California Housing Plan Is a Dud, but Local Rules Are the Biggest Problem

Perhaps it's time to stop waiting for Sacramento, and start pressuring local governments to soften their regulatory restrictions.


Cameron Davidson/Newscom

Perhaps it's the sign of Capitol hubris, but lawmakers in the waning days of the legislative session touted their "housing package" as a big part of the solution to California's ongoing housing "crisis." It's an actual crisis.

Prices and rents are so high that they lead to an exodus of our kids to lower-cost states. It depresses job creation, as companies avoid locating in places where their employees cannot afford to live. Housing is the prime reason California has the nation's highest poverty rate, at more than 20 percent, using the Census Bureau's cost-of-living-adjusted measure.

But it didn't take long before "experts" recognized what this columnist confidently predicted: The trio of bills, which were signed by the governor last Friday, will do little to fix things. "Housing experts say" the legislative package "is the most ambitious move the state has taken in decades — and perhaps ever — to address the issue," reported the Sacramento Bee. "Even years down the road, the measures will not stop rents from increasing or home prices from trending upwards."

The San Jose Mercury News paraphrases the results of a new UCLA Anderson Forecast: "California appears unlikely to be able to build enough homes in the coming years to put a meaningful dent in skyrocketing housing prices triggered by a shortage of affordable dwellings." The state, it concludes, needs 20 percent more housing to reduce prices modestly. That's not going to happen, with or without the housing package.

The housing plan will boost supply by throwing tax dollars at high-density low-income projects. One bill reduces some regulations—but only for certain projects that pay inflated union wage rates. It will help a little and then hurt a lot. As someone who has long covered local government, it's clear the main problems are city hall and your neighbors. Whenever I write about housing, people send nasty notes. They are tired of congestion and don't mind squelching new development.

Congestion is awful, indeed. It would be easy enough for me and my fellow homeowners to just enjoy what we have and lobby local officials to curtail new housing proposals. It makes no difference whether we do this to, say, preserve open space and the environment (if you're a liberal) or protect the rural or suburban character of the community (if you're a conservative). It all comes down to using government to protect our current lifestyle. But that means our kids are more likely to move to Nevada or Texas so they can also have a shot at the American Dream.

Local restrictions really need to be rolled back. For instance, the Sacramento-based Pacific Legal Foundation, a pro-property rights public-interest law firm, is petitioning the U.S. Supreme Court to review West Hollywood's affordable-housing fees, which mandate that developers pay into a low-income housing fund in exchange for getting permission to build new units. The costs are so prohibitive that it stops new development. This is reflective of a statewide problem.

"The city literally thanked the developer for adding 11 units to the neighborhood and then demanded a roughly $550,000 fee to subsidize affordable housing as a condition of the permits," said Larry Salzman, a PLF senior attorney for the case. The group cited the Takings Clause of the U.S. Constitution in challenging "a government's authority to use the permit process to force private property owners to dedicate private property to a public use."

The city's "inclusionary zoning" law is counterproductive. It forces developers to pay for below-market housing to get approval to build market-based housing. It's ludicrous to punish a developer for the city's lack of housing supply when that developer has proposed a project that will add to the supply. Yet the California Legislature this session also passed a bill that encourages localities to impose similar mandates on rental construction. No one would accuse state legislators of having an abundance of economic understanding.

The Pacific Legal Foundation also is representing a Marin County couple that was hit with a $40,000 fee in exchange for the right to split a lot, which would then be available for building. The legal issues are similar, in that individuals are being forced to foot the bill to help ameliorate broad societal problems. It's not a huge case, but these types of rules and fees discourage new construction.

Proposed mega-developments — such as the 21,000-unit Newhall Ranch project in the Santa Clarita Valley — get delayed for decades, which suppresses supply in a big way. But it's a frequent occurrence for small-lot splits and 20-unit projects to get killed or delayed. Often, such projects never get proposed in the first place because of all of the fees.

