Priced out: Can high-density housing solve the affordability crisis? (KPCC Forum Series)

Event Context & Scope

• The "Rescuing the California Dream" forum series, co-presented by KPCC and the Milken Institute, launched with a focus on high-density housing to address Southern California's affordability crisis.
• Current housing data indicates that only 30% of California households can afford a median-priced single-family home, while renters in Los Angeles and Orange Counties spend nearly 50% of their income on rent.
• Southern California faces a deficit of 527,000 new affordable units, with rents having risen 27% while incomes have declined.
• The series will culminate in a summary panel at the Milken Institute California Summit in December.

Root Causes of the Crisis

• Urban sprawl has physically reached its limits ("sprawl has hit the wall"), forcing development to fill in existing land where high-value properties are seized by wealthier buyers.
• Los Angeles holds the distinction of having the highest poverty rate in the nation, with one in four households living in poverty.
• Funding for affordable housing has been decimated: the state housing trust fund was cut 75% (from $108M to $26M), and federal HOME program cuts threaten to reduce funding from $26M to $2M.
• The Ellis Act (1985), originally intended to help small landlords exit the business, has been exploited by developers to demolish 20,000 rent-controlled units since 2001 to build luxury condominiums.
• Real income growth has been stagnant nationally for 12–15 years, exacerbating the supply-demand imbalance.

Definitions & Types of Density

• High-density does not exclusively mean high-rise; it includes infill development, doubling single-family lots to two-family, and lower-slung cities like Paris (approx. 6 stories).
• The Cornfield-Arroyo Seco plan in Los Angeles utilizes a 4-to-1 floor-area ratio for affordable housing along the Gold Line as a model for transit-oriented density without high-rises.
• Proposed density solutions include "second units" (granny flats) on single-family lots, with UCLA's CityLab demonstrating a fully modular, solar-powered unit built in four days.
• Downtown Los Angeles serves as a proof-of-concept where density has revitalized the area, creating walkable environments with mixed-use commercial and residential spaces.

Market Dynamics & Developer Incentives

• Private market forces generate roughly 80% of needed market-rate housing but less than 20% of low-income and less than 1% of moderate-income housing.
• Developers generally will not build affordable housing without financial incentives because high-density upzoning increases land values, necessitating high rents to achieve profit margins.
• Inclusionary zoning ordinances (used in Pasadena and 11 of 88 LA County cities) allow developers to build denser projects in exchange for setting aside a percentage of units for low-to-moderate income households.
• "Micro-units" (250–350 sq. ft.) are emerging as a developer-friendly solution for entry-level renters, though they are unsuitable for families.
• There is a net loss of affordable housing when new developments replace existing stock; for example, a new development in Pico La Cienega replaced 16 senior units with only 3 affordable units, resulting in a net loss of 13 affordable homes.

Policy Recommendations & Structural Reforms

• State & Federal Role: A statewide fix is required to clarify jurisdiction authority for local inclusionary housing ordinances, which are currently vulnerable to lawsuits.
• CEQA Reform: Reforming the California Environmental Quality Act is necessary to prevent its use as a tool to delay or block development while maintaining genuine environmental protections.
• Adaptive Reuse: Los Angeles' 1999 adaptive reuse ordinance successfully converted vacant downtown loft buildings into residential units by removing onerous parking and seismic requirements.
• Second Units: State Bill 1866 legalized secondary units on single-family lots, but local friction remains; San Diego's cap of 10% per neighborhood successfully reduced NIMBY opposition.
• Transit-Oriented Development: Metro has adopted a policy requiring 35% affordability on housing built on Metro-owned land along transit corridors.
• Preservation: An estimated 15,000 government-assisted units (including 5,000 CRA units) face expiration in the next four years without protection, risking permanent loss of affordable stock.

Future Outlook & Community Concerns

• Panelists warn that without aggressive intervention, Los Angeles risks becoming a "tale of two cities" with deepening segregation between the wealthy and the working class (teachers, caregivers, service workers).
• The business community, including the LA Business Council and startup investors, is increasingly identifying housing as a critical barrier to talent recruitment and economic growth.
• There is a growing consensus that building alone is insufficient; policies must ensure "no net loss" of affordable housing and prioritize the preservation of existing stock alongside new construction.
• Foreign cash investors and the lack of alternative financing models for naturally occurring affordable housing (NAOH) are identified as emerging challenges requiring new financial instruments like project-based vouchers.
• The discussion concluded with a call for a "state of emergency" declaration and the need for a comprehensive, multi-tool housing strategy rather than piecemeal solutions.