What is Driving the Massive Increase in Los Gatos’ RHNA Allocation?

Executive Summary:

  1. The Regional Housing Needs Assessment (“RHNA”) is the process established in State law by which housing needs within each jurisdiction are determined as part of the periodic process (“cycle”) of updating local housing elements of the General Plan.
  2. The 4th Cycle RHNA (2007-2015) required Los Gatos to plan for 562 units
  3. The 5th Cycle RHNA (2015-2023) required Los Gatos to increase the planned units to 619, or a 10% increase
  4. The 6th Cycle RHNA (2023-2031) required Los Gatos to increase the planned units to 1,993, or 322% increase.
  5. The increases were high for all cities in the Bay Area (ABAG).
  6. As a first step, The California Department of Housing and Community Development (HCD)is responsible for determining the number of housing units for which each region must plan, known as the Regional Housing Needs Determination (RHND). RHND is based on a population forecast for the region with specific adjustment for economic and demographic trends.
  7. The 6th cycle RHND for the ABAG region, which Los Gatos is in, is 441,176 new housing units.
  8. What’s different in the 6th cycle RHND from the 5th and 4th cycles?
    • For the 6th cycle the State made major modifications to the process for determining ABAG’s RHND. In prior RHND cycles total housing was based primarily only on projected population growth (223,550 units). However, for the 6th cycle the State added existing need (118,827 units) to the total RHND calculation. Existing need includes households that are currently overcrowded (defined as more than one person per room) or are overpaying for housing (defined as more than 30% of gross income). Additionally, the 6th cycle made a major modification to the region’s current vacancy percentage (98,799 units) to provide healthy market vacancies to facilitate housing availability and resident mobility.
    • The 6th cycle RHNA allocation for Los Gatos is compromised of the following elements:
      • Projected growth                730
      • Existing need and vacancy adjustment                710
      • High Opportunity and Job allocation adjustment 553
      • Total 6th cycle RHNA                1,993
  1. The important point to note is projected population growth accounts for 37% of Los Gatos total 6th cycle RHNA of 1,993.
  2. The remaining units come from first-time adjustments the State has made to address existing needs, improving regional vacancy rates and an overallocation of housing units based on Los Gatos’ designation as a high opportunity area.
  3. The adjustments made by the State in the 6th cycle, were done to compel local governments to take immediate action to implement policies, strategies, and zoning changes to accommodate their RHNA allocations. The 6th cycle RHNA allocation will establish a pattern of housing growth in the near term (2023 to 2031) that will anchor the foundation for how the Bay Area jurisdictions move forward on implementing the longer-term vision in Plan Bay Area 2050
  4. The hope is that these adjustments will be made in the near term and that future RHNA will then only reflect the population growth as done in prior cycles.

Below are the Details That Of the Executive Summary.

Background

Each California city is required to plan for new housing to accommodate a share of regional needs. The Regional Housing Needs Assessment (“RHNA”) is the process established in State law by which housing needs are determined.

Prior to each planning cycle the total new housing need for each region of California is determined by the California Department of Housing and Community Development (HCD) based largely upon economic and demographic trends. HCD is responsible for determining the number of housing units for which each region must plan, known as the Regional Housing Needs Determination (RHND). The RHND is based on a population forecast for the region from the California Department of Finance (DOF).

Los Gatos is located within the Association of Bay Area Governments (ABAG) region, which includes Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma counties. The total housing need for the ABAG region is distributed to cities and counties by ABAG based upon objectives and criteria established in State law.

In 2021 HCD determined that the total new housing need for the entire ABAG region in the 6th Housing Element cycle (2023 – 2031) is 441,176 units. The 6th cycle RHND is significantly larger than the previous 4th cycle and 5th cycles. For comparison the 5th cycle RHND (2015 – 2023) was 187,990 units and the 4th cycle (2006 – 2014) was 214,500. The 6th cycle represents a 2.4x increase over the 5th cycle and 2.1x increase over the 4th cycle.

What’s different in the 6th cycle RHND from the 5th and 4th cycles?

