Housing Policy

We Can Build Our Way Out of the Housing Crisis

California dreaming.

|

In 1998, I left a small city in Ohio for Southern California, trading one of the nation's lowest-priced housing markets for one of its highest. The trade-off was worth it, but I recall my wife's admonition. She would OK the move if we could buy a single-family house. It didn't have to be fancy, but she wasn't raising our kids without a yard.

The first place we saw was in the heart of a trash-strewn, gang-infested area. My wife cried. After difficult searching, we found a handyman's special. We still laugh at the time she asked a neighbor where the "bad" areas were in our new city. "You're in it, honey," was the retort. It turned out to be a great place to live.

Our experience goes to the heart of the ongoing problems in the Southern California housing market. Young families want to own a home. They want to put down roots. But prices have been escalating. Much is made of the state's difficult business climate. That's clearly a problem, but surveys show people mainly flee because of home prices.

The situation has gotten far worse since my family arrived in California. I checked with Zillow, and the home we bought (we've long since moved away) is valued at nearly three and a half times what we paid for it, so someone in my position these days would probably just stay in Ohio. The primary reason for the hike is that building just hasn't kept up with population growth.

We all know how supply and demand works. But Southern California governments have made it costly and cumbersome to build new homes, which should be obvious to the many people who remain perplexed as to why there's an affordability crisis.

The Southern California Association of Governments, the planning agency for most of the Southland, just released a new report (and hosted a summit) addressing this "challenge." SCAG does a fabulous job identifying the core issues, even though some of its policy prescriptions would make things worse.

"The SCAG region median home price is $507,886, an increase of over 58 percent over the past 20 years," according to the executive summary. "The median rental price in the SCAG region is $1,321, an increase of over 20 percent over the past 20 years." Over the same period, the report explains, "the median household income has actually decreased over 5 percent."

"In comparison to the last few decades, housing building has significantly decreased," the report added. "There are several factors contributing to the high cost of housing. The costs from the entitlement and permit approval process can represent up to 19 percent and government regulatory costs can add up to 7 percent." The report calls on local officials to say "yes" to housing. That's exactly right.

SCAG details the obvious results of insufficient building. High costs strain families. This leads to a "brain drain," as highly skilled people flee to other states. It creates an enormous burden on working-class and poor people, who often must spend more than half their income on housing. And it means people in small towns that have been devastated by job loss can't move to where the jobs actually are. According to the U.S. Census Bureau's cost-of-living-adjusted poverty measure, California leads the country in poverty rates, largely because of high housing costs.

The report might even understate the role of government in driving up prices. The direct regulatory costs are astonishing, but all the NIMBYism (not in my back yard) and resulting growth controls drive up prices of developable, vacant land. Because the price of entry is so high, builders focus on high-priced mini-mansions and luxury condos. If government regulations add, say, $200,000 to the cost of a home, then a builder might as well build something fancy and profitable.

SCAG gets the main point right: "We need to increase housing supply and promote affordability in our own communities," according to its president, Michele Martinez. But some "local strategies" detailed in the report are wrongheaded. For instance, SCAG describes rent control and rent stabilization — when government puts a cap on the prices landlords can charge — as policies "that are especially helpful for people with limited ability to adjust to sudden rent increases."

Well, yes, such caps ostensibly help some people. But those cities that embrace them create a huge disincentive to housing construction. San Francisco, for instance, has the most pronounced housing crisis in California (and probably the country) in large part because of a draconian rent-control law. The report touts "inclusionary zoning," which escalates costs by forcing builders to include a percentage of below-market units.

The report also points to a lack of public dollars for subsidized housing, but it's impossible to spend our way out of this problem. Most people are like my wife and I were in 1998; they don't want government-subsidized condos. They want a home with a yard. There's one simple solution: Build more of them. Build them in the city, suburbs and rural areas. Build, build, build. Fortunately, SCAG is pushing local officials to embrace that obvious solution.

Advertisement

NEXT: Gary Johnson Hits Hollywood, Predicts a Big Future for the Libertarian Party

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Yesterday someone posted a link to a rant by some pinko, the gist of which was that college campuses are rife with right-wing rhetoric. As evidence he made the claim that right-wingism is built into the curriculum of Econ 101. A glimpse into the mind of a marxist.

    If a states revenue department is named ‘The state board of equalization’ it is a pretty good tip-off that the state is infested with people who don’t understand or agree with the fundamentals of economics. It is inevitable that the economy there will become increasingly dysfunctional; it’s gonna get a lot worse before it gets better if it gets better at all. My understanding is that SF has been reduced to a third world-like demographic – people who are rich and people who live in homeless encampments.

