Half a century of housing policy failure: Part 1, “Allowed to say we’re full”

September 8, 2017 | California, Housing, Incentives, Inclusionary zoning, Law, Local issues, NIMBY, Regulation, US News, Zoning

 

By: David A. Smith

 

Increasingly taking leave of the rest of the nation

 

Over the last half century, no state has done as bad a job at housing policy as has the Golden State of California – quite an accolade when you consider the competition includes New York – and it has done so through a sequence of laws, each a more misguided attempt to compensate for the previous misguided laws now tacitly acknowledged as hideous mistakes but nevertheless politically untouchable because confer non-cash goodies to entrenched incumbent voter-donors.

 

“Shipmates, how billow-like and boisterously grand”

 

I start with this jeremiad so readers can be in no doubt of my sermon, evidence laden and analytic as it will be, using as my principal text a lengthy and well done Los Angeles Times (June 29, 2017) article by Liam Dillon, though of course I’ve rearranged his material to contextualize it. 

 

“Woe to him whose good name is more to him than goodness”

 

The farcical tragedy is in five parts with a coda:

 

1.     The housing element is an utter failure that’s crippling the state

2.     The housing element provides no nothing: no money, no tools, no resources, no powers

3.     Even as a mandate, the housing element is badly designed

4.     The housing element is easily subverted.

5.     All the housing element does is embolden exclusion.

 

And the coda will be:

 

6.     If this is such a failure, what should California do?

 

Shall we begin?

 

Sources used in this post

 

Los Angeles Times (June 29, 2017)

New York Times (July 17, 2017; baby blue)

 

 

A. The housing element is an utter failure that is crippling the state

 

After an hour of debate, Herb Perez had had enough.

 

Perez, a councilman in the Bay Area suburb of Foster City, was tired of planning for the construction of new homes to comply with a 50-year-old state law designed to help all Californians live affordably.

 

The rare elected officials who tells people the unpleasant truth

 

 

Everyone knows, Perez told the crowd at a 2015 City Council meeting, that the law is a failure.

 

 

A.1 The housing element has failed all over California

 

SACRAMENTO — A full-fledged housing crisis [Well, you wouldn’t want a partially-fledged crisis, now would you? – Ed.] has gripped California, marked by a severe lack of affordable homes and apartments for middle-class families. 

 

As I’ve shown repeatedly (because it seems always to surprise observers), there is no such thing as an inherently middle-class home or apartment; these standards change with time and space and people’s expectations always rise.  Meanwhile, affordability is likewise a temporal concept, because the price of housing, the income of the occupant, and the income of the newcomer are all continuously in flux.  There’s no such thing as permanent affordability of quality housing.

 

The median cost of a home here is now a staggering $500,000, twice the national cost.

 

The failure is manifest everywhere in California – in fact, the only parts of California that don’t have a housing crisis are those where the population is dropping.

 

One of the main criticisms of the law is that it hasn’t spurred enough new home building. Over the eight years leading up to 2014 — the law’s most recent reporting period — fewer than half of the 1.5 million new homes the law said [California needed] were built.

 

Visible persistent failure

 

That graphic, which I found in a Cal HCD report, is a damning indictment.  In 1967, when the housing element law was enacted, California had 19.2 million people; half a century later, the population has doubled, to 39.3 million, while the housing production in 2015, the highest in eight years, has barely reached the level of 1967, which was the lowest for a dozen-plus years on either side of it.

 

Developers in California need to roughly double the 100,000 homes they build each year [And this in a good year by recent California standards – Ed.] to stabilize housing costs, according to the McKinsey study and reports from the state Department of Housing and Community Development and nonpartisan Legislative Analyst’s Office.

 

Worse still, of that production, many of these new homes were built in places where the economics worked, and weren’t the areas of the greatest housing need, and only a fraction of them – roughly 10% — were affordable.

 

“The law has been completely ineffective at addressing the issue of housing affordability,” said Paavo Monkkonen, an associate professor of urban planning at UCLA. “If anything, it’s a waste of people’s time.”

