By David M. Greenwald
Executive Editor
Davis- In early March, the city of Davis put out its sixteenth annual residential development status report—it was originally designed to be a check-in to ensure consistency with the city’s one percent growth resolution, however, with the passage of SB 330, implementation of the one percent growth cap requirement has been temporarily suspended until 2030.
Nevertheless, I think it is constructive to look at the data here, and once again note that, since 2009, the city has built a total of 703 single-family detached homes.
This comment should not be taken to suggest that we should be only focused on single-family housing—far from it—but I find the metric a very strong indicator of where we are on housing.
In 2023 there were building permits issued for a total of 384 residential units.
The breakdown—again instructive: one single-family unit, 360 multifamily units, 23 
ADUs. Of the 360 multifamily units, ten were affordable units defined as deed restricted.
While 2023 was more skewed than perhaps the typical year, it is instructive to note that, since 2009, 27 percent of homes have been single-family homes—attached or detached, six percent have been multi-family ownership (condos), and two thirds have been multi-family rentals, which can also include ADUs.
The goal was to have 40 to 60 percent of units be single-family housing.
Obviously that’s far more extreme in 2023, with only one single-family home built.
The resolution that establishes a one percent growth cap equals 260 “base” units. However, that growth cap “does not include exempted units of affordable housing, accessory dwelling units, and units in mixed use buildings.”
Thus, in 2023, while building permits were issued for 384 dwelling units, it includes 23 exempt ADUs, 160 units in a mixed-use project and 10 affordable units.
Therefore, only 191 units are normally subject to the 1% cap. This is well under the 1% cap.
One of the discussions that I think we should have for the General Plan update is whether we should continue to target 40 to 60 percent of units as single-family homes.
It is also clear—at least to me—that we are simply not building enough single-family housing for this community. And it is also pretty clear—again at least to me—that it’s going to be hard to even get to 25 percent single-family housing without going peripheral and, as I argued yesterday, going peripheral is going to take some sort of change to Measure J.
With that said, it is perhaps worth it to look at Sacramento—not incumbered by Measure J.
They put out their Housing Element Annual Progress Report for today’s council meeting.
They too fell well short of their housing goals in 2023.
In 2023, for example, there “was a 7.5% decrease in overall housing production from 2022 to 2023, with 2,603 total units produced in 2023. This is approximately 45% of the 5,698 units that need to be built annually to meet the RHNA of 45,580 units over the eight-year planning period.”
In 2023, Sacramento produced 763 units of low- and very low-income units including non-deed restricted units, accounting for 29% of total production.
In 2023, Sacramento produced 583 deed-restricted units of extremely-, very low-, low-, and moderate-income units, accounting for 22% of total production.
In short, Sacramento met about half of its low-income target but surpassed its moderate income target, and fell further short across the remaining income categories.
Sacramento, in short, has managed to increase its housing production over the same period of 2006 to 2023. Housing almost completely fell off from 2009 to 2014. Sacramento has managed to increase its production—passing 1000 units in 2015, nearly 3000 in 2017, over 3000 in 2019, and in the 3700 range in 2020 and 2021. At no point has it topped the nearly 5000 units of 2006 and it has not come close to what it needs to average over the next housing element.
Davis’ housing production meanwhile has been sporadic over the same period—most years topping 200 units, some years topping three and several approaching 400. But with the exception of 300 single-family units built in 2016 and 2017, almost all of the units have been multi-family rentals.
This is the problem that Davis faces. Most of the housing—two-thirds of the units since 2009—have been multi-family rentals. Not arguing for exclusively single-family housing, but getting close to the targeted range would clearly be ideal.
And yet, as we know, that’s going to be increasingly unlikely. This Housing Element has almost exhausted the supply of infill land that can accommodate housing without a Measure J vote.
The next cycle is going to force some changes to Davis—because for the first time, it will have to rely on Measure J/peripheral parcels to provide the housing.
