State auditor rips Housing Department over flawed RHNA process

California’s local governments have long complained that the Regional Housing Needs Assessment (RHNA) is a flawed system that sets them up for failure. Now, the state’s top watchdog agrees — at least with the first part.

The California State Auditor conducted a review of the RHNA process and published its findings in a report last month. Those findings were also summarized in a letter to Gov. Gavin Newsom from Acting California State Auditor Michael Tilden.

As Tilden stated in that letter, his office could not conclude that the needs assessments given by the Department of Housing and Community Development (HCD) are accurate or adequately supported. In fact, the RHNA methodology suffers from serious flaws that undermine its credibility. Now, for the twist. Fixing those shortcomings could actually result in higher allocations for cities and counties, the report suggests. That would mean they would have to accommodate more housing, not less.

“HCD does not satisfactorily review its needs assessments to ensure that staff accurately enter data when they calculate how much housing local governments must plan to build. As a result, HCD made errors that reduced its projected need for housing in two of the regions we reviewed. We also found that HCD could not demonstrate that it adequately considered all of the factors that state law requires, and it could not support its use of healthy housing vacancy rates. This insufficient oversight and lack of support for its considerations risks eroding public confidence that HCD is informing local governments of the appropriate amount of housing they will need,” Tilden wrote.

The office further discovered that the Department of Finance’s future household projections are not adequately supported by data.

The report recommends a series of actions be taken to improve the methodology and trust in the system. These include:

  1. Amending state law to clarify how HCD should determine a healthy vacancy rate
  2. Establishing a formal process for HCD to document its consideration of all factors required by state law in its needs assessments
  3. Establishing a process to ensure that staff perform multiple reviews of data in its assessments
  4. Conducting a formal analysis of healthy vacancy rates and historical trends to inform vacancy rate adjustments
  5. Conducting a comprehensive, documented review of the Finance Department’s household formation rates and projections

You can read a copy of the letter to Gavin Newsom as well as the entire report here.


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