Mar172016

Root cause of California’s housing problems is homeowner greed and hypocrisy

The worst social problem in the most heavily Progressive-dominated political districts is a lack of housing caused by selfishness and greed, two characteristics hypocritical Progressives like to criticize Conservatives for.

walk_awayCalifornia has a housing problem. Anyone who lives in California copes with higher housing costs than nearly everywhere else in the United States. This problem is a boon to landowners and high wage earners, but it’s a bust for lower middle class wage earners who often put 50% of their income toward housing. Why do we have this problem?

First and foremost, the problem is one of supply. California has a chronic shortage of housing. The lack of supply is the primary reason prices are so high. When supply is limited, people substitute downward in quality just to obtain any housing at all. It’s why an income in Southern California that barely affords a condo would buy a McMansion anywhere else in the country.

Peninsula economy thought experiment

Imagine an isolated economy, perhaps an island, or perhaps a peninsula in Northern California. In this peninsula economy we have 10 workers and 10 houses. Each worker can afford to buy one house, and everyone has one.

Now lets imagine some new resource is discovered, and the local residents need help to develop it. Two new workers come to the area to develop the new resource, and they create demand for two new housing units to accommodate them. In a totally free market, two new houses would be built, and the 1:1 balance of 12 workers and 12 houses would be maintained.

Imagine instead that when the new workers moved to the peninsula there wasn’t room for two more houses. In that instance, 12 workers would be bidding for 10 houses. The 10 workers with the highest salaries would all need to put a larger percentage of their income toward housing, but they would outbid the two lowest paid workers in on the peninsula, and they would end up with the 10 houses. The other two workers would either leave, commute from outside, or live on the peninsula homeless.

next_generationIn the real world, there is always room for two more houses. If all the land were developed, it could be redeveloped at higher densities. In other words, if cities can’t build out, they can always build up.

But what happens if the 10 workers who had houses banded together and passed a law forbidding the construction of new houses. This completely artificial constraint would cause a permanent shortage of housing, and it would make the value of the homes of those 10 workers go up and up and up.

Those 10 owners gain a tremendous reward. The value of the real estate they own inflates dramatically, and they avoid all the problems of traffic and crime often (falsely) associated with population growth. It’s the best of all worlds — for the existing homeowners. For everyone else, not so much.

Some of these homeowners feel a little guilty for the way their exclusionary policies crowd out their neighbors, co-workers, and children, so they support affordable housing policies that are as effective as fighting a forest fire with a garden hose. These owners feel Progressive and enlightened despite their obvious hypocrisy.

Blame Zoning, Not Tech, for San Francisco’s Housing Crisis

Wealthy districts work hard to prevent new housing from being built in their neighborhoods.

Kriston Capps, Mar 11, 2016lowly_renter

The real fright-feature is the lack of housing. And the nightmare behind it is other people. … The problem is that San Francisco won’t build housing, and making matters worse, residents work tirelessly to prevent more housing from being built.

“Acting in a way that prevents everyone else from living in your pretty little city because you already have a place that you like does not make you a progressive,” he writes. “It makes you greedy.”

He’s got that right. While it’s by no means an article of faith, the lack of adequate housing supply is the consensus culprit in the housing crisis sweeping the country. A lack of new housing is tearing San Francisco apart in particular.

The housing crisis is both a regional and local problem. Looking at it two ways leads to two different conclusions about gentrification and displacement. From a regional perspective, any and every city in a metro area could be building more. Any and every new housing unit adds to the supply and lets out some pressure. … building new housing units anywhere—whether they’re set-aside affordable units or penthouse condos—goes in the win column from a regional perspective.

The answer is to build. Build more fucking housing, just like Nolan says. But the answer is also to zone: To take away land-use decisions from neighborhoods and hand them over to cities. And for cities to act in concert with other cities toward regional goals for new market-rate and affordable units everywhere. Not just where developers can get away with it, but where incumbent residents have already soldered shut the gate behind them.

hid_the_housesA lack of supply inflated California house prices since the mid 1970s. The problem is not physical, it’s political. Unless lawmakers approve many more dwelling units, the shortage will worsen.

In California local opposition groups possess too much power to stop development. The market for housing in most of the United States is much more stable, and house prices are much less inflated because the local political system does not restrict new home development near as much as it does in California. (See: Affordable housing in California requires ignoring the NIMBYs.)

The problems with chronic shortages, inflated house prices, and the substitution effect to lower quality housing is a direct result of the development approval process in California being 100% in the hands of local politicians. In California no State or regional entity has the power to override a local political body that rejects a reasonable development project.

Further, since local governments are highly dependent upon commercial and business tax revenue, they zone for more commercial than residential land uses, which in turn creates imbalances between the number of jobs and the number of available housing units, exacerbating the problem.

California will only have housing that’s affordable in a free-market, non-subsidized way when State legislators shift some power away from local governing bodies — a course of action that will not be popular on the local level. This could take the form of direct approval override of local governments by a State or regional decision-making body, or it could take the form of mandates for development. In whatever form, some State or regional body must be given power to stop NIMBYs from lobbying local government officials to stop development that benefits everyone.

[listing mls=”OC16054590″]