Props 1, 2 Will Fail to Mitigate State Housing Crisis

Housing apartmentIt’s been two and a half years since Gov. Jerry Brown jolted the debate on California’s housing crisis by saying much more private-sector construction was the only realistic way to address the crisis, not the old Democratic recipe of building a relative handful of subsidized housing units that help a small percentage of those in need. “We’ve got to bring down the cost structure of housing and not just find ways to subsidize it,” he said in January 2017 in criticizing previous state policies.

Brown sought to make it much easier for home-builders to clear regulatory hurdles. In September 2017, Senate Bill 35 by Sen. Scott Weiner, D-San Francisco – which reflected the governor’s priorities – was enacted. It holds that cities could not put up new obstacles to projects with proper zoning so long as they contained at least 20 percent of units at lower price levels.

And in the last two months, Brown has signed a series of new housing measures with similar goals – most notablyAssembly Bill 2923, which will make it much easier for the Bay Area Rapid Transit authority to follow through with its plan to build 20,000 new housing units by 2040 on 250 acres BART owns nears its transit stations.

Legislature renews emphasis on subsidized housing

But when it comes to Tuesday’s election and major housing initiatives, it’s back to the old Democratic playbook. Both the key measures meant to increase housing – placed directly on the ballot by votes of the Legislature – involve government-subsidized construction.

Proposition 1 authorizes the issuance of $4 billion in general obligation bonds. The biggest chunk – $1.8 billion – would go toward building apartment-type residences. $1 billion would go to loans to veterans. Both infrastructure and homeownership programs would receive $450 million each. And $300 million would go to build housing for farm workers.

The official state voting guide’s analysis estimates that this will create access to housing for 55,500 families.

Proposition 2 would allow the state to divert funds from 2004’s Measure 63 – which generates about $2 billion a year for mental health programs from an income tax surcharge on the very wealthy – to pay back over 30 years up to $2 billion in bonds to build housing for the homeless and those at risk of being homeless.

The official state voting guide’s analysis doesn’t estimate how many people would gain housing as a result. But based on Proposition 1’s estimate that $1.8 billion could create about 30,000 apartment units, $2 billion should be able to provide around 33,000 units.

Bonds would fund 88,500 units; 2 million needed

The combined net effects of the two measures: providing housing to about 88,500 families over the life of the two bond measures in a state that a 2016 McKinsey consulting group report said has a shortage of 2 million housing units.

The small increases in housing that Proposition 1 and 2 would create are consistent with the criticisms that have been made of California’s state housing policies since at least 2003. That’s when the Public Policy Institute of California released a report that said affordable housing programs focused much more on establishing a process for such housing than on actual results. It said it was “unrealistic” to think such an approach could have a significant effect in increasing affordable housing.

No recent polling has been done on Propositions 1 and 2, but they’re widely expected to pass easily. That’s in keeping with the record of bonds placed directly on the ballot by the Legislature.

This article was originally published by CalWatchdog.com

How to NOT Solve California’s Housing Crisis

house-constructionThere are obvious reasons the median home price in California is $544,900, whereas in the United States it is only $220,100. In California, demand exceeds supply. And supply is constrained because of unwarranted environmental laws such as SB 375 that have made it nearly impossible to build housing outside the “urban service boundary.” These laws have made the value of land inside existing urban areas artificially expensive. Very expensive. Other overreaching environmentalist laws such as CEQA have made it nearly impossible to build housing anywhere.

Then there are the government fees attendant to construction, along with the ubiquitous and lengthy permitting delays caused by myriad, indifferent bureaucracies with overlapping and often conflicting requirements. There is a separate fee and a separate permit seemingly for everything: planning, building, impact, schools, parks, transportation, capital improvement, housing, etc. Government fees per home in California often are well over $100,000; in the City of Fremont in 2017, they totaled nearly $160,000 on the $850,000 median value of a single family home.

This is a shakedown. It has caused a politically engineered housing shortage in California that enriches billionaire property developers that have the financial strength to withstand decades of delays and millions in fees, because they reap the extreme profits when they sell these homes at inflated prices. Also enriched are the public servants whose pay and pensions depend on all taxes – definitely including property taxes – and all fees being as stratospheric as humanly possible. Public employee pension funds also benefit from housing scarcity, as their real estate investment valuations soar into bubbleland.

When litigious environmentalists, insatiable public sector unions, and an elitist handful of left-wing oligarchs control a state, artificial scarcity is the consequence. Welcome to California.