 

Not wasting his time when he studies other time-wasters

 

Actually, as we’ll see in Section D of this post, from the perspective of resisting localities, the deployment of time isn’t a waste, it’s a tremendous investment because it provides fantastic social and economic returns to the incumbents’ club: it boosts the value of their housing while keeping ‘those people’ out of their neighborhood. 

 

But it’s got a sliver of its own beach

 

Sandwiched between wealthier communities to the north and south and more industrial areas to the east, the coastal Los Angeles County city of Torrance has swaths of single-family neighborhoods and lots of land for commercial and industrial business.

 

Torrance in the 1950s

 

“Many local communities basically run a scam where they spend all sorts of time — lots of public hearings, lots of public discussion — and then it’s over and you have this collection of paper sitting on a shelf,” said Sen. Scott Wiener (D-San Francisco).

 

At $50,000 every ten years, it’s cheap paper at the price.

 

“It doesn’t result in any additional housing.”

 

But it’s hard to bike all the way from San Francisco to Sacramento

 

“At some point, a city should be allowed to say we’re full,” Bill Sutherland, then a Torrance city councilman, grumbled before voting for the city’s most recent housing plan in 2013.

 

Built to be affordable: no longer

Homes in Torrance

 

I thank Mr. Sutherland for putting the issue before the reader: Who decides when a city is ‘full’?

I think I’m allowed to say we’re full

 

“I think we are actually at that point,” said Bill Sutherland.

 

Physically, no city is ever full.  It can always be built more vertical – indeed, human urban history is a continuing quest to live ever higher in the sky.

 

Developers will tell you that, as a matter of land-development economics, a city is usually built more vertical from time to time when the economics and demographics make that financially feasible.  Because developers are omnivorous creatures that will consume other people’s money, because people value what they pay for, in demographic terms a city is full only when nobody else will pay money to move into it.  So we can give a market answer to Mr. Sutherland’s question:

 

It is the outsiders who decide when a city is full.

 

The incumbents do not.

 

Torrance’s growth has slowed. Less than half of 1,828 houses called for in the city’s previous housing plan were built, according to construction permit data.

 

The lack of home building has had consequences.

 

Yes, it’s crippling California.

 

You think you’ll be able to afford housing?

 

A.2 The housing element’s failure is sabotaging California’s economy and opportunity

 

California’s housing affordability troubles have contributed to the state’s poverty rate, which is the highest in the nation.

 

And the highest in California for twenty years

 

It also has burdened millions with high rents and, according to a recent study by the McKinsey Global Institute, created a more than $100-billion annual drag on the state economy by lowering disposable incomes and limiting construction jobs.

 

To be specific, the summary states:

 

In Anaheim, Long Beach, and Los Angeles, households earning up to 115% of area median income, or $69,800 per year, are unable to afford local housing costs. In the city of San Francisco, a household earning $140,000 per year, or 179% of area median income, is squeezed.

 

Yes, you read that correctly: you can make 80% more than the median household – and you still can’t afford a home in San Francisco.  The city’s idiotic sunset zoning plays a big part in this, to be sure, but that’s merely an exacerbating and exasperating reaction to the influx of jobs, money, and the most dreaded newcomer of all – outsiders to want to live where we live.

 

Upzoning ® Affordability, and wealth creation, but the neighbors are adamantly against it

 

In dollar terms, we learned that each year Californians pay $50 billion more for housing than they are able to afford.

 

There’s a classic journal-ism – if they’re paying it, they can ‘afford’ it by definition, because nobody is putting a gun to their heads. 

 

30% of your income, please

 

Rather, ‘afford’ means ‘without sacrificing other expenditures that are normal parts of middle class life.’  Though that’s certainly a fair policy goal, using misleading terminology doesn’t help the discussion.

 

In total, California’s housing shortage costs the state more than $140 billion per year in lost economic output, including lost construction investment as well as foregone consumption of goods and services because Californians spend so much of their income on housing.

 

And, as we’ll see, not only is it getting worse, the forces making it worse are only strengthening.

 

[Continued next week in Part 2.]