Housing, global warming to dominate California’s 2019 agenda

Lawmakers tell business leaders high home prices and rents are driving up the cost of living here.

Lenny Mendonca, chief economic and business advisor to Gov. Gavin Newsom, tells business leaders at the state Capitol California needs more housing to drive down prices. “California is too expensive to do business in. A core driver … is housing costs too much,” he said. (Photo by Jeff Collins, the Orange County Register/SCNG)

SACRAMENTO – Housing and global warming are two of the biggest issues looming over state lawmakers this year, and solutions could spell big changes ahead.

Changes like apartments in neighborhoods that don’t want density, fast-tracking environmental reviews for new developments and tenant protections to curb homelessness.

Other changes likely will include more people using public transit, more zero-emission cars on the road and electric appliances replacing gas cooktops and furnaces.

And with a $21 billion budget surplus to work with, some people wonder if Californians should expect a tax cut. The short answer from state leaders: No.

Those were among the messages Southern and Central California business leaders heard when they converged on the state Capitol last week to meet lawmakers and to push for a more commerce-friendly agenda.

More than 50 members of the Business Federations of Los Angeles County and the Central Valley urged lawmakers to include more employers on state panels, avail themselves of industry’s technical expertise and increase tax incentives for investment.

The two “BizFed” groups are affiliated alliances of business associations representing all of Southern California and much of the Central Valley.

Jobs and business indeed are important, BizFed members were told. But helping all residents afford housing and find jobs close to home are just as crucial.
“We have to have an economy that works. We have to have businesses that are successful,” Lenny Mendonca, Gov. Gavin Newsom’s chief business adviser, told Business Federation members Wednesday, Feb. 27. But, he added: “Ensuring that the economy works for everybody is in business’ long-term interest.”

Assemblywoman Laura Friedman, D-Glendale, put it this way: Worry less about how the environmental movement impacts your business and more about how global warming impacts the economy.

“Of course we need to think about jobs,” Friedman said. “But what are the jobs of the future if … we’re already having troubles delivering water in drought years? What’s it going to be like in 10 years when we don’t have snowpack anymore because of climate change? This is not science fiction.”

High cost of business

Carefully shepherding the state’s surplus for future downturns, stepping up wildfire prevention and keeping the state’s utilities profitable in the wake of PG&E’s bankruptcy are all headaches facing lawmakers this year.

But state’s high cost of doing business must be addressed, state leaders said.

And a core driver of that is the high cost of housing.

“We need to dramatically increase the quantity of housing to help make it more affordable,” Mendonca said.

The state advanced that agenda in 2017 when a package of 15 bills were signed into law. Lawmakers see similar opportunities this year, with bills to speed up homebuilding and prevent homelessness already under review.

That means less local control over development decisions, lawmakers said.

Local control “is not delivering good results,” said Senate Housing Committee Chairman Scott Wiener, D-San Francisco.

“We need to legalize housing,” Wiener said. “We have this thing called zoning, which is a benign word for banning all housing other than the single-family home.”

To get more homes built, Wiener and Assembly housing committee Chairman David Chiu supported streamlined environmental reviews for new homes in already populated areas, similar to fast-tracking provided for sports stadiums.

While most new development is for luxury housing, lawmakers said they’re also considering property tax exemptions for developers building homes affordable to middle-income workers — the so-called “missing middle.”

Climate change

Other leaders say amping up the fight against climate change is key to meeting the state’s mandate for generating carbon-free electricity by 2045.

While the state met 2020 climate goals early, it needs to reduce greenhouse gases another 40 percent by 2030 according to legislation passed since 2006.

To do that, more Californians need to be driving clean-air vehicles or riding public transportation, state leaders said. And natural gas usage for home heating, hot water and cooking needs “to transition” to other power sources.

Climate change is real, but the only thing scientists got wrong was its timetable, said Glendale Assemblywoman Friedman.

“You’re seeing the change happen much sooner and faster than we ever thought,” she said. “The transportation sector is the largest sector of greenhouse gas emissions, and we’re going the wrong direction. … We want to have (state tax dollars) back in our region to get people out of their cars.”

Assemblyman Chris Holden, D-Pasadena, who chairs the utilities and energy committee, said lawmakers also need to find ways to replace natural gas.

“There’s a real conversation, what does the future look like and how long are we on natural gas and what does the transition look like,” Holden said.

Spending spree?

BizFed members support climate-change goals through programs such as cap-and-trade to curb greenhouse gases, according to federation statements. But some solutions go too far, the group says. The federation opposed bills last year to phase out natural gas for heating homes and buildings or to ban all gasoline-powered vehicles after 2040.

Some members pushed back during question-and-answer sessions with lawmakers. Pilar Hoyos, for example, complained about the lack of business representation on air quality community steering committees designed to curb air pollution.

“It’s disingenuous to say they want business to serve,” said Hoyos, public affairs vice president of Watson Land Co., a Carson-based industrial property developer. “A community is not made up only of residents. It’s businesses. It’s regulators. It’s all of us together.”

Larry Kosmont, who heads a Manhattan Beach real estate and financial advisory firm, complained about lawmakers’ reluctance to match federal tax incentives for “opportunity zones,” saying the economic investment will go to other states if California doesn’t compete.

And Matt Klink, a business and political campaign manager from Studio City, asked bluntly, how about tax cuts for that state budget surplus?

Don’t hold your breath, state leaders said.

Don’t expect the Democratic-controlled state government to go on a wild spending spree either.

“Now that we have a super majority, there’s a big fear that the Democrats are going to take the checkbook and run amok,” said Sen. Holly Mitchell, D-Los Angeles, chairwoman of the Senate’s budget and fiscal review committee. “That’s not what we’ve done over the last numerous budget cycles, and I don’t think we’re going to start now.”

Gov. Newsom’s priority instead is to pay down debt, invest in development and set aside funds so the state doesn’t need to raise taxes in the next recession, said business advisor Mendonca.

“But,” he added, “we’re not going to do across-the-board tax cuts.”