Legislators belatedly discover supply and demand
A former colleague who recently moved from California to Texas regularly posts photographs on Facebook showing what $300,000 buys over there, compared to here. One could buy a mini-mansion with a sprawling yard in an upscale Dallas suburb, or a crummy bungalow on a postage-stamp-sized lot in a Santa Ana barrio. So hard to choose.
Maybe it’s unfair for him to rub it in, but his posts reinforce an obvious truth: California’s home prices are exorbitant. A Coldwell Banker report finds nine of the 10 priciest markets in the country are in California. The median home price statewide is two-and-one-half times the national average. This is an astounding fact, considering many of California’s metro areas (Stockton, Fresno, Oakland, San Bernardino, etc.) aren’t exactly upscale havens.
There hasn’t been much concern about this from the Jerry Brown administration or, until recently, the Legislature, even though California’s poverty rates (highest in the nation, under the census bureau’s new cost-of-living-based barometer) are caused mainly by housing prices.
Many liberals assert this is the price for living in paradise. “They’re not making beachfront land anymore” is a common retort, as if the problem were confined to La Jolla, Malibu, and Santa Barbara. Alternately, they blame greedy developers and insufficient spending on public-assistance programs. Yet the San Diego County building association notes that 40 percent of the local price of a new single-family home there goes toward the government process (approvals, fees, etc.), which accounts for around $260,000 of a typical new home’s cost. That’s hardly the fault of developers.
The big culprits are land-use restrictions. The most far-reaching result of California’s climate-change policies has been on land-use and housing patterns. When Brown was attorney general, for instance, the state sued San Bernardino County under the Global Warming Solutions Act to stop the county from permitting so many suburban-style developments. As Californians get crammed into condos, they are supposed to abandon their cars for light rail and — just wait, it’ll be here in a few decades! — a high-speed rail boondoggle that’s unlikely to meet many of its original promises. That’s their theory.
In 2007, Brown pointed to Marin County, with its lovely multimillion-dollar homes set amid redwoods just over the Golden Gate Bridge, as the model for land-use planning in California. What particularly thrilled him was the way the county forces new developments to mitigate environmental problems. Actually, the way Marin “mitigates” such problems is to not allow much building: 84 percent of the county’s land is permanent open space. Good luck getting the OK to build anything on the remaining 16 percent.
The affordability situation in coastal areas has gotten so absurd even some of the most liberal legislators have rediscovered “supply and demand.” For instance, Assemblyman Richard Bloom, D-Santa Monica, last week introduced bills designed to reduce the housing shortage. New Assembly Speaker Anthony Rendon, D-Paramount, recently called for more housing construction. This is good news, even though the proposals are inadequate.
One bill allows property owners to build “granny flats” (formally known as accessory dwelling units, or ADUs). Many local governments “impose onerous design and parking standards that have made the prospect of building ADUs prohibitively expensive,” according to StreetsBlog LA. The blog points to another bill that creates a “by-right approval” for certain higher-density housing projects and quotes Bloom calling for an increase in housing production.
On Tuesday, the Los Angeles City Council unanimously approved two high-rise residential towers next to the city’s underused subway system. The two 30-story towers will reserve 37 units for low-income people, which is the type of “inclusionary” measures that let council members and legislators believe they are “doing something” about the affordability problem. Even this project is facing what the Los Angeles Times refers to as a “protracted legal battle,” thanks to the same environmental scenario Brown praised in Marin County.
The California Environmental Quality Act (CEQA) makes it easy to file an environmental lawsuit, which takes its toll on new construction. Developers have been trying, for instance, to build a new city of 58,000 people in the Santa Clarita Valley, north of Los Angeles. Newhall Ranch received myriad local and county approvals over two decades. But last year, the California Supreme Court rejected the project’s 5,800-page environmental report in a decision that will delay the project.
“The court said the environmental report failed to buttress its conclusion that the development would not significantly affect greenhouse gas emissions, which cause climate change,” according to the Los Angeles Times. “Also, the court said, it illegally allowed for the capture and relocation of the unarmored threespine stickleback, an endangered freshwater fish.”
That master-planned community would provide many houses, but it’s not what today’s planners prefer. By hobbling the construction of housing, bureaucrats are encouraging the long commutes they claim to hate. Stockton, an industrial city 75 miles east of San Jose in the flatlands of the San Joaquin Valley, is now officially part of the Bay Area, because so many commuters were drawn by lower-cost housing.
The nonpartisan Legislative Analyst’s Office last month released an updated report that offers a dose of common sense. Per the LAO: “(T)he key remedy to California’s housing challenges is a substantial increase in private home building in the state’s coastal urban communities.” By contrast, expanding government housing programs would be “extremely challenging and prohibitively expensive,” it added.
“The last refuge of densification advocates is to build to the sky and put in nanny flats,” said Wendell Cox, a housing consultant in Illinois. “There isn’t one iota of a chance that it alone will solve the problem. That makes sense, but you also need to allow building on the urban fringe to make a difference in housing affordability.” Exactly.
It’s great to see any acknowledgment of supply and demand in the Capitol, but California legislators need to understand that poor and working-class residents are priced out of the market because of growth controls. They’re not going to fix the problem with a few more granny flats.
