We know the problem well. We live it. Other than Hawaii, California has the ignominious distinction of leading the nation in housing costs, and not by a little.
A San Francisco apartment costs more than one in New York City. A Silicon Valley home is beyond reach of all but the wealthy. A 2015 Legislative Analyst’s Office report said homes here cost two and a half times more than the average national price. It gets worse by the day.
Companies expand elsewhere because workers can’t afford to live here. For workers who stay, commutes are interminable because they live far from their jobs.
It has taken California decades to get into this mess. Consider what’s coming to be a down payment.
No fewer than 15 housing-related bills await legislators upon their return Monday. Some would provide tax incentives so the working poor can afford decent housing, and homeless people can find shelter. Others would streamline approval for new homes so millennials can own a piece of the American dream, or at least share it with a bank.
By the end of the session next month, lawmakers will have chipped away at the problem. A grand solution is elusive, especially if it means building multifamily, multistory housing in constituents’ backyards.
California builds 100,000 to 140,000 housing units a year. The LAO said the state probably needs 100,000 additional units annually, almost exclusively in coastal communities, to dent the housing shortage. People with the good fortune to have bought in coastal California like it how it is. Understandably, the greater good is someone else’s problem.
Democratic Assemblyman Marc Levine wasn’t thinking globally when he carried out his Marin County constituents’ wishes by carving an exemption to state law in June that lets his slow-growth county avoid low-income housing requirements imposed on the other 57 counties.
Property tax structure is another problem. When voters approved Proposition 13 in 1978, they unwittingly encouraged cities to lure sales tax-generating commercial strips rather than housing. Voters would have to reverse that. Someday.
The high price of land is the main cost driver. But regulations and the threat of lawsuits slow construction. Legislators listen when environmentalists, lawyers and labor fight changes to those laws.
The cost of building material, permits and labor are higher here than in other states. But the LAO says labor is not a huge driver. Construction workers earn an average $50,000 a year, not enough to buy one of the homes they build.
The Sacramento Bee’s Erika D. Smith recently wrote that Habitat for Humanity pays $40,000 in fees to build a home in Sacramento, consistently the largest share of the $200,000 cost of construction. How counterproductive is that?
Still, incremental progress is better than none, starting with Senate Bill 35 by Sen. Scott Wiener, the Democrat from San Francisco, where the average rent for an apartment was $3,828 in July, highest in the nation. The bill would streamline the approval process when housing is proposed in cities where zoning already authorizes residential development. Whether it would do much to empty United Nations Plaza of homeless people is another matter.
Senate Bill 2 by Sen. Toni Atkins, D-San Diego, would add a $75 fee to real estate transactions, generating $200 million to $300 million a year to help pay for affordable housing. We prefer a direct tax, not more debt, though legislators seem less than enthused about another tax after this year’s $5.2 billion a year gasoline tax increase.
Senate Bill 3 by Sen. Jim Beall, D-San Jose, proposes a $3 billion bond for the November 2018 ballot. The bond would direct money to housing built on vacant land in cities, and near transit lines, while adding about $171 million to the state’s annual debt repayment.
Treasurer John Chiang urges up to a $9 billion housing bond, which would add $500 million in annual repayment costs. Taxpayers will spend $8.1 billion in this fiscal year on bond debt, up from $6 billion five years ago. Chiang’s effort seems only partly thought through, though he gets points for trying to illustrate on the crisis.
Legislators will try to not waste this crisis. But it has taken decades to get into this mess. Whatever progress is made in next few weeks merely will be a down payment.