Summers Housing/Homelessness Q2
There is a growing realization that California’s housing crisis is fundamentally a supply problem, but too many of the commonly proposed solutions fail to address the issues that discourage homebuilding in the state – and many would even make things worse.
Soaking taxpayers with expensive housing bonds will only add to their cost burdens, and making housing less profitable through rent control or affordable housing mandates only inhibits the investment needed for more housing. Even government-funded “affordable housing” developments average about $425,000 per unit, and can reach $700,000 or more per unit.
The state and local governments should, instead, simply remove the obstacles they have put in place that have driven up land and construction prices so much. Restrictive zoning limits the amount of land that can be developed, thus driving up prices, and has been used to discourage more affordable options like boarding houses. Development fees average more than $23,000 per single-family home – about three times the national average – and can be much higher in certain areas, topping $60,000 per home in Oakland and totaling roughly $150,000 per home in Irvine and Fremont. Prevailing (union) wage mandates drive up construction labor costs by as much as 30 percent. The California Environmental Quality Act has been used to squash or tie up developments for years and “greenmail” developers into adopting prevailing wage requirements and extract additional amenities and other concessions, further discouraging homebuilding. Excessive building code requirements also add to home prices, and the solar roof mandate, beginning next year, will likely add another $10,000 to $20,000 to the cost of a home.
Getting rid of so many taxes, fees and regulations – which easily account for one-quarter or more of the price of a new home – would bring down housing costs substantially and spur the development needed to meet demand.