REJECTED POLICY – REAL SOLUTIONS TO THE HOUSING CRISIS

To decisively solve California’s housing shortage, some of California’s more than 25,000 square miles of rangeland, currently occupied by cattle, would have to be approved for suburban development. California is only 5 percent urbanized, although if you listen to environmentalists, you might get the impression it only had 5 percent remaining open space. You could fit ten million people onto half acre lots in four person households and you would only use up 2,000 square miles – that’s only 1.1 percent of California’s land area. Why aren’t massive new housing developments spreading out along California’s 101, I-5 and 99 corridors?

Real solutions to California’s housing crisis would also require increasing the capacity of California’s water infrastructure and transportation infrastructure. In both cases, investment would be cheaper if this expansion was done on raw land. Real solutions to California’s housing crisis would mean rescinding the mandatory rooftop solar requirement on new home construction, and instead recommissioning and expanding the nuclear power complexes at Diablo Canyon and San Onofre, and embracing development of additional nuclear power and natural gas power plants. In a less confiscatory regulatory environment, the private sector could fund all of this while lowering costs to consumers.

Reforming environmental restrictions and unleashing private sector development of homes and infrastructure is the fastest, easiest way for home prices in California to return to near the national average. In turn, that would solve nearly every problem associated with a shortage of housing. California’s families would be able to afford to buy homes, or pay affordable rent. California’s employers, most definitely including government agencies, would be able to attract workers at prices that would not break their profits or their budgets, which would benefit the economy. And far fewer people would be rendered homeless.

APPROVED POLICY – COMPLETELY USELESS “SOLUTIONS” TO THE HOUSING CRISIS

As long as environmentalist litigators, public sector unions, and left-wing oligarchs run California, none of these real solutions will ever happen. What are they proposing instead?

To summarize, all politically viable housing solutions in California involve densification, i.e., cramming ten million more people into existing urban areas, and, predictably, more taxes, bonds, fees, subsidies and government programs.

Rent Control, Government Subsidized “Affordable Housing” and Government Funded Homeless Shelters

California is the epicenter of America’s “progressive” power structure. In California, in addition to controlling the public bureaucracy through their unions, progressive ideologues control the press, social media, search media, K-12 public education, academia, most corporations, the entertainment industry, and virtually all serious political campaign spending. As a result, California’s progressives can use ballot initiatives to con a brainwashed populace into approving their latest housing policy agenda. The common thread? Government control; government funding. For example, on the ballot this November are propositions to permit cities and counties to enact rent control, issue state bonds totaling $4 billion to build “affordable housing,” and use state tax revenues to build more government-run homeless shelters. It is possible all three of these measures will pass.

Already in progress is the implementation of California state laws that took effect Jan. 1 – AB 2299 and SB 1069 – which amend existing state laws governing “accessory dwelling units.” These new laws force California’s counties to streamline the process whereby homeowners can construct additional homes in their backyards. Does that sound good? Not so fast.

Doubling Suburban Population Densities ala Government Subsidized “Accessory Dwelling Units”

There’s a reason people work hard for decades to pay off their mortgages so they can own homes in spacious suburbs. It’s because they value the leafy, semi-rural atmosphere of an uncrowded suburban neighborhood. AB 2299 and SB 1069 will effectively double the housing density in these neighborhoods, violating the expectations of everyone living there who relied on the zoning rules that were in effect when they bought their homes.

If zoning laws in existing suburbs were relaxed at the same time as zoning restrictions were lifted on the urban periphery, the impact of these new rules might be mitigated. But every policy California’s elite and enlightened geniuses come up with is designed to maintain “urban containment.” And to add to the disruption these laws will inflict on quiet neighborhoods, California’s cities – starting with Los Angeles – are providing subsidies to homeowners to build these homes, then encouraging them to rent the properties to low income families wherein the government will pay the rent via Section 8 vouchers.

This is an expensive, utopian scheme that oozes with compassion but is fraught with problems. Doubling the density of suburbs is already problematic. But doubling the density of suburbs by subsidizing the settlement of people on government assistance into every backyard, invites social friction. It is forcible integration of people who, for whatever reason, require government assistance to support themselves, into communities of taxpayers, who, by and large, are working extra hard to pay the mortgages on overpriced homes in order to provide their children with safe neighborhoods.

As usual, when it comes to enlightening the public, neither the media, nor the urban planning experts in academia, ever offer much beyond pro-densification propaganda. A glowing New York Times article, entitled “A Novel Solution for the Homeless: House Them in Backyards,” raves about this entire scheme, already being tried in Los Angeles, Portland and Seattle. The article includes a quote from Vinit Mukhija, a professor of urban planning at UCLA, who says: “The value [of subsidized accessory dwelling units] goes beyond that, though, because it is finally somewhat of a departure of the purity of single-family housing in the region. It’s a good step to change what people here really consider a dogma of private housing.”

