If ever there were a year that would seem ripe for housing element reform, it's 2003. The recent Regional Housing Needs Allocation process (RHNA) in Southern California has been a disaster -- characterized most recently by a court ruling from Riverside County which chastised both state and regional agencies but didn't give much relief to the Inland Empire cities that filed the lawsuit. The Public Policy Institute of California recently concluded that good housing elements don't increase housing production. And in the midst of the state budget crisis, the Legislative Analyst's Office has proposed suspending the RHNA process, arguing that the idea is good but starting a new cycle under the current law is pointless. Yet there is little discussion of comprehensive reform, nor even much active discussion on whether to move forward into the next cycle of RHNAs and housing element updates in 2005. Legislative Analyst Liz Hill has proposed zeroing out the budget for RHNA in the 2003-04 budget -- the same approach that was taken during the recession of the 1990s. While conceding the value of the RHNA concept, she wrote: "Given the significant shortcomings of the process, we do not believe it is worth beginning another cycle of revisions under the current system. Instead, we recommend that the Legislature suspend the regional planning mandate for COGs and pursue legislative reforms of the process." But Gov. Gray Davis has not proposed zeroing out the RHNA process. State Sen. Joe Dunn (D-Santa Ana) -- who has been talking tough about housing elements for two years -- has introduced a new bill (SB 744) that would tie economic development and infrastructure funding to housing production and create a state appeals board for affordable housing projects that have been denied locally. But there does not seem to be any move afoot to negotiate an entirely new state-local housing policy. This is ironic. If there were ever an argument for reforming the state's housing policy — or putting it on ice for a while — surely it is the debacle that emerged from the Regional Housing Needs Assessment process in the six-county area overseen by the Southern California Association of Governments (SCAG). The latest development came on March 10, when a Riverside County Superior Court judge issued a ruling that seemed to favor dissatisfied Inland Empire cities, while hammering both SCAG and the state Department of Housing and Community Development (HCD) for deviating from the processes contained in state housing element law. SCAG's RHNA process — which technically covered the period from 1998 to 2005 — got off to a promising start, but it quickly ground to a halt over two related issues at the core of the problem with the housing elements. The first was the overall housing target given to SCAG by HCD. The second was SCAG's distribution of that housing within the region. HCD's original target for SCAG was about 623,000 units. In December of 1999, after considerable negotiations, HCD lowered that figure to 504,000 (later reduced again to 503,000). But this did not stave off a near-revolution within SCAG, led by inland cities that felt they were being forced to take housing that coastal areas did not want. Instead of resolving this internal dispute, SCAG called a "time out" in the spring of 2000 and went back to HCD, hoping to lower the number again to 437,000 units (see CP&DR Insight, June 2000). HCD rejected the lower number. SCAG went through an alternative dispute resolution process with its own cities, and also allowed HCD to rule on the allocations that had been worked out within SCAG's own subregions. In December 2000, HCD accepted the RHNA allocations for the Gateway Cities, Ventura County, and Westside Cities subregions but rejected a request for reductions from the Inland Empire jurisdictions. Eventually, a group of four Inland Empire cities and the Counties of Riverside and San Bernardino sued SCAG and HCD. Meanwhile, SCAG and three of its subregional agencies sued HCD. In ruling on the combined cases, Riverside County Superior Court Judge Robert Spitzer slammed both SCAG and HCD. He rejected SCAG's argument that the 437,000-unit figure should have been accepted by HCD based on SCAG's own "elaborated criteria." In fact, Spitzer found that the "elaborated criteria" did not appear to be based on state Department of Finance forecasts, forecasts used in the Regional Transportation Plan -- or, indeed, any methodology mentioned in the housing element law (Government Code § 65584). But he also found that HCD had usurped SCAG's authority by approving some subregional allocations and not others. Under the housing element law, Spitzer said, HCD can accept or reject SCAG's allocation, but subregional allocations are SCAG's job. "HCD cannot engage in a process of de facto appellate review of individual city and county allocations, which has the effect of discriminating among different members of a group of successful COG appellants," Spitzer wrote. The judge ordered HCD to set aside its December 2000 decision to accept some SCAG subregional allocations and reject others. And he told HCD that it cannot reject individual city housing elements based on a city's failure to meet the allocations contained in the December 2000 decision — a ruling that the Inland Empire cities and counties hailed as a victory. At the same time, Spitzer did not tell anybody exactly how to proceed. On the one hand, he said, "HCD has not been commanded to exercise its discretion in any particular way and has not been commanded to reject SCAG's Final RHNA. SCAG has not been directed to rehear the Inland Empire plaintiffs' appeals, to reopen the entire regional appeals process or to engage in a regionwide reallocation of HCD's revised RHNA consistent with this decision." On the other hand, he said: "However, nothing in this Statement of Decision should be construed as preventing the parties from agreeing to resolve or moot the issues in this action by immediately proceeding with the 2003-2008 RHNA process." All very clear, eh? The Legislative Analyst's discussion of RHNA and housing elements does not specifically mention the SCAG dispute. But a careful reading suggests that she finds the whole SCAG RHNA dispute a waste of the state's money. The housing allocation process costs the state money because it is a state mandate; regional and local agencies may file claims with the state for reimbursement. The LAO budget analysis notes that RHNA claims against the state between 1998 and 2002 were almost $10 million — or three times the figure appropriated in the state budget. The state has postponed paying most reimbursable costs, and the LAO estimates the state faces a future obligation of about $5 million. Furthermore, it is clear that the amount claimed is due partly to subregional infighting. The assumption in Sacramento is that most RHNA claims come from regional agencies seeking reimbursement for modeling and other allocation costs. In fact, the LAO noted, 75% of the claim amounts have come from cities and counties. And what are the cities and counties seeking reimbursement for? Local governments have great leeway in this area. But it's worth noting, as the LAO pointed out, that Moreno Valley -- the ringleader in the lawsuit against SCAG -- has filed a claim for $265,000. Meanwhile, Corona, a city of similar size in the same county that did not participate in the lawsuit, filed a claim for $13,000. Translation: The state is footing the bill for SCAG and its member cities and counties to sue each other over the RHNA process. For many years, the RHNA/housing element process has been a classic bureaucratic stalemate. The law is strong enough to be annoying and weak enough to be useless. The budget crisis could provide a vehicle for moving past this stalemate, if anybody were interested in doing so.