CC SR 20220816 I - RHNA Letter
CITY COUNCIL MEETING DATE: 08/16/2022
AGENDA REPORT AGENDA HEADING: Consent Calendar
AGENDA TITLE:
Consideration and possible action to send a letter regarding the Acting State Auditor’s
Report on the Regional Housing Needs Assessments.
RECOMMENDED COUNCIL ACTION:
(1) Authorize sending the attached letter, to be signed by all members of the City
Council, to the Governor, Legislative Leaders, and the Director of the California
Department of Community Development Regarding the Acting State Auditors
Report No. 2021-125 on the Failures in the Recently Issued Regional Housing
Needs Assessments by the Department of Housing and Community
Development.
FISCAL IMPACT: None
Amount Budgeted: N/A
Additional Appropriation: N/A
Account Number(s): N/A
ORIGINATED BY: William W. Wynder, City Attorney
REVIEWED BY: Ken Rukavina, P.E., Director of Community Development
APPROVED BY: Ara Mihranian, AICP, City Manager
ATTACHED SUPPORTING DOCUMENTS:
A. Draft Letter to the Governor, legislative leaders, and the Director of the California
Department of Housing and Community Development (page A-1)
B. CALE press release (page B-1)
C. Auditor’s Report No. 2021-125
BACKGROUND AND DISCUSSION:
The California Alliance of Local Electeds (CALE) recently reached out to cities in
California to alert them to a recent report authored by Michael S. Tilden, Acting California
State Auditor, which constitutes a “blistering critique of the Department of Housing and
Community Development (HCD) and its Regional Housing Needs Assessment (RHNA).”
(Attachments B and C).
1
CfTYOF RANCHO PALOS VERDES
The City Attorney’s Office prepared a closed session memorandum regarding this report
and discussing whether the City should consider joining with other California cities in
bringing a legal challenge to the HCD’s RHNA allocation for cities within the Southern
California Association of Governments (SCAG) region. The possibility of initiating
litigation was discussed as a closed session agenda item at the City Council meeting of
August 2, 2022.
The City Council directed, as an interim measure to litigation, that a letter be prepared
addressed to the Governor, legislative leaders and HCD Director Gustavo Velasquez,
calling this report to the attention of these leaders and requesting immediate corr ective
action be taken. A draft letter has been prepared for the City Council’s consideration
(Attachment A).
Staff therefore recommends the City Council each sign the letter to the Governor,
legislative leaders, and the Director of the California Department of Housing and
Community Development regarding Regional Housing Needs Assessments.
ALTERNATIVES:
In addition to the Staff recommendation, the following alternati ve actions are available for
the City Council’s consideration:
1. Identify revised language to add to the letter.
2. Do not authorize sending the letter.
3. Take other action, as deemed appropriate.
2
David L. Bradley , Mayor
Barbara Ferraro , Mayor Pro Tem
Eric Alegria, Councilmember
John Cruikshank, Councilmember
Ken Dyda, Councilmember
August 16, 2022, Via Email
The Honorable Gavin Newsom
Governor, State of California
1021 O Street, Suite 9000
Sacramento, CA 95814
The Honorable Toni Atkins
California State Senate
1021 O Street, Suite 8518
Sacramento, CA 95814
The Honorable Anthony Rendon
California State Assembly
State Capitol, Room 219
Sacramento, CA 95814
Gustavo Velasquez
Director, Department of Housing and
Community Development
2020 West Camino Avenue
Sacramento, CA 95833
SUBJECT: California State Auditor Audit Report No. 2021-125; Regional Housing
Needs Assessments
Dear Governor, Legislative Leaders and Director Velasquez:
We write as a unanimous City Council of the City of Rancho Palos Verdes to express our
concerns at the failure of the Department of Housing and Community Development (HCD)
to ensure that its recent Regional Housing Needs Assessments (RHNA) are accurate and
adequately supported. The recent RHNA allocation applicable to the City of Rancho Palos
Verdes represents an almost impossible burden on a community predominately located
within a Cal Fire-designated Very High Fire Hazard Severity Zone.
