Housing Policy

Californians Can Build Their Way Out of the Housing Shortage

Government rules and regulations on the local and state level have driven prices up.


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.

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.

For years, people have retorted: "That's the price for living near the beach." 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.

In California, it's always fair game to blame politicians. Over the years, they've certainly passed a lot of laws that make it tough to build new houses. As they dream up far-reaching new programs on myriad subject matters (e.g., the Secure Choice retirement plan for the private sector), they steadfastly avoid dealing with major problems where they could effect change.

"The lack of housing supply fuels headlines that reveal the state's housing prices at their starkest," Liam Dillon wrote in the Los Angeles Times. "It could explain why doctors and others making as much as $250,000 a year are struggling to find homes in Palo Alto." Prices in California are double the national average, Dillon writes, yet "legislators have shied away from tackling broad efforts to increase housing supply."

Of course, state legislators aren't the only ones to blame. City councils and county boards of supervisors love to control housing growth. But often, they merely succumb to public pressure. The Register reported this past week that a judge ordered Huntington Beach to "immediately comply" with a previous ruling requiring it to permit more low-income units as part of a high-density housing project.

The city, which has vowed to appeal, has been at odds with housing advocates "since last May, when the council, reacting to public outcry, eliminated more than 2,400 units of potential high-density housing from plans along portions of Beach and Edinger," according to the report. Focus on the phrase, "reacting to public outcry." 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.

Vox.com's Matthew Yglesias reported that a San Francisco supervisor "is forcing the city's chief economist to conduct an unprecedented economic impact study of the city's various land-use and development rules." There's this from the Santa Rosa Press Democrat: "Healdsburg is likely to create more affordable housing if it repeals a voter-approved growth management ordinance that restricts the number of new homes to an average of 30 per year."

Maybe the local pendulum is swinging back in a more sensible direction, even if the state 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: "Community 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.