Who is responsible for California’s affordable housing crisis?
If you listen to the state’s Democrats, their oppressive housing regulations have nothing to do with it. Rather, big, bad, for-profit technology corporations are to blame. Yes, the problem is that Facebook, Google, Apple and the other big tech companies have created too many jobs which pay too much.
I bet a lot of other states would love to have this problem. What a message to send to corporations deciding where to locate: If you create too many jobs in our state, you are going to have to pay.
California Governor Gavin Newsom and other state leaders have been leaning on these companies to address the “problem” they have created, while accepting no responsibility for the role the state has played. In response, the companies have stepped to the plate with billion-dollar-plus commitments to assist the state with its problem. Apple is the latest to contribute, pledging a total commitment of $2.5 billion.
"The sky-high cost of housing — both for homeowners and renters — is the defining quality-of-life concern for millions of families across this state, one that can only be fixed by building more housing," Newsom said, according to a statement from Apple. "This partnership with Apple will allow the state of California to do just that."
The governor is correct that more housing must be built. He is wrong to pursue a policy of arm-twisting the state’s largest companies to contribute to it and for the state to play any role in the building of the housing. The best thing for the state to do is to get out of the way.
So, when you hear about a housing shortage, you must ask, what has interfered with the free market to keep it from working? The answer, as is almost always the case when price increases grossly exceed inflation, is excessive government intervention.
In a truly free market economy, a housing shortage should never exist. As demand for housing rises, supply of housing rises to meet the demand. So, when you hear about a housing shortage, you must ask, what has interfered with the free market to keep it from working?
The answer, as is almost always the case when price increases grossly exceed inflation, is excessive government intervention. (See spiraling tuition costs brought on by unlimited government-funded student loans, and spiraling health care costs brought on by excessive government mandates on private insurance).
In California, the government intervention is rampant. The Golden State is notoriously the most difficult and expensive state in which to build new housing.
Construction costs average $330 per square foot in San Francisco, the second highest in the world. Environmental regulations, coastal regulations, zoning controls and permitting fees add costs and create delays for new home developments. The biggest culprit is the California Environmental Quality Act (CEQA), which has the purpose of “[preventing] or [minimizing] damage to the environment through development of project alternatives, mitigation measures and mitigation monitoring.”
In hopes of easing regulatory controls in response to the housing crisis, Republicans proposed SB 384 earlier this year to create some exemptions from CEQA. Democrats killed the bill in committee, despite having previously approved CEQA exemptions for new stadiums for the Oakland A’s and Sacramento Kings.
If you put concern for the environment over concern for people to be able to afford to put a roof over their heads, you wind up with an affordable housing crisis.
And state intervention keeps getting worse. Statewide rent control and eviction protection just passed which places further burdens on housing suppliers. And, starting January 1 all new homes must have solar panels installed on the roofs.
Next up will likely be natural gas bans, as already implemented in Berkeley, requiring new homes to utilize exclusively electricity.
Democrats have a monopoly on power in the state, holding over three-quarters of the legislative seats. It is in their control to correct the market imbalance that their policies have created. The answer is not for the government to step in and build housing (with or without a “public-private partnership”).
Government is not proficient at real estate development. The answer is to reduce the regulations which created the problem to begin with. In addition, the state should fix its road problems, as it is only natural that with population growth people must live further away from work.
Despite having the highest gas taxes in the country to pay for our roads, the state ranks 43rd in road quality and Los Angeles and San Francisco are among the worst traffic cities in the country.
The state should first demonstrate the ability to properly build roads before moving into the housing business.
James Breslo is an attorney, host of the Hidden Truth Show and founder of RealKast, a new media company. He was formerly a partner at the international law firm Seyfarth Shaw, defending companies and individuals against alleged civil rights violations.