The “dogma of private housing.” That epitomizes California’s elitist hostility towards ordinary families owning detached homes with spacious yards.

The incentives created by such a project are perverse. California’s elite has made homes unaffordable. Then, to the people who sacrificed so much to buy these homes despite their punitively high prices, the government offers them subsidies and Section 8 payments, if they are willing subdivide their lots and turn over half their property to people supported by the government. Inevitably, many financially struggling homeowners will be forced to accept this cruel bargain if they want to keep their homes.

Finally, just like in 2008, there will eventually be another economic downturn, when many distressed homeowners will be forced to sell their properties. And when that happens, just like in 2008, investment banking speculators will move in and buy homes by the thousands. This next time, however, these institutional investors will be salivating at the prospect of collecting government subsidies so they can operate two rental units on a single piece of property.

Demolishing Homes to Build High Rises Near Transit Stations

Another way California’s elites – many of whom live in gated communities with homeowner covenants prohibiting nasty things like accessory dwelling units in backyards – propose to solve California’s housing crisis is to force demolition of single family dwellings in the vicinity of mass transit stations. They support this mass destruction of vintage neighborhoods in order to make room for high density apartments and condominiums up to five stories in height. While an attempt in 2018 to enact this draconian solution was beaten back, California’s coercive utopian lawmakers will bring it back in 2019. Some form of this law is likely to pass.

There’s nothing wrong with gradually increasing the population density in the core of large cities. That is a natural and organic process. But it is the job of legislators and local officials to moderate that process, protecting established neighborhoods. Instead, again, the policy consensus in California is to cram ten million new residents into existing urban areas.

Government Subsidized Homeless Shelters on some of the Most Expensive Real Estate on Earth

Perhaps the most misguided housing policies coming out of California concern the homeless. Despite years of bloviating by the compassionate elite, almost no good data is available on homeless populations, much less any good policies. Press coverage of the homeless centers on the family unit; small children, parents forced out of their home by high rents. These are gut wrenching stories. But accompanying the legitimate cases of families or individuals coping with undeserved hardship, there are the willfully indigent, along with criminals, drug dealers, sexual predators and perverts. Again, the City of Los Angeles offers a striking example of bad policy.

In Venice Beach, which is within Los Angeles city limits, along one of the most expensive, touristy stretches of coastline in the world, there are now permanent homeless encampments. To address the challenge, Los Angeles city officials are fast-tracking the permit process to build a homeless shelter on 3.2 acres of vacant city-owned property less than 500 feet from the beach. This property, nestled in the heart of Venice’s upscale residential and retail neighborhoods, if commercially developed, would be worth well over $200 million. Imagine what could be done with that much money if the goal was to truly help the homeless. And by the way, the proposed shelter will be a so-called “wet” shelter, meaning that drugs and alcohol will not be permitted inside the shelter, but intoxicated homeless individuals will be allowed inside. Go in, get a bed, go out, shoot up, come back in.

That a solution so scandalously inefficient could even be considered by the do-gooders running City Hall in Los Angeles offers additional insights into the minds of California’s progressive elite. Solving the homeless crisis isn’t their goal here. Rather the intent is to create additional government-owned properties, hire additional government bureaucrats, while preening in front of television cameras and pretending to solve a problem. Should the Venice Beach property be developed as currently proposed, well connected construction contractors will rake in government funds, so eventually “up to 100” homeless people will find shelter. Meanwhile, thousands will remain outdoors.

California’s housing is unaffordable because of restrictive laws such as CEQAAB 32SB 375, and countless others at both the state and local level. At the same time, California’s political elites are are inviting in the world’s poor en masse to come and live here. An estimated 2.6 million illegal aliens currently live in California. But the rhetorically unassailable compassion expressed by these sanctuary policies does nothing to alleviate hardship in the nations where these refugees originate, because for every thousand who arrive, millions are left behind.

The result? While California’s visionary rulers engineer a shortage of housing supplies, their welcoming sanctuary policies engineer a burgeoning housing demand. This is the deeply flawed agenda they have implemented in California and are actively exporting to the rest of America.

The biggest lie of all is the compassionate overlay that informs every housing solution California’s elite promote. Because their solutions, however viable they may be politically, will not work. They defy basic economic sense. They create additional drain on public funds while doing nothing to alleviate the high prices that are caused by scarcity. They are sustained by an impossible assumption, that urban densification, and all the destruction that densification will bring, will in itself be sufficient to restore a supply and demand equilibrium for housing. And they reject the obvious solution, suburban expansion to complement higher densities in the urban cores, based on environmentalist objections that are overwrought. In practice, the solutions being implemented to resolve California’s housing crisis are not compassionate. They are cruel.