Looking at Sacramento shows that, even without such restrictions, getting enough housing built will be a challenge. With those restriction, we have seen over the last 16 years what happens.
The goal was to have 40 to 60 percent of units be single-family housing.
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Ccontext is everything. That goal was established long before our current appreciation of climate change. Why do you believe it is a realistic goal now?
Why do you prefer single family detached homes as much as you do?
This is what I wrote: “One of the discussions that I think we should have for the General Plan update is whether we should continue to target 40 to 60 percent of units as single-family homes.”
“That goal was established long before our current appreciation of climate change. ”
These goals were set in 2008 right around the same time the city established it’s Climate Action Team.
As my previous response indicates, I’m not saying we should keep it at 40 to 60 percent, but I do believe your comment to not be historically accurate.
These goals were set in 2008 right around the same time the City established it’s Climate Action Team.
You make my point for me. When did the Climate Action Team actually produce any results? It was several (many) years after it was established. Additionally, many climate experts have criticized the City’s Climate Actions as “lots of talk but very little action.”
What you said was: “That goal was established long before our current appreciation of climate change. ”
It’s not true as you wrote it. You can argue that the city hasn’t done enough on Climate Action, but regardless, it’s a strawman argument because I’m only looking at single family housing as a proxy for housing for non-students which is clearly inadequate over the last 16 years.
You are dancing on the head of a semantic pin.
What criteria are you using to measure “clearly inadequate”?
David,
You’re incorrect on this. The goal and the CAP were not established contemporaneously. The Climate Action Team may have been formed but it had not yet developed a CAP. That was in 2010, so the the housing goal was not developed in a fully informed manner.
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Why “clearly ideal”?
In all your years in or near Davis, what percentage of the time have you lived in single-family detached homes?
100% of the time, but I’m a fossil.
In a comment in yesterday’s article David said, “We have a very limited stock of available housing that gets purchased up almost immediately upon entering the market.” When I came to Davis in 1998 the market was full of available housing. The home we purchased had been on the market for over a year and the price had been reduced at least three times in that period, by an aggregate of at least 33%.
Why was the market working that way in 1998, but not that way in 2023? The answer to that question comes much more from changes in Demand than from changes in Supply. Where is the incremental additions to Demand for Davis housing coming from?
— The first, and most obvious source is from the existing residents themselves. Because of where they are in their personal life journey(s), they want to stay in place and avoid the life disruptions that moving to a new town (or even across town) brings. As a result a substantial amount of housing stock that would have been available in 1998 is not available in today’s reality. The question that that change in Demand brings to the fore is, “Should the existing Supply of housing be increased to offset the increased tenure that exists today that didn’t exist in 1998?”
— The second source is a biproduct of UCD. According to their published statistics, there are over a quarter of a million living alumni. In 1998 that number was probably no more than 150,000. So there are over 100,000 more UCD graduates who are susceptible to the desire to move back to the “scene of the crime” … the place where they came of age, and in many cases met their life companion. The success of UCD graduates in the workplace means that many more of those 250,000 have accumulated the wealth needed to afford a home in Davis.
— The third source is people fleeing the Bay Area for more affordable places to live. For all intents and purposes this cohort did not exist in 1998. The question that that change in Demand brings to the fore is, “Should the existing Supply of housing be increased to accommodate the people fleeing the Bay Area?”
There are other sources beyond those three, but I believe they are the most important and impactful.
Not only have those sources changed the magnitude of housing Demand, but they also have significantly changed the characteristics of housing Demand. Specifically, the first group has no children, so the quality of DJUSD schools in the vast majority of cases does not enter into the calculation of how they value their home. And since they are not planning on selling their house any time soon, the valuation of their home isn’t even “real,” it is simply “on paper.”
The third group is also demographically very different from the way Demand existed in 1998. As we have very clearly seen in the buyers who purchased in The Cannery, they are overwhelmingly “empty nesters” … either with grown children no longer living with them, or with no plans of ever having children. As a result, like the first group, the quality of DJUSD schools in the vast majority of cases does not enter into the calculation of how they valued their home when they bought it. The value of Davis as a place to live came from other factors.
