Yesterday, I showed how California Government, currently under the control of Democrats, increases the cost of gasoline through taxes, fees, and regulation, all things that are under the control of the State Government. The majority in the Legislature and the Governor have created the high cost gasoline in California (all the while blaming oil companies for the actions of the politicians).
Today, we’ll talk about the cost of housing. Once again, the increasing cost of housing is created by massive housing shortages throughout the state, and those shortages are caused by government fees and regulations. So what is the majority blaming for the high cost of housing? Once again, they blame the private market, a market they have severely controlled and regulated.
I would like first to make this observation to put the housing issues in a context. The cost of housing plays only a minor role in the homelessness crisis in this state. The major causes of homelessness are mental illness and substance abuse. That is why the Democrats’ solutions to crisis, that is, to build homeless shelters and give the homeless money don’t work. The mentally ill waste the money and avoid the shelters. The substance abusers spend the money on drugs or alcohol, and avoid the shelters because they are not allowed to abuse drugs or alcohol in the shelters. Politicians can spend years (as they have) claiming they care about the homeless, and do nothing, because they are treating symptoms not causes.
For those in control of their lives, the increasing cost of housing simply impoverishes them. They find roommates or families to live with them, and they pool resources simply to live. They don’t live in their cars or on the street, because they can’t, if they want to keep their jobs, and they want to keep their jobs.
So how has California state government increased the cost of housing?
Simply stated, the California Environmental Quality Act and onerous planning and zoning regulations. Local and State government entities spend a lot of times thinking about building houses, rather than actually building them. They study everything about building single or multifamily housing units, from how many cars will drive in and out of the units, the flies and rats that will be displaced by the units, how much water and electricity they will use, and, in many cases, just how pretty the units will be. Those governments then let everybody comment on the units. Most comments come from people already there who know that more units will increase the competition for the sale of their own unit, and therefore undermining one of their key investments. By the time it is all said and done, it is a 10 year process from conception to construction, and there is significant risk to the developer, who are as likely to have their projects denied as granted. If it is denied, they have to recover their development costs in the next project. Hence, the ever increasing cost of new houses.
Let’s look at California history. In 1974, 80 percent of Californians could afford a median priced home. I like to refer to the Neil Diamond classic song “I am, I said” that extols the virtues of Los Angeles saying “palm trees grow and rents are low.” In the 1960s, Los Angeles apartment owners would give televisions to renters as an incentives to move in. In 1974, the city of Los Angeles put a moratorium on the construction of apartments. By 1978, Los Angeles was imposing rent control because rent for apartments was skyrocketing. It wasn’t profiteers that caused this problem, it was government.
Throughout the 1980s and 1990s, controls on new housing increased, and by 1985, eleven years after the imposition of the CEQA requirements on housing projects, only 17% of Californians could afford a median priced home.
California government politicized the construction of housing, and the result was predictable. A government imposed scarcity of houses and housing units caused prices to skyrocket. It’s simple economics, as demand increases, either supply has to increase or price will increase.
Planning, zoning, and environmental regulations have destroyed the housing markets. Planners everywhere draw pretty pictures on zoning maps in pretty colors, and expect the market to conform their planning utopia. When it doesn’t, they blame developers, instead of their own lack of insight. Planning is indeed “socialism,” because it is government bureaucrats attempting to impose their view of the world on a vibrant and changing market.
There is a way to fix it, but the Democrats won’t get rid of CEQA. Too many of their supporters are vested in the current system. If they get rid of CEQA, or have a more market-based system, the political supporters of the Dems will no longer have a political process to extort money from developers (which they do now on a regular basis). Dems can’t force these developers to hire politically connected actors (like they have for years as they have required these developers to hire the civil engineering firm owned by Diane Feinstein’s husband). A system that emphasizes property rights would lead to an increase in supply of housing, and thereby decrease its cost.
Let developers figure out what housing consumers want, then let them build it. The state doesn’t need politicians in Sacramento, or the bureaucrats in the various planning departments throughout the state, determining what houses consumers want or where they want them. Consumers will figure that out for themselves, and developers will meet those desires. If we so that, prices will drop. It’s simple economics.