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During his first budget speech, Gov. Gavin Newsom extended his palms as if balancing a scale, a theatrical gesture meant to underscore a theme.

“Transportation is housing,” he said, “and housing is transportation.”

To that end, Newsom announced an ambitious and controversial plan: He would withdraw gas tax money from cities if they don’t meet regional housing targets that are set by the state but seldom enforced.

Some applauded the governor’s bold approach to solve a deepening crisis. Others took his comments as the type of bravado that Newsom was known for as mayor of San Francisco and doubted his commitment to follow through. Still others viewed the governor’s demands as heavy-handed and unrealistic, fearing it will require them to deplete their general funds for road repairs.

“Penalizing a city, penalizing the residents, the people who work here, the people who commute through here — I don’t think that’s appropriate,” said Reuben Holober, vice mayor of the Peninsula bedroom community of Millbrae.

If nothing else, Newsom has brought a new focus to the long-running debate over how much affordable and market-rate housing California communities must accept amid soaring demand. And he’s added tangible consequences to a law that’s been on the books for 50 years.

Photo: Tam Duong Jr. / The Chronicle

Residents often object to new development, saying it threatens the look and feel of their neighborhoods. Local politicians resent the state swooping in, telling them what to build and where to put it. And the regional numbers prescribe a certain amount of affordable housing in each community, which is expensive to build without major subsidies.

“We oppose this 100-mile screwdriver from Sacramento,” said Lafayette Mayor Cameron Burks, whose hilly city of ranch-style homes and sport utility vehicles has at points landed in the crosshairs of the housing-transit debate.

Since the recession ended in 2009, the Bay Area has added 722,000 jobs but built only 106,000 homes. Offices have sprouted in San Rafael and tech campuses sprawl throughout the South Bay, but housing around them is too sparse, and most workers commute from far away.

This form of urban design has warping side effects in the form of high rents, jammed freeways and people getting pushed into rural areas or wildfire zones.

“We have a housing shortage that has built up over decades ... aided and abetted by a 50-year ineffectual state law with little enforcement,” said Randy Rentschler, legislative director of the Metropolitan Transportation Commission.

The law empowered state officials to set housing numbers for local governments to distribute among themselves, considering such factors as job growth, transit access and existing homes. Though the state had to approve the portions, it never penalized cities that failed to meet them.

That system “essentially gave a free pass to those communities who refused to build their fair share of housing as determined by this same state law,” Rentschler said.

Now, Newsom wants to give the law heft. During his campaign, he set an aggressive goal of sprinkling 3.5 million homes throughout California by 2025. In his budget, he dangled rewards as motivation: $250 million to help cities with zoning and environmental reviews, and an additional $500 million once they hit certain milestones.

Cities that don’t comply would have to pay.

“We have all this SB1 money,” Newsom said, referring to a 2017 gas tax increase that withstood a recall effort last year. It provides crucial money for road repaving, buses, bridge repair and other infrastructure.

If “you’re not hitting your goals, I don’t know why you get the money,” Newsom said.

The idea caught fire on social media and caused mayors and city council members throughout the state to panic.

Marin County Supervisor Damon Connolly, who also sits on the Metropolitan Transportation Commission, said it’s unfair to condition transportation dollars on housing production. Cities can’t control all the forces that shape development, and some communities would wither if they lost money for transit and potholes.

“My overarching thought is that transportation is a stand-alone crisis,” Connolly said, noting that voters in Marin and throughout the state quashed last year’s attempt to repeal the gas take hike.

“They did this because we need congestion relief — it’s an immediate need,” he said.

Yet officials in other cities and counties cite Marin as one of the culprits in the regional housing crisis. From 2015 to 2017, the county issued permits for 442 homes — less than a fifth of the 2,298 it’s required to build by 2023. Lafayette did much better, with 194 permits, nearly half its target of 400. Millbrae, which has a BART and Caltrain station, permitted no homes from 2015 to 2017. But Holober said the city has two projects going through design review, which would create 844 units together and surpass the city’s goal of 663.

The Bay Area has long been riven by an east-west divide, with housing clumped in eastern parts of Alameda and Contra Costa counties, and jobs clustered in west-side areas of Marin, San Francisco and Silicon Valley. In the middle are cities like Oakland, where new apartment buildings and shops are blooming in what was once a desolate downtown. With 10,945 units permitted from 2015 to 2018, the city is on track to exceed its goal of 14,765 homes by 2023.

Oakland Mayor Libby Schaaf, also a Metropolitan Transportation commissioner, applauded Newsom for “setting a strong agenda right out of the gate.”

“It’s critical that all jurisdictions recognize the inextricable link between housing and transportation,” she said. “Any one jurisdiction’s failure to produce housing causes congestion, harms the environment and severely limits the economic potential of our entire state.”

Newsom said in his budget speech that his new housing targets would be realistic and nuanced. Some housing policy experts say the new system of rewards and sticks could help balance the region by forcing the job-rich North Bay and Peninsula to build more homes. Yet it would also place new demands on East Bay cities that already hold more of the housing burden. Leaders in some of these communities feel put upon, Rentschler said.

Photo: Photos By Paul Chinn / The Chronicle

Lafayette has become a colorful symbol in the discussion. It’s an affluent city with good schools and a BART station, where residents embrace neighborhood charm. The city has concentrated most of its development downtown, honoring its mission to maintain a “semirural” character elsewhere.

Four years ago, housing activists in San Francisco sued Lafayette, demanding that it resurrect a scrapped plan to build 315 apartments on a grassy knoll just north of Highway 24, The two sides settled, but after a twisted series of events, the developer resurrected the project himself and now has an application with the city. And last year, the city’s land-use policies and resistance to housing near BART prompted City Manager Steven Falk to resign.

Mayor Burks said his constituents are “acutely aware of the housing crisis,” and they’ve done more than other cities to build new apartments, many of them affordable to low- or middle-income families. At the same time, the city is dedicated to preserving local control.

“A cookie-cutter approach is not the way to go,” Burks said. He fears the state will impose unreachable goals on his city and then withdraw transportation money when Lafayette is unable to meet them.

Without its annual state gas tax money — which amounts to $420,000 this year — Lafayette would have to siphon from its general fund to pay for road improvements, Burks said. But the small city has a limited budget, so at some point its streets would deteriorate.

“Local businesses would suffer,” Burks said. “Commerce would suffer. Anyone cutting through the streets to get home at night would suffer.”

State Sen. Scott Wiener, D-San Francisco, said he was thrilled with Newsom’s comments but had some caveats. If the governor were to make good on his budget proposal, he should structure it in a way that does not hurt low-income areas that are struggling to attract development. And, Wiener added, Newsom should strip funding for roads but keep supporting public transit.

“Those are some issues that need to be worked through,” the senator said. “But as a general concept, I think this is smart.”

Rachel Swan is a San Francisco Chronicle staff writer. Email: rswan@sfchronicle.com Twitter: @rachelswan