To understand the changes in Demand, it would be useful to do a statistical dive into the demographic makeup of the people/families that bought homes in Davis in the past several years … and ideally compare that to the demographic makeup of the people who bought homes in prior years.
When you arrived, Davis had plenty of multi-family options, but you chose not to buy that kind. Why?
Since then, there have been plenty of multi-family housing options you could have moved into, but you’ve chosen not to do that. Why?
So, to quote someone on this thread,
Don, when we arrived in Davis to look for housing in June 1998 there were no multi-family options available … none. We then explored renting a house, but there were none of them available. So we returned to Nashville, and then flew back again to explore purchase options. We looked at 63 available listings over the weekend, and then returned to Nashville after making an offer for the house we ended up purchasing … and then closed on the purchase in September with our moving van arriving the next day.
The simple answer to your question is having a fenced yard for our cocker spaniels.
As you know Don I don’t own a house. I rent from my landlord.
First, school quality drives housing prices. Multiple studies that I’ve cited in these pages, going back to 1990 have calculated the premium which is roughly equal to the capitalized cost of private school tuition. Even long term residents who only see paper gains are reliant on this value premium. It’s created by the fact that the marginal buyer in this market is a family with school age children and as in most markets, the marginal buyer sets the overall market price. (This is explained in any introductory undergraduate economics textbook. The design of California’s wholesale electricity market transparently uses this fundamental principle.) That valuation entered into the calculation of all homebuyers because they had to account for the valuation made by the marginal buyers in any bid. No house purchase is made in isolation from the whole market. So all homeowners have an incentive in maintaining DJUSD school quality to maintain the valuation premium.
A further exploration of what might drive the housing market would be useful. The place to start is the U.S. Census On the Map data set that Matt brought to our attention. It shows that for the the combined Davis/UCD area that only 9400 are both living and employed within the greater Davis area while 18,000 residents are employed outside and 29,000 commute in (these are those with jobs excluding full time students). It’s this latter group which represents the largest share of latent housing demand. They likely have lower incomes than the 18,000 resident commuters.
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Richard in a classic market that is definitely true; however, the question that your point does not address is whether Davis is a classic market or not. As I noted in my comment above, I believe the answer to that question can be illuminated through a data analysis of all the housing purchases in Davis over the recent years. Such a data analysis might logically start with the first purchase of a housing unit in The Cannery and end with the most recent purchase. I suspect, but do not know, that in the Davis market the “marginal buyer” you refer to is much more often than not “a family with school age children.” I suspect, but do not know, that in our housing market the marginal buyer is more often than not coming from the Bay Area with no children … and frequently with both of the new residents having full time professional careers.
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There definitely is an incentive. The question is how strong is that incentive when compared to other communities where young families with school age children are a much higher percentage of the home purchases … Roseville or Folsom or Elk Grove for example.
To put this relative impact concept into context let me ask you a question, “How impactful do you think public school quality is in The Villages, Florida?
Richard, I did essentially the same analysis of the value added by DJUSD to housing being equal to the cost of private school tuition around 15 years ago on the predecessor blog to this one. Matt Williams argued that I was wrong then too. Of course if you have more than one kid the premium benefit increase proportionately. Whether this calculation holding up over time is a coincidence or something more is open to interpretation but the fact remains whatever the cause of the relationship anybody examining where to buy can likely count on the calculations holding up into the future,
Yesterday Matt Wrote:
David, the provisions you reference do nothing to address the 85 unaffordable for every 15 affordable ratio. The goal of a “good” project should be 100% affordable.
My interpretation is that Matt is squarely in the no growth camp. As Matt surely knows from the Laffer curve if you tax something at 100% you will get none of it produced. This is the situation with the Affordable exemption under Measure J. At 100% Affordable there is no incentive and none has been built.
