Half a century of housing policy failure: Part 2, “Can’t even think of having children”

September 11, 2017 | California, Demographics, Economics, Homelessness, Housing, Incentives, Inclusionary zoning, Law, Local issues, NIMBY, Speculation, US News, Zoning

 

By: David A. Smith

 

[Continued from the preceding Part 1.]

 

As we saw in Part 1 of what will be a lengthy post, the Golden State of California has spent the last half century killing one of the job-creating, money-laying geese – the state’s ability to house the continuous tide of people who either would like to live in California or are born into California and want to keep living there.

 

Nearly a decade removed from the depths of the Great Recession, and 38% of California’s 18 to 34-year-olds still live with their parents, according to U.S. Census data.

 

It’s tempting to think of California’s housing shortage as confined solely to the enclaves of San Francisco, Los Angeles, and (these days) Silicon Valley, because if that were true we could blame somebody – tech billionaires, environmentalists, urban politicians – or even better, national forces imposed on us from far away:

 

Housing costs are not the only thing keeping junior from moving out.

Student debt loads, disappearing labor markets, and delaying marriage are also contributing to the trend.

 

Yes, it’s tempting to blame others for our problems because in so doing we absolve ourselves. 

 

We’ve seen no thorough analysis yet on how California’s abundant avocado toast supply may be keeping millennials confined to their nests.

 

Here is the culprit

 

Alas, it’s not true. 

 

Home construction depends on complex factors including the cost of land, materials and labor, the availability of financing for developers and interest rates on mortgages for homeowners.

 

Texas, with which California hates to be compared because all the sociobusiness comparisons are unfavorable, has those same challenges and it’s having no problem at all creating new housing.  Nor is Las Vegas.

 

                    No problems building here

 

 

Sources used in this post

 

Los Angeles Times (June 29, 2017)

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

San Jose Mercury-News (August 28, 2017; burnt red font)

 

California’s problem is widespread across the state:

 

A widely-cited report by the consulting firm McKinsey Global Institute found that in every metropolitan area in the state – from Fresno to Palmdale to Salinas – at least 30% of residents could not afford local rents.

 

Nor can California’s housing problems be blamed on the economy, since California’s economy dipped less than the rest of the country’s and most other places (don’t have California’s out-of-control rising rents/ prices.

 

 

A.3 California’s housing policy retards household formation and job creation

 

That’s roughly 3.6 million people [living with their parents] – more than the entire population of Chicago.

 

Throughout the OECD, fertility rates are declining, and while it can be attributed to many factors, housing shortages consistently show up in the positive correlations.  A decade and a half ago I read a report (which in the ensuing period I’ve repeatedly searched for and never found) that traced Italy’s birth directly to a shortage of affordable apartments – places to which young people could move after marriage.  In the merging world, Egypt and the UAE are two countries where housing policy is predicated on forecasting the number of newly marriageable young adults, and striving to deliver new affordable homes for them.

 

Georgina Romero, 28, used to live with her boyfriend in a garage behind his parents’ home in Lawndale. (Mark Boster / Los Angeles Times)

 

Georgina Romero, 28, makes $13.50 an hour teaching toddlers and pays $600 a month to live with her boyfriend, mother, two younger siblings and her sister’s boyfriend in a three-bedroom house in Watts.

 

She moved there in March to help her mother with her housing costs. Before that, Romero paid $300 a month to live with her boyfriend in a 400-square-foot garage behind his parents’ house in Lawndale.

 

“I would love to have children,” Romero said. “But with this living situation, I can’t even think of having children right now. I don’t feel like I’m stable enough.”

 

Romero works at a head start office in Torrance and said she wants children but doesn’t feel stable enough in her living situation. (Mark Boster / Los Angeles Times)

 

Meanwhile, California’s innovators are creating new jobs – just not new housing:

 

In Los Angeles, booming with construction and signs of prosperity –

 

As I’ve written before, housing is urban infrastructure, because 1=1+1.

 

 

The cranes and construction surrounding Los Angeles represent new jobs and the day-spaces that house those jobs – offices and industries and even retail.  All those jobs have to go somewhere at night, and they have to get to and from the somewhere.

 

– some people have given up on finding a place and have moved into vans with makeshift kitchens, hidden away in quiet neighborhoods.

 

Come for the jobs, live in your car: giving new meaning to the term and concept of mobile home.

 

In Silicon Valley — an international symbol of wealth and technology — lines of parked recreational vehicles are a daily testimony to the challenges of finding an affordable place to call home.

 

They’re also a symbol of flexible labor and they’re actually an innovative and ecological solution – if used as a temporary or seasonal housing supply. When they become a permanent feature of the landscape, then there can be trouble.

 

 

Ben Metcalf, the state’s top housing official, has said the affordability problems are as bad as they’ve ever been in California’s history.  And the state is expected to add an additional 6.5 million people over the next two decades.

