HCD values the findings of the California State Auditor’s report on the Regional Housing Needs Assessment (RHNA) process, which found few problems with HCD’s needs assessment methodology and no instances of double counting. The auditor also identified opportunities for HCD to further promote fairness, accuracy, and transparency in the RHNA. In response to the auditor’s findings, HCD committed to undertaking the following in a timely and comprehensive manner:
- Improve review documentation and create procedures to further ensure data errors are eliminated.
- Conduct research and public outreach to determine an equitable, fair, and transparent jobs/housing adjustment factor.
- Ensure data on units lost during state of emergency is provided, verified, and applied in each determination.
- Conduct research and public outreach to perform a formal analysis of healthy vacancy rates and historical trends to inform adjustments using the vacancy rate factor.
- Ensure HCD’s RHNA determination letters describe, in detail, all factors required by GC 65584.01.
HCD has acted quickly to implement the auditor’s recommendations. HCD also committed to undertaking a variety of tasks associated with each recommendation, which have been completed prior to or as a part of the California’s Housing Future 2040 initiative. These tasks are summarized below.
Auditor’s Recommendation 1 (Quality Assurance/Quality Control Data Review):
To ensure that its needs assessments are accurate and do not contain unnecessary errors, in June 2022, HCD instituted a process to ensure its staff perform multiple reviews of data included in its assessments, including data that staff input and Councils of Governments submit. HCD created and now utilizes a review checklist that tracks the submission and verification of data provided by the COG during the consultation phase. The review checklist prompts staff to confirm and verify the data submitted by the COG, as well as the source of the data and any applicable notes as to why the data was either accepted or rejected. The review documents also utilize application programming interfaces (APIs) to reduce reliance on copy and paste for certain data sources. The checklist also includes a space for manager review and approval.
Recommendation 2 (Jobs Housing Factor and Units Lost):
To demonstrate that its needs assessments are complete and address all relevant factors, in September 2022, HCD established a formal process to document its consideration of all factors required by state law in its needs assessments. For instance, HCD has added explanatory notes describing how every factor required by state law is considered in the RHND letter template that is transmitted to the regional Councils of Government. HCD also incorporated steps into the review checklist described in Auditor’s Recommendation 1 that now prompts HCD to confirm whether the COG has submitted data related to the jobs-housing imbalance and state of emergency adjustment factors.
HCD also implemented a new jobs-housing balance adjustment in the non-COG 5-year 7th cycle determinations that seeks to ensure a healthy jobs-housing balance is achieved in each region. Above and beyond the recommendations of the Auditor, HCD used the California’s Housing Future 2040 stakeholder process to further refine a jobs-housing balance approached that was part of the audit response. HCD sought feedback from stakeholders on how to better incorporate jobs-housing balance, and to identify data sources, methodology, and recommend targets. During this stakeholder engagement initiative, HCD asked stakeholders about jobs-housing balance as a part of the public survey, the Sounding Board, and listening sessions with relevant experts in the field of jobs-housing balance. In the California’s Housing Future 2040 Report (PDF), HCD describes the Department’s new jobs-housing balance methodology under HCD Implementation Effort #3 and will apply this methodology to future determinations. HCD shall use reasonable and good faith efforts to ensure that this methodology is transparent and uniformly applied.
Recommendation 3 (Vacancy Rate):
In February 2023, HCD completed a formal analysis of healthy vacancy rates and historical trends to inform the vacancy rate adjustments in the RHND. HCD conducted research into academic studies published regarding historical and current vacancy rates, and how they may be used to calculate an accurate vacancy rate to use for the RHND. Those changes were implemented in the non-COG 5-year 7th cycle determinations. During the California’s Housing Future 2040 stakeholder engagement initiative, HCD discussed these findings with experts which validated the efficacy of HCD’s approach detailed in the California’s Housing Future 2040 Report (PDF) under HCD Implementation Effort #2. As described in HCD Implementation Effort #2, HCD will apply different targets for both owner and renter vacancy rates going forward based on the conclusions from the research and stakeholder recommendations.
Recommendation 4 (Comparable Region Analysis):
In June 2022, HCD established a formal set of criteria and factors that COGs may include in their comparable region analysis, which HCD will use when reviewing the appropriateness of a COG’s proposed comparable regions. These criteria exclude factors that are either identical to or highly correlated with rates of overcrowded and cost burdened households to ensure proposals identify regions with healthy housing markets.