Eventually, enough Californians are going to realize they’ve been conned. They will recognize that government subsidized densification is financially unsustainable and ruinous to their way of life. They will support politicians who are willing to stand up to environmentalist litigators, government unions, and the left-wing oligarchy that profits from scarcity. Hopefully that will happen before it’s too late.

San Francisco’s Smallest House on Market for $650,000

Photo courtesy of Zillow

Photo courtesy of Zillow

The smallest house in San Francisco currently on the market is priced at $650,000 for a “shabby” 480 square feet abode.

According to SFGate, the house is 480 square feet, has one bedroom and one bathroom, and despite the $650,000 price tag, it is “among the cheapest homes in the city.”

“The shabby, pale pink abode at 66 Bishop St. is a bonafide fixer-upper, but the 2,500 square-foot-lot and the opportunity to remodel and rebuild could be of enormous value,” SFGate claimed. “This is the sort of property contractors and developers scoop up, but it might also be a project for a first-time buyer looking to squeeze into S.F.’s sky-high market, where the median price paid for a home is around $1.3 million.”

Real estate agent Linda Ngo declared, “There aren’t many homes in San Francisco listed at this price… You just have to be willing to put in some elbow grease.”

According to AreaVibes, the San Francisco crime rate is 105 percent higher than the average crime rate in California, and 117 percent higher than the national U.S. crime rate, despite also topping the list of most expensive places to live in the world. …

Click here to read the full article from Breitbart.com

Bring Back Blight, Sprawl; evict CDBG to Fix Affordable Housing

HousingWhen you were a child did you ever try walking down the upward side of an escalator at a mall? It can be dangerous and often results in bringing you back to where you started.

Howard Husock’s recent “How to build a Housing Ladder: Lessons From, and For, Silicon Valley” (Oct. 3, 2018) is an analogous backwards attempt to solve the Silicon Valley affordable housing crisis.

Husock’s solution is to build new “middle housing” (2-to-9-units), in areas where there is a lack of developable land:

  • As part of mixed commercial-residential developments
  • Elevated above parking lots in air rights projects
  • Converting open space in office parks
  • Small multifamily housing projects on “greenfield” (unzoned) land

From 1979 to 1985, I implemented every one of Husock’s above policy prescriptions with negligible results when I worked for the LA County Community Development Block Grant program:

  • A study for a 1,000-unit multi-family housing air rights project proposed to be built over a bus yard in West Hollywood (never built)
  • Funding a land-write down for a 100-unit Section 202 high-rise senior housing project on commercial zoned land adjacent to a shopping center in West L.A.
  • Soliciting a design-build contract for a 12-unit energy-efficient multi-family housing project on infill land in East Los Angeles
  • Relocating and rehabilitating new freeway construction removal houses to vacant sites for affordable housing,

* From 1985 to 2014, I played a role at a utility district in selling surplus land for housing development on “greenfield” (raw, unzoned land) sites.

Similarly, HUD CDBG policies have yielded insignificant results in the Palo Alto Peninsula as unaffordability and homelessness have only increased.

CDBG Housing Funding Drawdown Failure

CDBG is a federal HUD flexible revenue sharing program that can be used at the local level for housing and infrastructure improvements in lower-income target areas. The drawdown rate for CDBG funding for housing for California is the worst in the country at $4.83 unexpended for every $1 allocated (or 17% expended-see here, page 39).

In my experience, CDBG functions much as Steven Malanga of the Manhattan Institute states:

“Local officials quickly betrayed the CDBG’s ostensible antipoverty mission, using the grants to supply patronage jobs and set up nonprofits run by their allies….a Brookings Institution report noted that communities viewed the federal largesse as “free money.” One federal investigation found that nearly one-third of the operatives in Boston mayor Kevin White’s political machine worked for the city as CDBG coordinators” (“Let’s Kill the CDBG”, City-Journal, Autumn 2017).

Depreciation Creates Affordable Housing

The term “housing ladder” used by Husock is a misnomer.

The term refers to buying a cheap home in an older area and building up equity and then selling and moving up to a tier of higher priced housing as family income increases (e.g., moving up the ladder). Cheaper rental housing does not provide an upward ladder of social mobility from home equity loans, renovation or appreciation.

Moreover, the housing ladder concept should also not be confused with the term “neighborhood filtration.” Older housing “filters” down to first-time buyers.

In other words, all affordable housing by definition is older housing. Only in California is there a policy that lower income households are entitled to brand new, luxury housing by inclusionary housing policies and building new apartments with redevelopment funds.

