This is a tragedy of the commons type thing. If every local democracy votes in favor of local concerns (no new housing), then the problem doesn't solve itself; California has a bunch of angry residents that can't find anywhere to live. Whatever you think is right or wrong, there is still an elected government at the state level, and it's not only homeowners that vote in those elections. So their hand is forced to do something given the gridlock at the local level. (If it was only Santa Monica that refused to build new housing, then this wouldn't have become a state-level issue. But every locale is making the exact same decision, because it's in their current residents' best interests. The state has to take into account the views of everyone.)