You may not like this but that is our capitalist system.
The real questions this community needs to answer are (1) what is the maximum percentage of Affordable housing you can build while still incentivizing builders to build and (2) will the community accept that percentage as an amendment to Measure J?
That’s basically what I said earlier. Matt is a new housing obstructionist. Matt tried to deny it, but Ron Glick and I know the truth.
Ron
The Laffer Curve was shown long ago to be invalid. Lowering tax rates does not increase tax revenues. Several studies have shown that the marginal tax rate must exceed 72% before incremental revenues are negative.
Having many conversations with Matt, he is not an obstructionist. We may differ on how to achieve more housing and what it is composed of, but he has positive ideas, not just simply “no” or “go find me a rock, oh, just not that rock.”
My point was that at 100% Affordable, the percentage Matt claims is optimal, you destroy all incentive which is why the Measure J Affordable exemption has failed to produce any projects.
At the basic level, the only way to address the shortage of housing is to build more housing. Anyone that proclaims that ‘we have to do XYZ’ before approving more housing (and it doesn’t really matter what XYZ is) is obstructing that new housing. I think Ron and Walter have properly identified Matt’s proclivities, and perhaps Richard’s as well.
Davis’ “housing shortage” is neither monolithic nor homogeneous … despite whatever myopic pronouncements Mark West might pontificate. It isn’t “basic” either. There is no demonstrated need for unaffordable $1 million plus houses. There is no demonstrated need for homes for people who will commute to jobs outside the community. What there is is a need for affordable homes for people who work in Davis and contribute to the local economy.
“A common housing-affordability guideline states that you shouldn’t spend more than about a third of your income on housing (see more on the 28/36 rule below). So, assuming an annual housing expenditure of $72,672, triple that to estimate the approximate annual salary you’ll need to make to comfortably afford that $1M purchase: $218,016.”
https://www.bankrate.com/real-estate/income-needed-for-1-million-home/
200K wouldn’t be an unusual combined income for a two-income household of professionals associated with the university. How many such professionals are currently commuting in to Davis? Every time I check Trulia.com, there are 2-1/2 to 3 times as many homes for sale in Woodland and Dixon as there are in Davis. In my opinion, Davis has a shortage of housing in all categories.
Studies are showing that just building more housing of any kind, not targeted to a narrow category, will decrease prices and improve affordability. Here’s one:
The Atlantic
America’s Magical Thinking About Housing
The city of Austin built a lot of homes. Now rent is falling, and some people seem to think that’s a bad thing.
Context is everything. From the article …
Yep, we need to add housing at a much faster rate than what we’ve done so far. Mild actions will do little.
By the way I can make the case for 25% Affordable as a benchmark. But would the community accept that level?
I’m okay with looking at construction of SFH as an indicator of the market, but not as a goal to itself.
I think the clinging-on to the single family home by so many people ( not just “fossils” ) is understandable given that most of us have never lived in anything else… but that is exacerbated by the fact that zoning laws in the US have made it so that pretty much the ONLY kind of housing that has been legal to build for the past 60 years has been single family housing. So we have a preference for what we know… something of a feedback loop there.
I know a lot of people who have been exposed to living in more urban settings are JUST fine with attatched housing / condos / Apartments etc. But that really isnt the point either… because if we actually did grow at 1% per year… and you think that even a significant fraction of that growth should be comprised single family housing… then you are advocating for sprawl.. creating a city in the mold of natomaas / elk grove etc.
Thats just what the math gets you… see my urban limit line calcs from this time last year.
We cant keep producing low-density housing AND then complain about traffic and sprawl… The single family home IS traffic and sprawl.
Regarding incentive, there is none only if you’re talking about private development. The City — as a corporate entity as well as the representative of its citizens — has incentive to build affordable, but currently lacks the resources to do so. It’ll take a change in state law to alter that situation, either some reincarnation of redevelopment agencies or the ability for a city to forcibly annex land for affordable housing.