California’s natural beauty, beaches and temperate climate alone do not explain why its housing costs are so much higher than just about everywhere else in the country.
As the Golden State struggles to jump-start its economic growth, especially outside of Silicon Valley, housing affordability is becoming an increasingly intractable barrier.
Dan Walters put his finger on the problem in a recent column in The Sacramento Bee. Democrats in the Legislature are keen to tout their efforts to help the poor through increased government spending, expanded welfare benefits and various labor reforms. Nevertheless, “their failure to confront the heaviest burden on poor families — California’s soaring housing costs — will extend California’s embarrassment of having the nation’s highest real rate of poverty,” Walters contends.
California’s poverty rate may not look too bad at first blush. The official rate is 15 percent, just slightly above the 14.5 percent national average. But in recent years, the U.S. Census Bureau has been calculating a supplemental poverty rate that incorporates more accurate measurements of income and cost of living. According to the supplemental measure, California’s real poverty rate for the 2013-15 period was 20.6 percent — 8 million residents in all — the highest state rate in the nation, and significantly above the 15.1 percent national average.
While some of California’s expensive housing costs are simply due to high demand, much of it is self-inflicted by poor policies.
Many government actions meant to help the poor are inferior to fostering economic growth through greater economic freedom and fewer regulations, which allow people to more easily pull themselves out of poverty. And some measures are even counterproductive to reducing poverty because they reduce job opportunities — such as added costs to employers like the minimum wage increase — or encourage greater dependence on government handouts, trapping people in a cycle of poverty.
A March 2015 report from the nonpartisan Legislative Analyst’s Office noted that “the cost of building a typical single-family home in California’s metros likely is between $50,000 and $75,000 higher than in the rest of the country.” Contributing factors are the cost of construction labor, which is about 20 percent higher in California metro areas than the rest of the country, excessive environmental regulations and building codes, restrictive zoning and development fees imposed by local governments that are more than three and a half times the average in other states for a single-family home — $22,000 versus $6,000.
Not to fear, however, for Palo Alto Mayor Patrick Burt has the solution: slow job growth until housing becomes more affordable, as he explained in a recent Curbed SF interview. That’s right, we just have to kill off economic opportunity and the quality of life until cities deteriorate to the point where people don’t want to live there anymore — but housing will be more affordable!
A better idea is to eliminate the land restrictions that artificially limit the supply of housing, and reduce or eliminate the regulations and fees that artificially inflate housing prices.
Real estate may never be cheap in coastal California, but we needn’t exacerbate things with government interventions and controls.
Article Originally Published in the San Bernardino Sun by its Editorial Board