Don’t be alarmed if California’s housing package makes things worse

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I’ve occasionally quoted journalist H.L. Mencken’s quip that the “whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.” But after years of covering California politics, I think the quotation needs revision.

Modern politicians often alarm the populace about real problems rather than hobgoblins. The flaw is that their solutions usually make things worse. Politicians promise to lead us to safety, but don’t admit that the latest danger was caused by their previous policies.

The latest example involves California’s crisis du jour: housing. We all see the outrageous prices of homes and apartments. The median home price in Orange County approaches $700,000, which means most buyers need more than $100,000 in cash to get a mortgage, and the monthly nut (with taxes and insurance) will approach $4,000.

We tell ourselves this is caused by the high demand to live in paradise, but demand is only half of the story. The other half is supply. There’s plenty of room to build, even in the state’s crowded urban areas, but myriad local and state policies have made it impossible for builders to keep up with the growing population.

Prices have gotten so outlandish, and cost-of-living-driven poverty rates so astronomical, that lawmakers now promise relief in the form of a state “housing package.” Alas, most of what they offer will raise taxes and give the government more control of the market.

Before we get to these “solutions,” it’s important to revisit the thinking that got us to this crisis point. A decade ago, then-Attorney General Jerry Brown was praising Marin, the tony 260,000-population county on the north side of the Golden Gate Bridge, as the model for the state because of the ways its growth-retarding land-use policies allegedly fought global warming.

Marin is a beautiful place, filled with lush, open hills just a stone’s throw from one of the most congested and priciest cities in the country. The Marin model, as I explained in my 2007 Register column, involves eager compliance “with the California Environmental Quality Act, which requires cities and counties to identify potential environmental impacts from proposed developments and take reasonable measures to mitigate them.”

Marin County was trying to reduce its “ecological footprint” by making it nearly impossible to build most types of housing. I noted that 84 percent of the county’s land already was set aside as open space. By contrast, Brown was suing San Bernardino County because it was permitting too many suburban-style developments. The state has only doubled down on these kinds of policies in the years since.

Open space is lovely, but it comes at a price. I know someone who pays $4,000 in rent for a modest apartment there. San Francisco has little developable land, of course, but the city’s tenant laws compress supply. Moreover, the counties surrounding San Francisco have tight growth controls, despite also having lots of hills and open space.

This is just one example of how California has engaged in a long-running strategy to stop or delay housing construction, thereby reducing supply and driving up prices. Cities also routinely get in on the slow-growth act. That’s sometimes driven by homeowners — even conservative ones — who moan about growth and congestion.

Unfortunately, the Legislature’s approach does nothing to roll back this process.

Senate Bill 2 just hit roadblocks in the Assembly, but epitomizes the Sacramento mindset. Supporters want to impose a $75 to $225 fee on many real-estate transactions to fund government-subsidized “affordable housing.” Senate Bill 3 would place a massive bond on the ballot that, if it passes, would subsidize such housing. Even Brown admitted there will never be enough money to subsidize our way out of the housing crisis.

Senate Bill 35 would wisely make it easier for developers to build housing projects by creating a “ministerial” approval process, which means they have a right to an approval without the whole planning and CEQA process. However, it only applies if they build high-density projects favored by legislators. And it imposes a union wage requirement that will drive up the cost to build that housing.

Another measure would promote “inclusionary zoning,” which requires builders to include a percentage of below-market houses in their developments. That, however, inflates the cost of market-based offerings. Assembly Bill 71 would punish owners of vacation homes by removing the state mortgage-interest deduction. The problem isn’t that people are “hoarding” houses, but that the state doesn’t allow enough of them to be built.

So, yes, the public is right to be alarmed by this crisis, which is no hobgoblin. But they would be foolish to believe legislators are going to save them. More likely, they’ll pass some bills that make things worse — and a few years from now, will offer more “solutions” to the new problems they created.

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