Housing Crisis Caused by State and Local Governments

California has a housing affordability crisis. According to Beacon Economics, Californians spend more of their income on housing than in any other state in the country. Beacon also blames high housing costs for the out-migration of 22 percent of middle class Californians to other states.

These figures are notable. Some of the other conclusions from Beacon’s recent study, such as their conclusion that high income tax rates do not contribute to the middle class flight from California are much more suspicious.

The question is then, why is housing so expensive in California? The conclusion is obvious; this is a supply and demand issue. There simply is not enough available housing in California to keep housing prices at an affordable level.

There are some factors involved which are beyond the control of government, such as the high cost of undeveloped land in the state, particularly in areas where it has become scarce such as the Los Angeles, Coastal and Bay Areas. But, even those issues are resolvable if the allowable housing densities are raised so that the shared cost of the land is spread among more housing units.

But these economic issues belie a number of truths. California’s environmental laws make it very easy for opponents of new housing to delay, stop, and increase the cost of building housing in the state, and local government land use and zoning laws give them extensive control over private property development.

A classic example of these land use restrictions on housing development are occurring in the bankrupt city of San Bernardino. There are literally thousands of planned homes on vacant land within that city that are now dead, not because the city is bankrupt, but because the city has, through its elected and appointed officials, made the permitting process impossible to surmount.

Environmental lawsuits have been brought against worthwhile projects in Highland. Housing development in Redlands has been delayed because of illegitimate concerns from the Redlands Airport board. But even these projects, have been exclusively designed to provide housing to upper-middle class residents who can afford the $400,000 minimum price tag.

The delays and deaths of these projects is mostly enabled by government incompetence, and in some cases, unreasonable opposition to legitimate housing development.

Of course, the lack of affordable housing is a completely resolvable matter. When Governor Brown dissolved city Redevelopment Agencies, it required cities to divest themselves of billions of dollars in developed and undeveloped property throughout the state. These projects where supposed to provide a 20 percent set-aside for low and moderate income housing development. Most cities refused to spend that money. In the City of San Bernardino, it was used exclusively for the development of senior housing projects, which have no real impact on housing prices as they provide no housing for low and middle class families where most of the demand resides.

As part of the divesting process, empty parcels of land could be provided at a discount to housing developers, with the caveat that the developer produce high density, single family residential housing that could be built at low enough cost to provide affordable homes for first-time home buyers or people reentering the housing market after losing their homes in the housing bubble of 2008.

But don’t count on that occurring anytime soon. Unless the State of California takes this issue seriously and begins to enforce housing mandates on cities, local governments are unlikely to comply with the housing requirements they had agreed to as part of the redevelopment deal. Nor is it likely that people opposed to new housing (usually people that already have their house), will stop abusing environmental laws and local government approval processes to allow for new housing construction that might bring “undesirables” to their communities.

It’s time for California to rethink its public policies related to housing and taxation, before the Middle Class producers in our society abandon the state completely.