Governor Newsom is making housing a top priority. His proposed budget devotes significant resources to housing production and homelessness, including:

• $500 million for local governments to address homelessness
• $500 million (from $80 million originally) for the state’s low-income housing tax credit
• $500 million for “moderate-income” housing production
• $25 million for homeless Californians to access federal disability programs

But public cash alone won’t solve the problem, given the scale of the need. Along these lines, Gov. Newsom correctly identified local restrictions on new housing as a key barrier. To address the intransigence, he proposed the revolutionary step of limiting local government access to gas tax funds if the jurisdiction is behind on its housing production.

But how do you define a local jurisdiction “not meeting” housing production? Right now, it’s a bureaucratic threshold, set by the state for each region, which then in turn sets housing targets for each city and county in the region. Historically though, these “regional housing needs allocations” have been weak and easily gamed (though this process will become more stringent going forward, based on recent legislation like AB 686 and AB 72).

So if Gov. Newsom relies on an opaque and uncertain state-derived metric, his policy may not be that effective in actually encouraging new housing production. And cities and counties are somewhat limited anyway in how much housing actually gets built in their jurisdictions, particularly if they’re in areas without much housing demand.

A better metric would involve assessing local zoning and permitting processes near major transit stops or in “low vehicle miles traveled” areas (if a local jurisdiction doesn’t have much transit). Cities and counties can certainly control those two aspects of land use. For example, cities that have upzoned and streamlined permitting near transit would maintain their gas tax funding. Cities and counties that restrict what can be built or require multiple layers of discretionary review would then lose access to dollars.

Sen. Scott Wiener’s proposed SB 50 would get the state far down that path already, but Gov. Newsom’s use of that kind of budget mechanism would add political heft to the approach.

And as an added bonus, it might actually work in encouraging responsible local land use policies to boost housing production in the right places.