Devereaux Housing/Homelessness Q2

Published by kradmin on

The factors leading to increased housing costs and their effect on affordability are discussed quite a bit, as are exhortations for government to provide programs that assist people or projects to address their needs. However, there is little discussion regarding the fact that, given the wealth gap in the country and state and the number of people living in poverty, government cannot afford to buy its way out of the problem. Nor is there much discussion about government’s role in growing the economy and creating higher wage jobs and providing the education and training to perform them – which would also result in greater affordability.

Local government fees and charges to pay for infrastructure and services are often mentioned as adding to the cost of housing. This approach to funding these items is a direct result of the restrictions on raising local revenues imposed by Propositions 13 and 218. Prior to these initiatives, local government could and did raise property taxes to pay these costs instead of passing them on to homebuilders and homebuyers.

The state construct for local government funding produces perverse incentives and inequality in funding. Property is taxed at 1% of its value, capped by Prop 13, then voter approved overrides are added. Cities, the counties, schools and special districts split the money from the 1%. The amount that cities receive varies widely. In San Bernardino County it ranges from 1.75% to 38.8% of the 1%. Each city also receives one of the percentage points from the sales tax on transactions in their jurisdiction. This has led many cities to seek sales tax generators rather than housing. Providing local governments, a share of income taxes from their residents and those working in their businesses would change the incentives.