The California state auditor’s office released a long-awaited report on the state’s regional housing mandates last month, outlining multiple major flaws in the program generally criticized by local lawmakers. 

The Regional Housing Needs Allocation, more commonly known as RHNA, is the chief metric used to figure out where – and how much – new housing is built in California. The number of new homes is set by the state’s Department of Housing and Community Development (HCD).

That program has been criticized by city council members on both sides of the aisle for years, with city and county leaders questioning how they’re supposed to hit what they consider unrealistic targets for new housing and how the state comes up with the numbers. 

The housing department defended their practices in their response to the auditor’s report, saying they were pleased the audit “found no significant problems with the methodology,” and agreed to make several small changes to the process. 

In response, Acting California State Auditor Michael Tilden made his thoughts on the existing methodology clear, saying the housing department mischaracterized the report. 

“Our report does not state that HCD follows a sound methodology when developing needs assessments,” Tilden wrote. “We identified several problems with HCD’s methodology.”

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Newport Beach Councilman Will O’Neill said state officials rejected the city’s housing plan, despite zoning for double their required allocation. 

“The RHNA process this cycle has been incredibly frustrating,” O’Neill said. “When cities make a good faith effort and are still denied, and potentially punished, you lose faith in the process.”

Right now, city councils throughout Orange County are trying to figure out where they’re going to fit 180,000 new homes by 2029, and while most have submitted their new plans to the state some have already gotten bad news back. 

[Read: New Housing Plans Pit OC Cities Against Sacramento Over State Mandated Housing Goals]

While the study looked at housing plans all over California, Orange County was specifically left out because the county’s council of governments is currently suing the state, alleging the state failed to use appropriate numbers for housing vacancy rates, overcrowding and population size. 

While local leaders have pushed for lower allocations, the new state audit actually points out why the numbers could go higher. 

In a letter to Gov. Gavin Newsom and the heads of both the state senate and the assembly, Tilden said they found multiple errors in the process that show the state can’t prove “that its needs assessments are accurate and adequately reported.”   

“The availability of sufficient housing is of vital statewide importance, and HCD’s (the Department of Housing and Community Development) needs assessments are what allow jurisdictions to plan for the development,” Tilden wrote. “We identified multiple areas in which HCD must improve its process.”  

To read the full report and the responses from the government agencies it criticized, click here. 

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One of the largest flaws Tilden’s report pointed out was that the housing department has no program for reviewing the data they input, leading to several errors.

“HCD does not have a formal review process to ensure that these important housing needs assessments are as accurate as possible,” the auditors wrote, encouraging them to implement a new review process. 

Auditors also found an error in the RHNA process reduced mandated housing in Sacramento County by just under 2,500 units, meaning the county missed out on factoring them into their housing plan. 

Laura Foote, executive director of Yes In My Backyard Action, said while she expected any audit of the department to show some problems in the math given how complicated the allocation process is, this only shows how local officials need to up their efforts. 

“RHNA is a floor, not a ceiling,” Foote said in a Friday phone interview. “Local officials look at the number of homes we need to build and they’re like ‘Oh my gosh that’s so many’… but at the same time they need to put that alongside the cost of chronically underbuilding for decades.” 

“This is how you solve so many underlying problems.” 

Newport Beach Councilman O’Neill said it’s difficult to apply housing mandates with a broad brushstroke. 

“Anytime a broad, sweeping statement is made about a state with 40 million people, it will be right in some circumstances and wrong in others,” O’Neill said. “Over the last RHNA cycle … we saw over 1,000 units built (over the minimum), but we received no credit for that into the next cycle.” 

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Auditors also raised concerns that the housing department failed to show how it came up with a healthy housing vacancy rate, the number that represents how many homes should be empty in the area at any given time. 

That rate can set the bar for hundreds or thousands of new homes, such as in Sacramento County, where it increased the necessary construction by 22,700 units, and the auditors say there’s no real information backing up the department using a 5% vacancy rate. 

“When we asked HCD for its support of using the 5 percent healthy vacancy rate in the assessments, it provided only limited information that did not adequately support its assumptions,” auditors wrote. 

The report the 5% vacancy figure was based on came from a working group in 2010, which didn’t specifically state a preferred number and was using some government reports published in the 1980s. 

The auditors also brought up concerns that the department failed to address the loss of housing to natural disasters such as wildfires, a growing problem in California. 

The report also outlined concerns with how the state’s Department of Finance handled its projections for the future, saying they have been generally accurate but still had room for improvement. 

The Finance Department agreed to make the recommended changes in their response to the audit. 

Noah Biesiada is a Voice of OC Reporting Fellow. Contact him at nbiesiada@voiceofoc.org or on Twitter @NBiesiada. 

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