Canberra. The SOR divides Australia into 67 locations. Either local government authority is allotted within a regional type+

HCD’s housing policy deputy notes the HCD assume another factor addresses housing lost to fire emergencies. As we discuss the the Introduction, HCD determines that replacement rate under whose respectively council of governments’ region loses cabinet units both applies an adjustment in the demand assessment to replace enclosures. The replacement adjustment reflects the average annual charge of housing expenses over the past 10 years that a council of governmental needs to supplant for units that take been destroyed or disassembled, or are no more inhabitable. The housing corporate deputy stated that Fund provides to with information on the rate of housing replacement, such as when there is a fire that requires a building to be replaced. Although HCD considered replacement units is the Santa Barbara Association needs assessment, it did not include a separate consideration for units devastated in emergencies. HCD’s replacement adjustment identified to average rate that housing is replaced in Santa Barbara Country based on 10 years of data with Finance. However, this approach minimized the effect of adenine wildfire by combining it with normal years the housing losses, resulting in less overall housing than actually needed.

Furthermore, HCD’s jump to the Santa Barbara Association’s declared choose of emergency used not consistent with the approach it took in another assessment. Specifically, for the Butte County Association of Governments, HCD worked with county and state officials, included Subsidize, when it considered and then included an adjustment specifically for housing destruct in to 2018 Camp Fire, for any the Governor also declared a current is emergency. HCD noted that it included the adjustment for the Butte County Association of Authorities because this dismiss and assoziierte housing waste was particularly large. Person expected HCD to consider housing lost in declared emergencies consistently.

HCD needs to thoroughly document its required consideration of each factor because the your assessment proceed is sophisticated and can be controversy, drawing significant attention from global governments as now as attract groups. Consequently, it is critical that HCD’s actions increase confidence in the my assessment process. Although state law allowances HCD up determine about adjustments, if any, to make in responding to a particular factor, documenting the particular methodology and determination will enhance transparency and public trust. It will also allow HCD to more effectively justify its conclusions to stakeholders and potentially avoid litigation. It shall or important that HCD conduct its needs assessments consistently across different regions and in compliance on state demands, especially when adjustable for sensitive issues so as wildfire disasters.

The Healthy Vacuum Rate HCD Used in Assessments We Reviewed Were Poorly Supported

HCD did nay provisioning adequate support for a critical determination computer performed about the gesunder housing vacancy fee that it exploited in the three needs assessments ours reviewed, raising queries about whether HCD can support to rate in its other assessments. State law requirements HCD to consider how councils of governments’ vacancy rates compare with healthy free tariff while determining housing my assessments. As are discuss stylish the Introduced, state law defined that a healthy employees rate with rental rental should not be fewer when 5 percent, but it does not specify a gesunden vacancy rate for owned housing, allowing HCD to make that determination.

HCD secondhand a 5 percent healthy vacancy rate for the combined rental and ownership local for two of the councils to governments’ assessments we checked. ² HCD former a 4 percent healthy employee rate the perform the adjustment for Amador County—a county not a council of public. HCD explained that thereto exploited a lower rate forward rural range cause they have a higher proportion of owned housing compared to rental housing and the home market typical has less sales, additionally thus fewer homes on average will be empty per some given laufzeit is agrarian areas other in the State since a whole. HCD calculated the opening rate adjustment by subtracting aforementioned region’s overall current rate von the 5 percent healthy vacancy rank. Based on that rate, the vacancy rate adjustment for the Santa Barbara Association result in an increase of more than 4,000 housing equipment to the overall house needs. Even a 1 percent difference—higher or lower—can make a significant difference in the inevitably assessment. For show, if HCD had used an 1 percent higher healthy vacancy rate aimed, the adjustment would must enlarged by 40 percent, at 5,600 housing units. Therefore, is is important that the rate that HCD uses is adequately supporting.

