Apr272016

Everyone in California wants to be the last new resident in their neighborhood

Everyone who buys a new home believes the neighborhood is perfect, and after they move in, any additional residents ruin the neighborhood with more traffic congestion. None of the new residents notice the glaring hypocrisy.

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Whenever a family buys a new house, the builder constructed that house only because no local opposition group was strong enough to prevent its construction; however, once new homeowners move in, many of them immediately adopt the belief that traffic congestion is out of control and any new development will ruin the character of their neighborhood, so these nimbys band together to prevent others from obtaining the same benefit they enjoy. Through willful ignorance, these new homeowners fail to comprehend the hypocrisy of this attitude and behavior.

I lived in Irvine’s Woodbury neighborhood for a few years. At the time, neither Stonegate or Cypress Village were built out, so when I drove on Sand Canyon, I enjoyed light traffic. From what I’m told now, people avoid Sand Canyon due to traffic congestion.

Local residents in Irvine would waste their time organizing to oppose future development because the Irvine Company would crush them politically. However, in other communities stronger and larger opposition groups confront smaller and weaker developers, tipping the balance of power in favor of those who stifle new construction; thus builders fail to provide sufficient supply.

People who oppose new developments benefit in two ways. First, if they succeed, they avoid the problems of traffic congestion in their neighborhood. And second, more importantly these people enjoy higher home values because by preventing supply from coming to market, potential buyers have fewer choices, so existing homeowners receive higher bids when they want to sell. Existing residents regard opposing new development as a win-win.

Unfortunately, opposing new development carries a social cost. California xenophobes revel in high house prices and high rents because it keeps out the undesirables; unfortunately, the high cost of housing also impacts their children.

no-house-for-youHigh wage earners own most of the property in Irvine. Most of their children will never afford real estate in the community where they grew up. Some of these children will grow up and find high-paying jobs enabling them to stay in the area, but for those who aren’t at the top of their class or who chose to go into professions with modest pay, they will be excluded from the club; many will leave the state due to the high cost of renting or owning.

Solving the problem of insufficient supply doesn’t require an innovative solution: it requires political will. If we want to provide affordable housing to the next generation, there are Two strategies for more abundant and less expensive housing, and the result of both strategies would allow builders to produce enough housing to accommodate the need. In short, we must build our way out of this problem.

Build a way out of high housing prices

April 23, 2016, By STEVEN GREENHUT

SACRAMENTO – If there were 30 loaves of bread and 50 people who wanted them, you can guess what would happen. Prices for those loaves would rise, from, maybe, $2, to $3 or even $10, depending on how desperate people were to make sandwiches. Those prices wouldn’t fall until some buyers switched to tortillas or bakers started baking more bread.

That concept is so simple it’s almost embarrassing to point it out. Yet when policymakers talk about other products, they lose sight of these basics. The housing market jumps to mind. Prices throughout California are still going up. Affordability is down.

reluctanceIt isn’t that policymakers don’t recognize the problem. Most do. The real problem is that local politicians dare not challenge local residents who view development opposition as a win-win proposition because if politicians act against the expressed interest of their constituency, their constituents vote the politicians out of office.

I know well-paid professionals in some coastal cities who have basically given up on the dream of homeownership given the typical $1-million-plus price tag for a tiny bungalow. A modest apartment in San Francisco can easily set you back $4,000 a month. Orange County isn’t much better.

(See: OC Housing affordable relative to rent, but not relative to income)

For years, people have retorted: “That’s the price for living near the beach.”

Everyone believes they live in a very desirable location; after all, they choose to live there. People who make this argument fail to understand that the place they live was just as desirable when prices were much lower, in fact, probably more so. There is a certain emotional appeal to believing the place you chose to call home is so desirable that people were willing to pay ridiculous prices to live there. The reality is a little different. It isn’t an abundance of demand that makes prices so high, it’s a lack of supply.lowly_renter

Actually, it’s the price we pay because those who already live in such lovely places lobby city councils, boards of supervisors and the state Legislature to put the kibosh on new construction, supposedly to stop congestion. A few minutes’ drive from the Golden Gate Bridge, one finds endless, lovely countryside – all tightly growth-controlled to keep out young families and other riff-raff. …

Is it just me, or does that exclusionary attitude repulse you too?

Try to find any development project that doesn’t spark a backlash from neighbors, environmentalists and slow-growth activists.Affordable-housing activists miss the big picture, of course. They believe the solution to the housing-affordability crisis is to subsidize (or mandate) the development of below-market-price “affordable” units. That’s a drop in the bucket; traditionally, “affordable” housing is best found in the “used” housing market. There’s no constitutional right to a subsidized new condo. They are right that localities need to permit more infill housing, but they need to green-light every type of new housing. If you feed supply into the system, it will help at every price point.

Exactly. This point is so important that everyone who’s concerned about housing affordability in California should advocate for it. Pursuing affordability mandates is not the answer. Approving more construction is the answer.

Maybe the local pendulum is swinging back in a more sensible direction, even if the Legislature hasn’t gotten the memo. The problem isn’t a secret.

A report last month by the state Legislative Analyst’s Office came to this conclusion: “[C]ommunity resistance to housing, environmental policies, lack of fiscal incentives for local governments to approve housing, and limited land constrains new housing construction. A shortage of housing along California’s coast means households wishing to live there compete for limited housing. This competition bids up home prices and rents.

It’s simple stuff. The problem won’t be fixed until people stop coming here, stop having children or the government finally just lets builders build more houses.

End-Of-The-American-DreamAllowing builders and developers to increase supply would solve California’s housing problems. If we don’t allow more supply to come to market, people will substitute down in quality further and further merely to obtain a place to live, lifting house prices at every level of the housing ladder and pricing out the lowest tier of the housing market. California is already the least affordable housing in the US, and this problem will only get worse.

California may never have affordable housing; it certainly won’t as long as all development approvals are 100% determined locally. The problem of NIMBYism and the desire of each homeowner to be the last person to move into their neighborhood will cause this problem to get worse and worse over time.

The problems with housing shortages are most acute in the Bay Area, and any real action to solve these problems will likely start there. If something is not done, home ownership will be relegated to only the wealthy and the highest of high wage earners: everyone else will be transitory renters who overpay for housing and never get ahead — at least until they give up and move out of state.

In California, the American Dream will truly be dead.

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