For the 6th cycle the State made major modifications to the process for determining RHND. In prior RHND cycles total housing was based primarily only on projected population growth. However, for the 6th cycle the State added existing need to the total RHND calculation. Existing need includes households that are currently overcrowded (defined as more than on person per room) or are overpaying for housing (defined as more than 30% of gross income). Additionally, the 6th cycle made a major modification to the region’s current vacancy percentage to provide healthy market vacancies to facilitate housing availability and resident mobility.

The total 6th cycle RHND for the ABAG region is comprised of the sum of projected growth, existing need, and a vacancy adjustment as follows:

Projected growth                            223,550

Existing need                                   118,827

Vacancy adjustment                       98,799

Total 6th Cycle RHND                      441,176

The important point to note is the need for additional housing units based on projected population growth is only 50% of the total 6th cycle RHND with the other half coming from first-time adjustments the State has made to address existing needs and to improve regional vacancy rates. As seen from this breakdown, if these adjustments were excluded (as was the case in prior RHND cycles) the total need for the 6th cycle would be 223,550 which is very similar to the 4th cycle RHND of 214,500 and only a 19% increase over the 5th cycle.

Los Gatos 6th Cycle RHNA Allocation Explained

Once the RHND has been determined, ABAG must now allocate the 441,176 new housing units to each jurisdiction beginning with a share of the RHND. This allocation process is called the Regional Housing Needs Allocation (RHNA). The baseline allocation used to begin the assignment is the jurisdiction’s total number of forecasted households for the year 2050, which was determined by the Plan Bay Area 2050 Blueprint.

For Los Gatos, the baseline allocation was .3% of the 223,550 projected growth in regional units. The .3% represents Los Gatos’ share of Bay Area Households in year 2050. The calculation is as follows:

223,550 Projected growth x .00326 = 730 units

This number is 18% above the 5th cycle RHNA of 619 units.

The next step is to allocate the existing need and vacancy adjustment of 217,626 new units to Los Gatos. Again, using the baseline allocation of .3%, the additional units assigned to the Town is computed as follows:

217,626 existing need and vacancy adjustment x .00326 = 710 units

This amount combined with the projected growth increased the RHNA to 1,440 new units.

The ABAG methodology also places greater emphasis on assigning new housing units to those areas which have been determined to be a High Opportunity Area or areas that are in proximity to jobs and public transit rather than vacant deployable land. This methodology shifts the regional growth pattern, with more household growth directed to transit-rich, high resource places to support the Pan Bay Area 2050 Blueprint.

Since Los Gatos has been determined to be a High Opportunity Area, the RHNA methodology allocates more housing than the .3% baseline percentage. This results in an additional 553 units being allocated to Los Gatos. Essentially, Los Gatos is “exporting” this additional housing to other regional areas to balance the regional housing needs.

In summary, the 6th cycle RHNA allocation for Los Gatos is compromised of the following elements:

Projected growth                                                          730

Existing need and vacancy adjustment                   710

High Opportunity and Job allocation                       553

Total 6th cycle RHNA                                                    1,993

 

 

Conclusion

It is important to understand how the 6th cycle RHNA was constructed especially if one is trying to project future RHNA allocations for the Town. First, the 6th cycle has embedded in it a long-term element since the baseline allocation is based on the Town’s projected share of Bay Area households in 2050. Secondly, the number of new units required based on projected population growth is only 730 units, which is close to the 5th cycle RHNA allocation. If one is trying to project future RHNA allocations, it would be prudent to only use the units required to meet the population growth since it is impossible to determine what the State may want to do regarding future adjustments for existing need and access to opportunity areas.

The last point is the adjustments made by the State in the 6th cycle, were done to compel local governments to take immediate action to implement policies, strategies, and zoning changes to accommodate their RHNA allocations. The 6th cycle RHNA allocation will establish a pattern of housing growth in the near term (2023 to 2031) that will anchor the foundation for how the Bay Area jurisdictions move forward on implementing the longer-term vision in Plan Bay Area 2050. The hope is that these adjustments will be made in the near term and that future RHNA will then only reflect the population growth as done in prior cycles.

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