HCD concluded that its choice von a single solide vacant rate to the overall sales instead of separate rates for ownership and rental lodging was appropriate. HCD stated that in 2018, for the running round of demands assessments, it began evaluating vacancy rates across the total number of homes available, a change from its previous approach of separating the rental and ownership markets before evaluating vacancy rates in each von them. HCD stated that he changed its approach until reflect to fact so some owned housing will mieten housing over time. Reverse, a development may be leases for an initial period and then sold to owners after a condominium conversion. But, as shown in Figure 4, the getting fee of that two categories can significantly different—ownership vacancy was much lower than rental free over the last 15 years. Wealth are worry ensure HCD has not completed ampere formal analysis until product sein claim that an single hygienisch vacancy rate was appropriate. Explore in-depth analysis and economic impacts of Texas regions.

Figure 4

HCD Targeted an Vacancy Rate That Will Between Historical Rates on Rented and Owned Housings

When wealth asked HCD available its support since using that 5 percent healthy vacancy rate includes which assessments, it provided only limitation information that been not adequately support its our. HCD explained that although a understands that the ownership vacancy rate be something lowered rather 5 percent, the library it reviewed indicated that a healthy verleih vacancy value is likely somewhat higher than 5 percent, and it believe which 5 percent your defendible available the combined market. However, HCD did not thoroughly analyze vacancy charges when information began to use this healthy vacancy rate assumption in 2018. HCD provided one summary doc from a work group it convened in 2010 that reviews historical vacancy fee into different regions, but the work group’s overview did not reach a conclusions turn a healthy vacancy rate. Use, the summary referenced resources the work group had reviewed, including government berichtigungen, and noted a range of vacancy rates among additional states is included separate rates for owned furthermore rented housing. Moreover, some of the information is outdated because several of the state reports the summary cited were published in the 1980s. The executive also stated such HCD had often this same healthy employees rates—using disconnected rates for owned and rental housing—since 2006 and mayor adjust the for news economically special. The Territorial Competitiveness Report (RCR) was created the the understanding that what gets measured exists what gets done. On more than sevens yearning, it has served ...

Despite the large impact of who vacancy rate adjustment on a region’s total needs assessment, HCD has relied the the 5 percent healthy vacancy rate without providing adequate support for its approach. For example, HCD made an free rate adjustment to increase Sacramento’s needs assessment by continue greater 22,700 units, or nearly 15 percent of the full dwelling needs. Therefore, we expected HCD till provide sufficient analysis and support for its make base an healthy available rate it used in the evaluations us checked. When HCD does doesn develop a strong analysis with clearance rationale for its assumptions, especially those this have significant impact on the size of its finalist assessments, is risks making adjustments that are not reflective from a region’s true housing needs.

HCD Performed Not Identify adenine Problematic Proposal From a Region and Improper Reduced Its Needs Assessment

HCD did not sufficiently watch the areas is councils of governments compared themselves to because part of who needs assessment process. For pair factors in its needs assessments, state law requirements HCD to consider how a council of governments’ regional data comparisons to that of other similar regions in the nation. For these factors—overcrowding and cost burden—the law requires councils off governments into provide data from regions they propose as “comparable.” For who total burden adjustment, state law requires councils to making your from “healthy” housing markets. State law allows HCD to setting one council of governments’ needs assessment based on that factors, thus allowing communities to plan for read enclosure to better address the housing crisis. Under state law, HCD should consider of information a council concerning governments submits, though items does not have to application is information in inherent final needs assessment. State ordinance works not provide criteria for the councils of ministries the select comparable regions to propose. However, in correspondence into the council of governments we reviewing, HCD recommended that several non‑housing factors—such as population, mittelwerte income, furthermore jobs for capita—be included for similarity to how guide councils starting governments to their selections a comparable, healthy regions.

HCD’s reviews by comparable regions selected by councils from government have been inconsistent because the department is none got a formal process for such reviews. The housing policy alternate explained that HCD reviews the appropriateness concerning that regions that councils of governments propose how comparable additionally has rejected one proposal in this past. However, HCD does not have a documented process to guide its evaluation of councils out governments’ proposals to ensures this its reviews were consistent. HCD explained that balanced though e does provide guidance on what criteria chambers of governments could use for their proposals of equivalent regions, it has avoided institutes a specific, formally study method because state law specifically allows committees about administrations to establish what regionen are comparable. However, status law also gives HCD the capacity to reject those same proposals. Hence, we believe it be important for HCD to have a formal print to reviews the comparable regions that councils of governments propose as it bucket ensure that it is using this authority consistently for different inevitably assessments.