The Legislature applied itself to the housing crisis, yet many experts believe that lawmakers' solution won't fix much at all. Perhaps it's time to stop waiting for Sacramento, and start pressuring local governments to soften their regulatory restrictions.

This column first appeared in the Orange County Register.

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  1. And we should give one solid fuck about California, why?

    1. Because we want them to stay in California and not metastasize to the rest of the US. If they can’t afford to live there then they are going to come to your neighborhood and ruin it too.

      1. Build a wall.

        1. I’m making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life.

          This is what I do…

    2. I’m still figuring out the over/under on when it finally sinks into the sea.

    3. 39 million of you live in California.

      1. “39 million of you live in California.”

        …and I still can’t understand why.

        1. California has three large cities along the coast, a wide range of climates for tourism, a thriving agricultural area, and hosts the epicenters of two major industries.

        2. Fewer and fewer Americans do each year, but they are more than made up for by immigrants for whom California is a colossal step up on the ladder.

          Also, what Hugh said.

        3. Basically it’s because it is the best place on the planet to live. Northern California is truly as close to heaven on earth as you can get… Other than all the government and idiots that now live there. It didn’t used to be like that though. My grandpas family moved to San Francisco during the depression. He grew up there, bought a house in the burbs where my dad grew up, and I grew up the first part of my life. Then we moved to Washington state because it was getting too stupid to put up with.

          Now, sadly, Washington is on the verge of flipping at the state level to being a crazy lefty state too. Democrats have won presidential elections here since before we moved here, but the state level was always pretty well balanced out, and hence moderate. With all the proggies moving here to Seattle it is going to flip everything to full crazy town within the next election cycle or two. Probably going to move again in the next couple years. Idaho is lookin’ mighty nice.

          The funny thing about Cali is that more people have been moving away from it than to it the last several years. Even with all the dysfunction some places are still not horrible. If you don’t mind the taxes you have the greatest climate in the known universe. If you’re a lefty you of course see all the stupid as a selling point, but even if you’re not a commie the allure of the weather can almost be a worthwhile trade off. Lots of Rs and libertarians put up with it just because it’s so awesome geographically.

        4. Mainly for the weather.

  2. “The housing plan will boost supply by throwing tax dollars at high-density low-income projects. “
    Projects alright. Put mostly black and hispanic people in projects to keep them out of your safe little gated communities.

    This has never been tried in New York, New Jersey, Detroit, Chicago, etc.

    What could possibly go wrong?

    Commifornia, the first state to declare bankruptcy.

  3. RE: California Housing Plan Is a Dud, but Local Rules Are the Biggest Problem: New at Reason

    Of course local rules are the biggest problem.
    How else are the local politicians going to justify their jobs?

  4. I’ve always thought that you’ve got to be a complete moron to buy a 1300 sq ft house for $900,000. I don’t care where it is.

    Especially with those interest-only loans and other bullshit debt. They got what they deserved in 2008. And it’s going to happen again.

    1. Yup. I live in Seattle, and it is that stupid here now. SF is way worse than that… A 13000 SQFT house for $900K there would be a DEAL. A 1200 something SQFT 3 bedroom on my block in Seattle sold for $850K, a 4 bedroom for $1,075,000. This was a strictly blue collar neighborhood when I moved here 12 years ago too, not even fancy houses or anything.

      We’re more than double the typical long term stable/sustainable median income to median home price ratio… But it’s not a bubble! LOL

  5. California again?
    Secede already; and take Hawaii with you.

  6. I wish writers would be more aggressive when writing about NIMBYism. Much of the congestion and complaints they have is regarding public land use, and infrastructure. We do have infrastructure issues, in most states the Department of Transportation plans 10-15 years in arrears.

    Really we should change it to NOPIDO’s. Not On Property I Don’t Own.

    It shines light on the controlling nature of those practicing this philosophy. Use the government as weapon to control something to which you have no legal claim.

  7. No, we should pressure Sacramento. County and local governments are a creature birthed of the state government. As such, the state government could easily fix every city if it wanted to. All it has to do is ban these perverse land use restrictions. Other states have such laws, and are better off for them.

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