Politics & Government

Dan Walters: California’s high housing costs symptom of weak supply

Advocates of so-called “inclusionary” policies to provide more housing to low- and moderate-income families were elated when the U.S. Supreme Court this week spurned a challenge to San Jose’s ordinance.

The court’s refusal to hear the case, however, hinged on legal technicalities, rather than developers’ allegation that requiring them to set aside portions of their projects for below-market pricing constitutes an illegal seizure of property without compensation.

In the absence of a decision on that core issue, the California Supreme Court’s ratification of San Jose’s ordinance stands, removing a legal cloud on inclusionary housing laws in a number of cities and indirectly encouraging more communities to adopt them.

The ordinances are one political response to the growing shortages and rapidly rising costs of housing for lower-income families.

High housing costs are the major factor in a Census Bureau calculation that California has the nation’s highest rate of functional poverty, with conflicts between incomes and rents particularly severe in the San Francisco Bay Area and metropolitan Los Angeles and San Diego.

The problem with inclusionary policies and other coercive approaches to housing, such as rent control ordinances, is that while they may be politically gratifying, they divert attention from the real problem of housing in California, which is that we have way too little of it.

After reaching unsustainable levels in the middle of the last decade, thanks to ridiculously lax lending policies by financial institutions, housing construction plummeted into an abyss. And as the oversupply of underwater homes and apartments was soaked up in more recent years, we developed a shortage that is now severe.

Even though construction has increased sharply, it’s still just two-thirds of what’s needed to keep pace with current population growth – not counting a backlog of unsatisfied demand. That shortage, particularly in the rental market, manifests itself in ever-higher costs as high demand chases low supply.

Inclusionary laws, rent control and other feel-good approaches – even direct financing through bonds – simply don’t generate enough new housing for the non-affluent. As a recent report from the Legislature’s fiscal adviser, Mac Taylor, points out, building subsidized affordable housing for the state’s 1.7 million “rent-burdened” families “would cost in excess of $250 billion.”

Instead, Taylor advises politicians to adopt policies to encourage private investment in housing at all levels, because increasing the overall supply would filter down to ameliorate costs for the non-affluent.

However, local politicians who commiserate with the nonvoting poor and adopt token housing policies often cater to hostility of their already-housed constituents to new construction, even much-touted, high-density “infill” projects.

A not-in-my-backyard mentality, and the political inertia it spawns, are the biggest impediments to easing California’s housing crisis.

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