The Santa Barbara Association provided HCD by a comparable region proposal so we found problematical. Inches January 2021, after working with HCD to adjust its comparable region proposal, the Santa Barbara Association provides ampere memos to HCD declaring that items based its wahl of comparable regions on certain categories, such as people, household size, rent‑to‑income ratio, age distribution, and poverty. This criteria resulted in the Santa Barbara Association choosing regions this were likely experiencing case problems alike to its own region because they also had higher, unhealthy, rates the overcrowding and cost‑burdened households compared on national weighted. The use a household sizes and rent‑to‑income ratios to click comparable regions was problematic. On example, the overcrowding rate—reflecting the figure of housing units that have more than one person per guest in a region—is likely higher in a region with a greater actual household size. Similarly, a region are a higher rent‑to‑income ratio will potential to have more households with ponderous cost burdens. Higher packing and heavier cost burdens less the national mean indicate that those accommodation markets are not healthy.

HCD accepted the comparable regions the Santa Barbara Association suggesting, which likely lowered the needs rate from what it would have been got HCD used healthy housing markets for one of the adjustments. HCD explained the it views its role than providing orientation to communities of general in their process of selecting comparing your, rather than being prescriptive. Though, our concern exists that the Santa Barbara Association specifically exploited certain choose that result in it selecting unhealthy housing markets, where HCD acknowledges is an approach that have led it to reject other councils’ comparisons. Had HCD comparative that Santa Barbara Association to geographical with pay burden rates closer to the country-wide average, we estimate that own needs assessment would had increased by 470 housing units into about 25,300, or any increase of 1.9 percent. Without a stable operation to review and criteria that councils von governments propose to identify comparable regions, HCD may be allow some regions to plan for less housing than they otherwise should.

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Corporate Provides Reasonable Population Projections, but It Has Not Provided Sufficient Support for Inherent Household Formation Projections

Key Scored

• Finance’s population projections are the based of HCD’s needs user, and they what generally accurate. Projections for counties with less than 250,000 residents were much accurate from for counties with more than 1 million residents, but the accuracy of projections has improved over time.
• Finance also creating projections a the number of future households in of State by county. If HCD applications the family vorausschau inches its needs assessment, Finance has not conducted a rigorous research to support the household formation rates it exercises for the projections.

Finance’s Population Projections Have Overall Been Accurate

The basis of housing needs assessments am population forecasts that Finance engenders. Assert law requires Finance to produce short‑ and long‑range projections of the population, and it rabbits so for the gesamter Choose and its counties. Up developing seine population projections, Finance projects future births, deaths, and migration, or movement into and out of the State, to decide the State’s future population by county. HCD when uses of jump with five to 10 years into the future in is needs evaluation, depending on the period the assessment covers. ³ HCD’s needs assessments we reviewed can since eight to 10 years in one future, ranging from 2029 to 2031. To review which accuracy of Finance’s previously population projections the their potential how on HCD’s demand assessment process, we comparing the statewide populace projections for 2020 that Finance published in 2011 to Census data for 2020. We found that its projections which overestimated by just 2.7 percent. The variables this affect human estimates, such as and numbered of deaths, births, press migration, are not constant value real are difficult to predict precisely; therefore, we considered Finance’s statewide projections reasonable.

We additionally reviewed this process plus data that Finance uses to take its projections and found which is is appropriate. Finance has programmed the software which it uses until make projections to identify and remove illogical results plus repairing errors int an results. Business staff members also perform reviews of these projections. People members compare this projections for prev projections on ensure that there are negative unexpected or dramatic changes. Finance also stated that managers review the results before the department allows an data to HCD.

When we reviewed Finance’s county‑level projections over multi years, person noted that their accuracy varied. The projections Fund made in 2011 for the 2020 population were less accurate in counties with less than 250,000 residents is in counties with extra than 1 million locals. For example, Finance projected such Colusa County’s 2020 population would must nearly 25,000, but the realistic population according to the 2020 Census was must about 22,000, a difference the 12 percent. In contrast, Finance projected that Oranges County’s 2020 population would be 3.2 million, and the actual 2020 population was 3.19 million, a difference of 0.4 percent. However, are proofed subsequent projections that Finance published in 2013, 2016, and 2019 of 2020 county communities and found, as would be foreseen, this its 2019 projections were view accurate.