 

Only if it can house them.  Instead, something else is happening.

 

 

A.4 Job creation and net immigration is happening elsewhere

 

Nearly 40% of Torrance’s 147,000 residents now pay more than 30% of their incomes on housing, according to federal data.  In 2014, Toyota Motor Corp. decided to relocate its North American headquarters — and 3,000 jobs — from Torrance to Plano, Texas, citing as one factor the Lone Star State’s lower cost of living.

 

If I told you Silicon Valley, you’d believe me, wouldn’t you?  Toyota in Plano

 

We make much of the value of coastal living – I’ve certainly written about it as a demographic force – but as demonstrated by Texas, water can be brought into the modern urban environment and replicate the full sybaritic experience.  (Actually, Palm Springs proved the concept eighty-plus years ago.)

 

All the water sports you could want: Palm Springs, 1935

 

Even the attractive salaries and lavish perks of Silicon Valley struggle to overcome the local housing market, as young tech talent flees to the relatively inexpensive climes of Austin or Portland. Nearly 60% of Los Angeles companies in a recent University of Southern California survey said the region’s high cost of living was affecting employee retention.

 

And once a company decides to relocate, the center of the country starts to make sense.

 

Especially as it’s a non-stop flight anywhere

 

The jobs are relocating because they have seen the consequences of what the good people of Torrance tacitly doing what Councilman Bill Sutherland was impolitic enough to vocalize: decide the city is full and zone to prevent any net increase in population. 

 

In certain markets, even extremely high incomes aren’t enough to blunt the cost of housing. In San Jose, where the current median income is nearly $100,000, renters can still expect to pay 40% of their monthly income on rent, according to an analysis by the real estate data firm Zillow. 

 

Torrance has thus driven its high-paying jobs out of state, and the low-paying jobs far out of town:

 

High costs have left housing in Torrance out of reach for Azucena Gutierrez and other workers in the city.

 

Azucena Gutierrez, 38, stands outside her apartment in Boyle Heights before leaving for her job in Torrance last fall. (Mark Boster / Los Angeles Times)

 

Every weekday, Gutierrez goes into Torrance homes to teach prenatal and infant care to new and expectant parents. Gutierrez, 38, earns less than $15 an hour.

 

She lives in Los Angeles’ Boyle Heights neighborhood, crowding into a two-bedroom apartment with her husband, who is a substitute teacher, their 14-year-old son and 5-year-old daughter. Steep housing costs have forced Gutierrez’s older sister to move in with them too.

 

Housing demand is elastic: when supply is expensive, households reduce because average household size increases. 

 

Gutierrez would like to live near her job and for her children to attend Torrance’s better rated schools.

 

And the locals want to keep your kids out of their schools.

 

But the $1,600-a-month rent she saw advertised for a one-bedroom apartment in Torrance was more than the $1,500 she pays now for more room across town.

 

Azucena Gutierrez, 38, leaves her home before sunrise in Boyle Heights and heads to her job in Torrance. Gutierrez lives with her husband, children and sister and pays $1,500 a month for her two-bedroom apartment. A one-bedroom in Torrance would cost her $1,600 per month. (Mark Boster / Los Angeles Times)

 

“I waste a lot of time in traffic,” Gutierrez said.

 

Sadly, Ms. Gutierrez’s formulation is wrong: she’s not wasting that time, she’s investing it, because it is the cost of getting to her paid work.  And we can figure out what she’s paying herself:

 

Based on apartments.com, a similar 2-BR in Torrance would cost roughly $2,600.

 

Plenty for rent, just not at Ms. Gutierrez’s price point

 

The drive is roughly an (incredibly aggravating) hour each way.

 

Pick any route you want, it’ll take an hour-plus

 

“Time, I can’t get it back. I’m spending close to two hours driving every day. That’s 10 hours [a week] I could be spending with my family.”

 

So Ms. Gutierrez is spending two hours a day, 22 days a work month, or 44 person-hours.  And let’s use the IRS’s mileage cost of 54 cents a mile, which is $23,75 a day times 22 days, or $520 in extra transportation costs.  Living in Boyle Heights saves $1,100, minus the $525 of commuting costs, meaning Ms. Gutierrez is $575 after-tax better off each month for her 44 hours away.  That’s $13 an hour net after tax, and that’s the most conservative estimate of the marginal cost. 

 

Those hours in traffic, in other words, pay her family better, net after tax, than her job does.

 

What she’s doing is rational.  It is also miserable.  One day, she and her whole family may move out of state.

 

From 2000 to 2015, the state lost nearly 800,000 residents with incomes near or below the poverty line. Nearly three-quarters of those who left California since 2007 made less than $50,000 annually. The leading destination for California’s poor? Texas.

 

[Continued tomorrow in Part 3.]