    Hey California: keep your idiots. Build a wall.

    1. I can’t help but agree. I hope Cali continues pursuing the same types of policies so I can continue to have a state to point and laugh at.

      1. My Co-Worker’s step-sister made $14500 the previous week. She gets paid on the laptop and moved in a $557000 condo. All she did was get blessed and apply the guide leaked on this web site. Go to this web site and click tech tab to start your work.. Go now… http://www.ImdbCash.TK

      2. Start working at home with Google! It’s by-far the best job I’ve had. Last Wednesday I got a brand new BMW since getting a check for $6474 this – 4 weeks past. I began this 6-months ago and immediately was bringing home at least $90 per hour.
        I work through this web site.. Go to tech tab start your work… http://www.Trends88.Com

    2. How long before the word “male” is verboten?

    3. The gini coefficient for SF was .51 last time they measured it. Higher to be sure than the US average of .469, but not by that much. What data did you use to come to your understanding?

    4. If Econ 101 is micro, that is just math. No bias at all.

      Intro macro, on the other hand, is filled with left-wing bias (as taught at most schools).

      My school had 4 digit numbers, so I dont recognize this 101 concept.

      1. Based only o my memories, 101 is macro, then it is followed by micro.

      2. “If Econ 101 is…”

        … is a social science like sociology. No bias at all.

  2. It doesn’t matter. If housing prices dropped, as they did a few years ago, we’d have some sort of bail out to try and drive them back up. Because everyone is afraid of low housing prices despite the occasional “affordability” rhetoric.

    1. Correct. Expensive housing is only expensive if you’re buying.

      1. Or paying taxes on it. I’d love for the value of my house to drop like a rock, because I have no intention of selling it anytime soon.

    2. Keep the prices up and you can keep all the wrong people from moving in.

      Just like any group of wealthy progs, they must mouth platitudes about the middle class and “poor” but when it comes to having to actually live with the dirty peasants, it’s “hell no, price them out of this market.” Racists. Sauce for the goose.

  3. I live in Columbus where home prices are pretty reasonable. I don’t get paying 3 times as much for the same or less house. I suppose if that was the only place your chosen career had jobs available. I like having walking around money.

  4. Just need the right “top men” in charge so they can get rid of the evil corporations artificially inflating the housing costs.

  5. Just need the right “top men” in charge so they can get rid of the evil corporations artificially inflating the housing costs.

    1. Well the only real solution is to nationalize all industry. That way no one has to be paid because the aristocrats will provide all ones needs. As long as you don’t get uppity and complain you won’t have to worry about money. There were no homeless slaves in the south BEFORE Pre-Bellum. They never had to worry about money.

  6. If anyone thinks housing is expensive now just wait until Trump builds a wall and kicks all the bad hombres* out.

    He better build the wall before he deports all the Mexicans otherwise there will be no one left to build it.

    1. I would help build the wall and I was born in the US of A.

    2. Funny how the wall between Mexico and America would be to keep people out, just like China’s Great Wall. No commies are badmouthing that wall.

  7. You know, they can just do nothing and this problem will solve itself as companies and workers flee the area for ones with more reasonable cost structures

    1. government does not exist to do nothing it exist to meddle and makes problems it created more complicated to hide the fact that it caused the problem in the first place

    2. But it will take a while until everyone flees to Texas or Oregon or Arizona or Colorado…there are plenty of folks getting screwed in the meantime.

      1. Housing sticker shock is already happening in Austin, which is becoming San Francisco Jr. in that regard.

        There’s plenty of room in Houston and DFW for entry-level homes, but like the author said, bureaucracy costs are most likely keeping them from being built.

  8. The costs from the entitlement and permit approval process can represent up to 19 percent and government regulatory costs can add up to 7 percent.

    Around here, impact fees are the killer. And people wonder why “affordable housing” doesn’t get built.

  9. right-wingism is built into the curriculum of Econ 101.

    Wealth creation is racist, as any civilized person knows.

  10. The report touts “inclusionary zoning,” which escalates costs by forcing builders to include a percentage of below-market units.

    And then the same people turn around and complain about the income inequality crisis that they just caused.

  11. There’s one simple solution: Build more of them. Build them in the city, suburbs and rural areas. Build, build, build. Fortunately, SCAG is pushing local officials to embrace that obvious solution.

    But that’ll contribute to urban sprawl!

    1. And the other problem… those local officials trying to get reform measures passed usually run into fierce opposition from homeowners shouting the usual “MUH PROPERTY VALUEZ!!!” chorus.

      1. And by the way, I speak as a homeowner whose house, purchased for $103K in 2006, is now valued at ~$97K. But that doesn’t bother me, because it’s a house and neighborhood I like living in.