To have recently reviewed the Acting State Auditor’s report on the methodology utilized
by HCD resulting in inflated RHNA requirements by hundreds of thousands of housing
units, we find this report profoundly disappointing. We now urge you, as the legislative
leaders of this state and the Director of HCD to carefully review the same and immediately
take corrective action to remedy misallocations caused by HCD’s errors and failure to
comply with statute.
In his March 2022 report, your Acting State Auditor audited HCD’s RHNA process based
on multiple claims that HCD overinflated RHNA determinations for many regional COGs
and failed to follow statutory requirements as part of the RHNA process. Your Acting State
Auditor found that HCD had made at least the following errors in its RHNA allocations:
A-1
Governor, Legislative Leaders and Director Velasquez
August 16, 2022
Page 2
1. HCD failed to provide adequate analysis to support its health vacancy rate
assumptions. Healthy rental vacancy rates are typically 5%, while healthy owner-
occupied housing vacancy rates are roughly 1.5%. However, HCD used 5% as the
“healthy” vacancy rate for both rental and owner-occupied housing types, which resulted
in an overinflated housing need by more than 200,000 units.
2. HCD made several data entry errors. HCD used census data from the wrong
year for one region, and arithmetic errors in the household population numbers in its
letters sent to certain regional councils of governments (COGs). While these errors
apparently did not affect the final RHNA determination for these regions, it indicates there
may be additional and significant errors that were not the subject matter of the audit.
3. HCD was inconsistent in its use of comparable regions. HCD did not
consistently apply comparable regions for certain regional COGs. For example, for the
San Diego Association of Governments (SANDAG), HCD used data from the 2016 5-year
American Community Survey (ACS), but in the Sacramento Area Council of Governments
(SACOG) and Southern California Association of Governments (SCAG) regions, it used
the 2017 5-year ACS data, while in the Association of Bay Area Governments (ABAG), it
used the 2018 5-year ACS data. Furthermore, for three regional COGs, HCD chose to
use the national average of a data set, despite the fact that the national average includes
rural and urban areas, but the regional COGs are one of the densest urban areas in the
U.S., which is completely incomparable. However, in another regional COG, HCD used
the weighted average of the seven largest metropolitan areas as the comparable region,
which would yield more accurate results.
4. HCD failed to consider the balance between jobs and housing in its
assessments and inconsistently addressed housing lost through wildfires.
Although there is no consensus on the methodology to address the jobs -housing
imbalance, HCD makes assumptions regarding super commuting and median income.
HCD’s inherent assumption is that super-commuting is economically driven, however, the
median income of super-commuters is twice the median income of those who commute
30 mins or less. It would appear that super-commuting may be a choice for many and is
not necessarily an indicator of insufficient housing. The typical planning approach has
been to compare the jobs-to-housing units to an optimal 1.5 jobs for every housing unit.
Using that measure, only one metropolitan statistical area (MSA), San Jose-Sunnyvale,
has too little housing. Many other MSAs have the inverse issue - too many housing units
for the number of jobs available
5. The California Department of Finance (DOF), which calculates population
projects, should show assumptions it made in its determination of household need.
In the past, the DOF has been responsible for estimating the number of households
needed (pent-up demand and future growth). The DOF economists and demographers
have traditionally provided that household number to HCD which then converted
households to housing units by adding a buffer for vacancies and replacement, thus
ensuring a healthy housing market.
A-2
Governor, Legislative Leaders and Director Velasquez
August 16, 2022
Page 2
Through this housing cycle, HCD assumed that the DOF underestimated the number of
households needed, despite its use of 20-year trends and adjustments to cope with
market anomalies. HCD, under the direction of the Legislature, therefore, made its own
unsubstantiated adjustments to the number of households needed. The overlap of work
done by DOF and HCD resulted in an over-estimate of approximately 733,000 housing
units for the four largest COGS - ABAG, SCAG, SANDAG and SACOG.