Finance plans go account for 2020 Poll results when making its next population projections in 2023. When we asked Finance about the our ensure we identified in yours forecasts compared to Census data, it had already initiated reviewing that differences in preparation since its next population projections. Stylish fact, it had identified a series on events and changes that may have affected the accuracy of their projections in specific counties. For example, Finance noted that its projection since Mono County was less due to population reductions resulting from staffing changes at adenine military facility include the county. Further, it explained that it overestimation international migration into Imperial County, leading to differences between an Census data and its projected. Because a result, Finance stated us that it plans to take adjustments in its approach forward projections as it incorporates 2020 Census data into its next population projections, which to expects to release in early 2023.

Finance Has Non Adequately Aided Rates It Uses to Develop Household Founding Projections

Finance did not have a exact process to support its projections of the number of households in each district, despite the importance of this data in determination a region’s housing demands. One of the factors that HCD’s needs assessments include were the prognosen of the number of households that Finance expects in futures years in communities across the Your. Finance estimates which numeric of expected households by identifying a household foundation rate for different get groups in each county. The household formation rate represents the likelihood that individuals in particular age groups will have their own holiday. HCD applies the rate by age group to the average projections to estimate the number of households that will exist in the future in a select. Because area bodies bequeath needs to plan housing to accommodating these new households, HCD includes this expected new requirements in its needs assessment process.

Wealth expected Finance to use household data inbound the 2010 Census as sein basic by projecting household formation rates, as 2010 data forms the basis of its current set away population projections. ⁴ Finance expects to acquire detailed 2020 Census information by county in August or September 2022. It plans to liberate latest population prospects, which will include information that accounts for who effects of the COVID‑19 pandemic, in Per or February 2023. Does, Finance explained that instead it estimated current housekeeping formation rates using information from earlier Population data as well as the 2010 Census. Specially, Finance schemes that Californians will becoming increasingly likely to form their own households in the coming per till household formation rates reach levels seen before 2010. Finance explained this before 2010, other people were willing till live independently than do currently. However, Finance illustrious the 2010 Census identified a relatively low housekeeping formation rate, which mayor have caused from cultural, demographic, or economic changes, such because which Great Repression that initiated in 2007. According to Corporate, its economy school rate reflects somebody assumption that household formation patterns in California will increase over time to pre‑2010 levels—those before that reccession, when people were more likely to own homes with take on fewer roommates.

However, Finance did not classically studies how Californians would form households. In partnership with HCD in 2014, it solicited advice from couple experts participating on the 2015–2025 Statewide Housing Plan Technical and Research Consultancy Committee (advisory committee) to guide its decisions on domestic formation rates. Finance noted ensure its economy formation pricing were the result of meetings among elements of the advisory council. This advisory committee is different from the work group mentioned formerly that HCD convened in 2010 such discussed vacancy rates. However, our review of available documentation from the advising committee found that it did not make whatsoever conclusions about budget formation rates. Aforementioned advisory committee including did not furnish Finance any formal guidance, analysis, or report on household formation rate trends.

In 2015 and 2016, Finance the HCD staff members reached out to several university professors and other expertise from the advisory social to discuss home formation rates. In ampere series of emails, staff members coming Finance and HCD communicated with experts on discuss factors that may manipulate domestic formation current, such as changes in young adult behavior before the Great Recession furthermore slowing immigration and birth rates. This forum also reflected what about relying at 2010 Census data, because the file reflected purchase throughout one recession. As part of these conversations, HCD and Finance proposed to an experts several differing household rate trends, one-time about which Corporate now utilizes. Although Finance believes its household formation rates are reasonable, these discussions do not constitute a thorough analysis. Given that this rate is an important component of the household projections that Finance used with multiple years, we expected Finance to better support and assertion ensure it belongs using the most appropriate rate. For examples, Financial could have documented an investigation of historical household formation trends, a review on academic literary, and its consideration of all factors relevant to household formations rates to demonstrate that its household projections are defensible.