  12. until I looked at the paycheck saying $4730 , I did not believe that…my… brother woz like actualy bringing in money part time from there computar. . there friend brother started doing this for less than 7 months and resently paid for the morgage on there home and bought a new Cadillac …….

    …….. http://www.jobprofit9.com

  13. Ellie . true that Susan `s blurb is good… I just purchased a gorgeous Fiat Panda sincee geting a check for $8891 this-last/4 weeks and also ten grand last-month . this is actually the most financialy rewarding Ive had . I started this 9-months ago and right away was bringin in at least $87, per-hour .

    see……………. http://www.BuzzNews10.com

  14. Large scale bunkhouses in big cities.

    The rental market is monopolized by the concept of physical privacy. Monopolies kill leverage. Supply/ demand and land use policies hold no promise for ‘bursting the bubble’ for a number of reasons that will continue, one is that supply/ demand only drops prices when there is a surplus, but in housing markets ? at best ? developers simply meet the equilibrium between supply/ demand, they do not pass it.

    Nothing with walls will produce different results already witnessed in every developed town. They cost money to build, reduce the sharing of amenities, give opportunities for damage and illicit behavior/ degeneracy among people, and most of all, they limit the number of people paying rent per square foot. Leverage among lower/ middle classes will unfailingly be lost and inequality will rise so long as density is tried to be accommodated with the use of walls. Space needs to be utilized in the vertical direction without turning units into 48” tall / 125 sq ft units that for $2,200/ month like Seattle is doing.

  15. Charge rent for the beds. Turn it into an honest rental with secured access and pre-screening and without the prison like qualities of missions. People need options not help, and right now what is missing is a filter that differentiate between the two. You can make the same money off 4+ broke people as you can one well off by recognizing privacy is in fact non-essential for many for some time. Large numbers = less personal = less of an awkward silence/ feeling of intrusion. It has the unexpected benefit of letting the peaceful outnumber the un-peacful which works if people are visually exposed (meaning no walls) in which case they do seem to get along without needing to be micromanaged. It also has the benefit of eliminating claustrophobia as is the case in ‘affordable’ coffins, I mean units.

    Just because people cannot afford $1200/ month does not mean they cannot afford a bunk bed.
    Large scale bunkhouses – gotta wonder why they only seem to exist in the hills (historically they’ve been used on cattle ranches). Cities should be making money off the issue – that is where the money should come from.

  16. until I looked at the paycheck saying $4730 , I did not believe that…my… brother woz like actualy bringing in money part time from there computar. . there friend brother started doing this for less than 7 months and resently paid for the morgage on there home and bought a new Cadillac …….

    …….. http://www.jobprofit9.com

  17. Start working at home with Google! It’s by-far the best job I’ve had. Last Wednesday I got a brand new BMW since getting a check for $6474 this – 4 weeks past. I began this 8-months ago and immediately was bringing home at least $77 per hour. I work through this link,

    go? to tech tab for work detail,,,,,,, http://www.highpay90.com

  18. Liliana . if you think Lawrence `s blog is incredible, I just purchased a new Honda after earning $5741 this – 4 weeks past and also 10 grand lass month . it’s by-far the most-comfortable job I have ever done . I started this four months/ago and almost immediately began to make minimum $85… p/h .

    see this……………. http://www.BuzzNews10.com

  19. Liliana . if you think Lawrence `s blog is incredible, I just purchased a new Honda after earning $5741 this – 4 weeks past and also 10 grand lass month . it’s by-far the most-comfortable job I have ever done . I started this four months/ago and almost immediately began to make minimum $85… p/h .

    see this……………. http://www.BuzzNews10.com

  20. just as Patrick replied I’m dazzled that a stay at home mom able to make $7886 in 1 month on the internet
    see more at———–>>> http://tinyurl.com/Usatoday01

  21. What effect do the Prop 13 limits on property taxes have which might be artificially suppressing homeownership turnover and the resulting step-up in taxable basis? It seems to me that someone who has owned a home for 30 years has a tax basis which is a small fraction of their next door neighbor who purchased last year. That long term owner may want to move (cashing out, no doubt) and sell the home to a friend or relative and find a way to keep the low basis. It is so much money that it seems likely to skew the market severely, disguising costs, favoring some, penalizing others, and driving up marginal new house/development cost.

    Is my speculation about this off base?

  22. until I looked at the paycheck saying $4730 , I did not believe that…my… brother woz like actualy bringing in money part time from there computar. . there friend brother started doing this for less than 7 months and resently paid for the morgage on there home and bought a new Cadillac …….

    …….. http://www.jobprofit9.com

Please to post comments

Comments are closed.