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Regional Housing Needs Allocation (RHNA)

Regional Housing Needs Allocation (RHNA)

The RHNA process refers to the first two steps (Determination and Allocation) of a multi-step process that California governments utilize to plan for housing needs in each region of the state.

Since 1969, California has required that all local governments (cities and counties) adequately plan to meet the housing needs of everyone in the community. This process starts with HCD determining how much housing at a variety of affordability levels is needed for each region in the state. Then the regional governments develop a methodology to allocate that housing need to local governments. California’s local governments then adopt housing plans (called housing elements) as part of their “general plan” (also required by the state) to show how the jurisdiction will meet local housing needs.

The Current Housing Planning Process

Regional Housing Need Determination

DOF

HCD Determines housing need after consulting with DOF & COG

COG

Regional Housing Need Allocation

COG develops RHNA Plan;
HCD Reviews

HCD acts as COG (Predominantly Rural Counties)

~ 1—2 Years

Housing Element Update

Local Governments Update Housing Elements and Report on Implementation on their APRs (539 jurisdictions)

HCD Reviews

~ 1—2 Years

Determination: Calculating the Housing Need in Each Region

HCD is responsible for determining the regional housing need for each region’s planning body known as a “council of governments” (COG), with input from the Department of Finance (DOF). HCD and the COG consult and compare data related to demographic trends and housing conditions in the region. After this consultation, HCD issues the final regional housing need number for the region, which is broken out by income categories. The final housing need determination must be issued at least two years before the next housing element due date.

The determination is required to account for both the existing and projected housing need in each region. Accordingly, in addition to considering DOF data on future population and household growth, HCD also assesses whether additional housing is needed to serve the existing population. For instance, HCD considers data on overcrowding, cost burden, vacancy rates, and jobs-housing imbalances to account for pent-up demand when determining the regional housing need. HCD is also required to consider whether units have recently been lost due to a state of emergency declared by the Governor.

Allocation: Distributing the Need to Cities and Counties

Once HCD has issued the region’s housing need determination figure (the amount of housing that must be planned for), the COG is responsible for allocating the housing need amongst all of the jurisdictions (cities/counties) within that region. The COG must develop a methodology for allocating the regional housing need and submit the methodology to HCD for review. Starting in the 6th cycle, HCD was given the authority to review the draft allocation methodology developed by each COG to determine whether it furthers the five statutory objectives of RHNA. After the methodology is adopted by the COG, they must develop a Regional Housing Need Allocation Plan (RHNA Plan). The RHNA Plan must be adopted by the COG at least one year before the next housing element due date. Learn more: Building Blocks: A Comprehensive Housing-Element Guide.

Statute requires that the COG develop a RHNA allocation methodology that furthers five statutory objectives (Gov. Code Section 65584(d)). Overall, the statutory objectives encourage the development of an allocation plan that promotes more economically and racially integrated communities by allocating housing to high-resource, job-rich areas, while also meeting the state’s greenhouse gas reduction goals by encouraging infill development and the protection of environmental resources. Statute also lays out 13 factors that COGs are allowed to consider when creating the allocation methodology, as well as three criteria that cannot be considered. HCD is charged with developing the RHNA Plan for 20 predominantly rural counties across the state that do not have a COG.

California’s Housing Future 2040: The Next Regional Housing Needs Allocation

Health and Safety Code Section 50515.05 directed HCD, in collaboration with the Governor’s Office of Planning and Research, and after engaging in stakeholder participation, to develop recommendations to improve the RHNA process and methodology that promotes and streamlines housing development and substantially addresses California’s housing shortage. The California’s Housing Future 2040: The Next RHNA Report (PDF) fulfills HCD’s obligation to submit a report to the Legislature with HCD’s findings and recommendations and outlines the changes HCD believes are necessary to ensure that the RHNA process appropriately plans for the homes that will be needed across the state by the year 2040.

From March to July 2023, HCD solicited ideas and feedback from stakeholders for ways to improve the RHNA methodology and process. To ensure HCD received feedback from a wide range of stakeholders, the California’s Housing Future 2040 stakeholder engagement initiative employed a variety of engagement strategies. These engagement strategies included a webinar, a public survey, a Sounding Board of 30 technical experts, one-on-one listening sessions with key partner organizations and subject matter experts, and a public email inbox. The feedback received from stakeholders directly informed the recommendations and administrative changes found within the California’s Housing Future 2040 report. For more information on the California’s Housing Future 2040 stakeholder engagement initiative and the feedback that was shared with HCD, please see the Stakeholder Engagement Summary in the Appendix of the California’s Housing Future 2040 Report (PDF).

The California’s Housing Future 2040 report identifies a mix of recommendations that would require statutory changes, as well as planned adjustments to HCD’s processes under existing administrative authority, to lay the groundwork for creating future homes. Collectively, these RHNA modifications will more accurately account for the housing needs of existing and future residents, promote and streamline housing development, affirmatively further fair housing, advance the state’s climate goals, and substantially address California’s housing shortage. The California’s Housing Future 2040 report offers a pathway for the state to improve addressing our housing need—for current and future generations of Californians.

For more information on the California’s Housing Future 2040 stakeholder engagement initiative and findings, please see the Stakeholder Engagement Summary in the Appendix of the California’s Housing Future 2040 Report (PDF). 

The amount of housing each region must plan to accommodate.

The amount of housing each region must plan to accommodate.

Other regions not covered above (6th Cycle)

The amount of housing each region must plan to accommodate.

Other regions not covered above (5th Cycle): 2014-2019

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 approach 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 recommended 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.

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