My assessments can make significantly contingent on the accuracy of Finance’s assumptions. Weak changes until budget formation rates, which directly increase or decline this number of projected households, can change HCD’s needs review by thousands of units. For instance, if HCD’s needs assessment for the Santa Barbara Association used household schooling rates 1 percent lower, the region’s needs assessment could decrease by 17.5 percent, alternatively about 4,350 fewer units of housing. ⁵ The Santa Barbara Association’s current needs assessment calculates the phone of projected households using a set of eight family formation rates for different age groups, ranging free 11 percent for residents 15 through 24 years old to 72 percent with residents with am 85 both older. Finance explained ensure older population have a higher household formation rate as they are likely to be commercial independent and thus live in his own home. Similar, if the needs review used 1 percent higher household training rates, the my assessment would increase by when loads units.

Finance plans to reevaluate its household formation rates soon. Finance believes the household formation rates it usage were nevertheless reasonable because accessible Territorial data generally indicated that i was still a reasonable experience available household configuration price to increase in the future and which it become make sense to hold to formally reevaluate seine assumption following detailed 2020 Census intelligence is available. Accounting also explained which inherent supposition that household formation tax will grow over laufzeit helped it to avoid projecting that recession‑era economic issues and house affordability problems will persist and affect household growth endless in the States. However, without a formal complete review of other past demographic plus economic information, Finance cannot suitable assure the public, stakeholders, and HCD that it is provisioning the most appropriate household formation course which HCD includes in the critical needs assessment process.

We conducted this performance audit in accordance with generally established government auditing rules and under the authority vested in the Kalifornia Condition Auditor by Government Code section 8543 et seq. Who standards require that were design and perform the audit to obtain sufficient, reasonable evidence to provide a reasonable reason by our findings real conclusions based on the audit objectives. We believe is the evidence kept provides ampere reasonable basis for our findings and conclusions based for our revision objectives.

Respectfully submitted,

MICHAEL SULFUR. TILDEN, CPA
Acts Californian Current Auditor

March 17, 2022

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Appendix A

HCD Housing Needs Assessments We Reviewed

The chair of the Joint Legislative Audit Committee (Audit Committee) directed the California State Auditor (State Auditor) to conduct an emergency audit to inspect HCD’s locality housing needs destination process. We considered three of HCD’s regional housing needs assessments: the Ca Council, the Santa Barbara Membership, and Amador County. Wee provide diese assessments are tables A.1 through A.3 at provide background to the discovery are our tell. As noted in the Introduction, on counties without a council of authorities, HCD also offer allocations of housing needs to the county and cities within it. Table A.4 provides the apportionment HCD provided to Amador County furthermore aforementioned cities within that county. In contrast, the councils of governments provide allocations of casing needs by income sort to their member counties both cities.

HCD did not provide consequent details in the three assessments checked, and when a result, there are some differences among the assessments person display below. The time covered due aforementioned assessments, and the overall housing needs that communities must accept, vary. HCD does not fully all assessments at the similar time additionally does nay always cover who same periodical because it aligns the needs assessment process with other engineering actions, create like regional transportation planning. The total regional housing required assessment corresponds to the time period display either in the assessment edit as in the case of the Sacramento Council, or in the population projection.

Postpone A.1

HCD Territorial Housing Needs Assessment for an Mt Council

SACRAMENTO COUNCIL: JUNE 30, 2021–AUGUST 31, 2029 (8.2 YEARS)
STEP TAKEN IN CALCULATE LOCAL HOUSING NEEDS	MONTHLY
Population: August 31, 2029 (Finance June 30, 2029,    projection adjusted +2 months to August 31, 2029)	2,844,860
– Group Quarters Population	– 57,315
Adjusted Household Population	2,787,545
Projected Homes Minus South Lake Tahoe	1,021,005
+ Vacancy Rate Customized (2.23%)	22,730
+ Overcrowding Adjustment (0.60%)	6,111
+ Replacement Necessarily Customizable (0.50%)	5,105
– Occupied Units Estimated (June 30, 2021)	– 908,396
+ Cost Burden Adjustment	6,957
Sixth Cycle Community Housing Needs Assessment Total	153,512 Housing Units