To summarize, your Acting State Auditor recommended that HCD institute processes to
ensure the RHNA process is accurate, consistent, and transparent. Unfortunately, the
Acting State Auditor has no authority to require HCD to re-assess the RHNA
determinations or to require HCD to follow statutory requirements in the future. Thus,
HCD has no obligation to implement any of your Acting State Auditor’s recommendations
or fix any existing errors in the RHNA determinations.
Rancho Palos Verdes is within the SCAG region and our community is working diligently
to prepare and submit its 6th Cycle Housing Element. This “over-estimate,” of course,
directly adversely impacts our community and places an undue and unrealistic burden on
the City to identify sites adequate to accommodate additional housing. As already noted,
the unique conditions in our community require that our RHNA be fair and equitable. We
now look to you, as our state leaders, to immediately address your Acting State Auditor’s
report and work to immediately correct the deficiencies in the most recent HCD RHNAs.
Sincerely,
Dave Bradley
Mayor
Barbara Ferraro
Mayor Pro Tem
Eric Alegria
Councilmember
A-3
Governor, Legislative Leaders and Director Velasquez
August 16, 2022
Page 2
John Cruikshank
Councilmember
Ken Dyda
Councilmember
cc: Ben Allen, Senator, 26th State Senate District
Al Muratsuchi, Assemblymember, 66th State Assembly District
Jacki Bacharach, South Bay Cities Council of Governments
Jeff Kiernan, League of California Cities
Marcel Rodarte, California Contract Cities Association
Sharon Gonsalves, Renne Public Policy Group
Kome Ajise, Executive Director, Southern California Association of Governments
Rancho Palos Verdes City Council and City Manager
A-4
July 7, 2022
All California Cities Should Join Lawsuit Against HCD for Incorrect RHNA
Allocations, Based on State Auditor’s Report
On March 17, Michael S. Tilden, the Acting California State Auditor, issued a blistering critique of the
Department of Housing and Community Development (HCD) and its Regional Housing Needs Assessments
(RHNA). The Auditor found problems in the HCD methodology that inflated RHNA requirements by hundreds
of thousands of housing units out of the state total of 2.3 million units, overshadowing the smaller cases of
undercounting in the report.
The attorneys at Aleshire & Wynder, LLP, have determined that the only recourse that Cities have to appeal
HCD’s overall RHNA Allocations is through the courts, since there are no other appeal avenues available to
cities or the public. They have written a full legal brief that can and should be joined by every city in the State
of California to reduce the RHNA allocations to their correct values, as required by law. Since cities are now
facing penalties for not achieving our RHNA targets, it is summarily unjust to base these penalties on
allocations that are likely inflated by up to 1/3 of the state total.
The cost for the lawsuit is estimated at $200,000, and if 10 cities join, their costs will be only $20,000 each. If
more cities join, the costs will be further split. If very many cities join, which is our hope, then HCD will face
political as well as legal pressures to follow the law and down-modify the RHNA allocations, which is a normal
process for HCD based on other inputs such as updated census information.
For City or Town Councilmembers: Please contact Pam K. Lee at Aleshire and Wynder, LLP, and she can
share the closed-session legal brief with your City Attorney. You can then get this item on to your closed-
session agenda to discuss with your full Council. Pam K. Lee <plee@awattorneys.com>
For Interested Community members: Please contact your City or Town Councilmembers and encourage
them to take the action above for Councilmembers.
For more information about the reasons your city should join the lawsuit, please refer to the attached
information sheet.
Signed,
Julie Testa, Executive Director CALE, Vice Mayor, City of Pleasanton
Contact Info: Susan Candell, Executive Board CALE, Former Mayor and City of Lafayette Councilmember
About CALE
The California Alliance of Local Electeds (CALE) brings together current and former local elected officials, community
activists and other concerned residents. CALE believes that California’s 482 municipalities are too geographically and
culturally distinct to be subjected to one-size-fits-all rules from the state capitol. CALE believes that communities thrive
when local democracy thrives.
B-1
C A L E
CALIFORNIA ALLIANCE OF LOCAL ELECTEDS