As Legislature Tries to Stuff More Housing Down the Throats of Cities, California Just Says No
It's the Demand, Stupid. The cost of housing in California is in direct proportion to the demand for housing here.
April 23, 2019
The Los Angeles City Council voted unanimously to oppose a proposed bill in the California State Senate, SB 50, which would offer waivers and other encouragements to housing built close to urban railway stations. The bill would override local zoning and allow structures up to five stories tall in areas currently populated with single-family homes. It would also allow waivers for parking, with less than 0.5 parking spots required per unit. An apparently far-reaching law with many prongs to it - the text runs several pages - SB 50 would also take over local guidance regarding affordable housing, requiring any building over 10 units to include a certain number of affordable units. However, developers would be able to opt paying a fee rather than constructing such units.
"There are so many reasons to oppose SB 50 that it's almost difficult to know where to start," commented City Councilmember Paul Koretz. He went on to explain, "There's no sign that building luxury housing, even in large numbers, would reduce the rent." He also pointed out that Los Angeles has already approved 100,000 units of housing. "We already have densified," he said.
However, the California Department of Housing and Community Development claims that the City of Los Angeles has failed to produce its own target number of affordable housing units. So far, the city has only produced 1/4 of the number of units it wanted to have by 2021.
That's the news. Here's the attitude.
Economics is the study of the use of scarce resources which have alternative uses. This is a definition given by British economist Lionel Robbins and used by Thomas Sowell in his classic textbook, Basic Economics. "What does 'scarce' mean? It means that people want more than there is. This may seem like a simple thing, but its implications are often grossly misunderstood, even by highly educated people."
People, particularly government officials, like to throw around the idea that we have a "housing crisis" in California. The reasons for this "crisis" are described as varied, from income disparity, uncontrolled illegal immigration, to rising rents and home prices.
There is no crisis. There is only reality. Reality is that habitable land in California is a scarce resource. There isn't as much of it as there is demand for it. Period. The cost of housing in California is in direct proportion to the demand for housing here. The more people who want to live here, the higher the price. Period.
As far as "crises" go, having high housing costs is a good one. It means that demand is high. Demand being high means people can afford to pay the prices being asked. That means they have money. People having money is good. When housing costs plummet, it usually means that wages have fallen and unemployment is high. That isn't good.
When government officials call the current situation a crisis, they mean different things at different levels of government and in front of different audiences. At the local level, they often point to the large number of drug addicts and mentally insane living on the streets and call that a housing crisis. That is not a housing crisis. That is a crisis in our combined legal and healthcare systems. We do not have laws that allow us to take individuals off the streets who are obvious dangers to themselves and others. We do not consider mental health problems as significant or worthy of coverage in health plans as we do more easily understandable physical health problems. (In reality, they are all physical health problems.) Hence, we have a large population of troubled people using the streets at their home. Add to this the thousands let out of prison early due to Proposition 57. Add to this the attractions our government has seen fit to offer the indigent, and it is no surprise that the "can'ts" and the "won'ts" flock to our state. These are not people who could or would pay the rent at any price.
On other levels of government, officials look at senior citizens and other longtime residents who get displaced by the construction of new housing and call that a crisis. Oddly, this is a crisis of the government's own making as they approve proposals to raze old neighborhoods (such as those affected by SB 50) and construct big new multi-family developments. In theory, those displaced may get first dibs on the "affordable" units in the new developments, but in reality, they have had to move elsewhere during the long permit and construction phase, they could probably not afford the units being offered, and the amenities offered by the new construction are not in any way comparable to what they enjoyed in their previous homes. In many cases, the developers who are replacing the old homes with the new mega-development can build the required "affordable" housing somewhere else altogether. The previous residents may find such an offering far less than desirable, if not impossible.
If there is a crisis the government should be addressing it is that of the infrastructure for which they are actually responsible: the roads and the water. Both of these areas have been sadly neglected for many years. And it shows. The freeways (admittedly, the purview of the feds) are so potholed and bumpy they are dangerous at any speed. Droughts are declared at the drop of a hat because of the negligence of officials to construct appropriate storage facilities or to limit new housing rather than encourage it.
Land in California is a scarce resource. The more government seeks to interfere in how the free market allocates that resource, the more of a crisis they will create.