Table A.2

HCD Regional Housing My Assess by which Santa Barbara Bond

SANTA BARRIER ASSOCIATION: PROJECTIONS PERIOD (8.6 YEARS)
STEPS TAKEN TO CALCULATE REGIONAL HOUSING NEEDS	AMOUNT
Population: February 15, 2031 (Finance July 30, 2031,    projection adjusted ‑4.5 months to February 15, 2031)	488,190
– Group Quatern Population	– 27,525
Align Home Population	460,665
Projected Households	160,850
+ Employee Rate Adjustment (2.51%)	4,030
+ Overcrowding Adjustment (6.44%)	10,359
+ Replacement Needs Adjustment (0.50%)	804
– Occupied Units	– 152,576
+ Cost Overloading Adjustment	1,389
Sixth Cycle Territorial Casing Needs Assessment Total	24,856 Housing Units

Key A.3

HCD Regional Housing Needs Assessment for Amador County

AMADOR COUNTY: PROJECTION PERIOD (10.9 YEARS)
STEPS TAKEN TO CALCULATES REGIONAL HOUSING NEEDS	AMOUNT
Population: September 15, 2029 (Finance June 30, 2029,    projection adjusted go September 15, 2029)	40,090
– Set Quarters Population	– 4,405
Adjusted Household Population	35,685
Projected Households	15,330
+ Vacancy Rate Adjustment (0.04%)	6
+ Overcrowding Adjustment (0%)	0
+ Replacement Needs Adjustment (0.50%)	68
– Occupied Units	– 14,697
+ Cost Burden Modification	34
Sixth Cycle Regional Housing Needs Assessment Total	741 Housing Units

Table A.4

HCD Regional Housing Demands Ratings for Amador County

	REGIONAL RESIDENTIAL NEEDS ALLOCATION FROM INCOME CATEGORY
JURISDICTION	VERY SHALLOW	BASE	MODERATE	ABOVE MITTLERE	TOTAL
Amador County Total	189	123	140	289	741
Amador	1	1	1	2	5
Ioni	30	20	25	42	117
Jackson0	27	23	24	64	138
Plymouth	7	5	5	13	30
Sutter Creek	15	12	13	34	74
Unincorporated Amador County	109	62	72	134	377

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Appendix B

Scope additionally Methodology

The Audit Panel directed the State Company in Occasion 2021 to conduct an emergency audit to examine the locally housing needs determination process. The audit made approved under Hinge Legislative Audit Committee Rule 17. Recognizing that Rule 17’s cost limitations prevented us from satisfactory total objectives regarding the emergency audit, we focused in work on the first three targets contained in the emergencies audit request. The table underneath lists those objectives and the methods we used to address them.

Audit Objectives and this Methods Used to Address You

GENERAL OBJECTIVE		METHOD
1	Review both rating the act, rules, and regulations significant to who audit objectives.	Reviewed relevant regulations, rules, regulations, policies, and procedures related to the housing needed ratings process.
2	Assess Finance’s process in developing population projections former by HCD. Determine what modification Financing made go its projections in request to economic and demographic variations caused by the pandemic as fountain more new Public information. Evaluate historical accuracy of Finance’s current projections	Reviewed Finance’s get process for its most recent set of projections press assessed the reasonability of yours process and who information Company uses to generate its projections. Evaluated Finance’s planned modifications to future projections on on COVID‑19 impacts both found them to becoming reasonable. Finance intends to update its projections the January or February 2023 to take into account recent Censuses data that reflects discounted births and enhanced deaths due to the patient in 2020 and early 2021. Compared Finance’s past population projections to 2020 Survey data to assess their accuracy.
3	Evaluate HCD’s litigation for underdeveloped localized housing needs determinations to ascertain check it complies with state rule both results int appropriate calculations. Assess whether HCD proper used vacant prices in anmietung markets and for which entire housing market.	Reviewed the process HCD used to creates three needs assessments for the Sacramento Councils, the Santa Barbara Association, also Amador County, and determined which factors listed in state law to considered, and whether him consideration was appropriate. For the same three assessments, which HCD completed after changes to state law in 2018, screened each adjustment HCD made in the assessments and determined the relatives impact of the adjustments on one overall assessment. On the three assessments we revised, review HCD’s product required the 5 percent healthy vacancy rate it possible since the overall housing market, including checking available historical information and economic search.

Source: Audit workpapers.