Redevelopment as Demolisher of Affordable Housing

Further compounding this problem is the rampant redevelopment found in California where older housing districts are demolished for brand new, greater property-tax-generating commercial retail and hotel development.  But affordable housing units don’t even nearly keep up with demolitions. Only 20% of the increased property taxes generated go toward low-income replacement housing.

In 2011, Gov. Brown abolished redevelopment agencies during the 2009-2012 budget crisis. In 2017, Assembly Bill 1568 restored redevelopment for affordable housing using sales and use taxes in addition to property taxes.

The political Right objected to redevelopment mainly because of the use of eminent domain for private purposes.  The Left objected because it would end the purported supposedly reduce low-income housing, and along with it, political patronage jobs.

But neither objected to the goal of redevelopment in the first place: getting rid of “urban blight”; and along with it, market-produced housing affordability. And older homes that weren’t in a redevelopment district were eligible for CDBG low-interest rehabilitation loans and outright grants, again to reduce “blight”. “

Redevelopment and CDBG functions to build back up the property tax base lost from California Proposition 13 by effectively making older (affordable) housing stock unofficially a non-conforming use of property. Prop. 13 reduced the base property tax rate from 4% to 1%. Redevelopment is a sort of reverse Prop. 13.

A 1999 report, “Banking on Blight,” indicates a large proportion of the land area of cities in California are designated redevelopment project areas, notably the City of Long Beach with 54% or 26 square miles. A glance at a map of the redevelopment project areas in the Cities of San Jose in Silicon Valley and in working class Oakland shows a similar magnitude of the extent of redevelopment (see here and here).

Urban Sprawl Reduced to Crawl

With the demolition of thousands of blighted, older, but affordable, housing units in urban California by redevelopment, the only other housing option for first-time buyers is to find market affordable housing at the urban fringe, but California’s social engineers even deterred this.

In 2008, Gov. Schwarzenegger signed Senate Bill 375 – “Redesigning Communities to Reduce Greenhouse Gases”, as an anti-urban sprawl policy.  SB 375 would divert new development to cities as opposed to the urban fringe purportedly to reduce carbon footprints and promote “smart growth”.

Affordable Housing as a Social Problem

Tom Sowell has aptly stated “someone once defined a social problem as a situation in which the real world differs from the theories of intellectuals.” In the case of housing affordability, this would apply to both the Right and the Left’s solutions to the affordable housing crisis in California.

Ergo, if you want affordable housing, eliminate redevelopment and anti-urban sprawl transportation and housing policies; and zero-out the federal CDBG program, as Trump advocates.

Proposition 10 Would Only Inflame California Housing Crisis

house-constructionThis November, Californians will see several taxpayer threats on the ballot, not the least of which is Proposition 10, titled “Local Rent Control Initiative.” This measure would open the floodgates to big government bureaucracies, burdensome regulations and a loss of property rights. The word must be getting out, because a poll released last week by the Public Policy Institute of California shows Proposition 10 lagging.

Proposition 10 would repeal the 1995 Costa-Hawkins Rental Housing Act, a law that was enacted after a compromise was worked out between dozens of different interest groups. Costa-Hawkins stopped local governments in California from enacting a hodge-podge of different rent control laws, each with its own big bureaucracy. The law prohibited rent control on newly constructed buildings, single-family homes and condominium units. It also guaranteed the owners of existing rent-controlled buildings the right to raise the rent on a unit to market value for new tenants when the former tenants moved out.

Proposition 10 would allow cities to enact any type of new rent-control law. New bureaucracies could impose new rules, fees and price controls on old buildings, new buildings, small buildings, garage apartments, granny flats and even single-family homes and condos. Proposition 10 would make California’s well-documented housing crisis even worse by discouraging investment in rental housing and incentivizing conversions or even demolition of existing rental property.

The nonpartisan Legislative Analyst’s Office warns this measure could hurt California taxpayers, predicting a loss of hundreds of millions of dollars in state tax revenue. That would mean less money for schools, roads and emergency services. …

To read the entire column, please click here.

California Should Stop Trying To Stomp Out Suburbia

urban-housing-sprawl-366c0We may be celebrating — if that’s the right word — the tenth year since the onset of the financial crisis and collapse of the real estate market. Yet before breaking out the champagne, we should recognize that the hangover is not yet over, and that a new housing crisis could be right around the corner.

This is particularly true in California, which took one of the biggest hits in 2008 as its sky-high prices collapsed, causing enormous problems in areas including the Inland Empire, where incomes are lower and the economy was largely built around new housing construction. The urbanist punditry helpfully came out in force to declare such areas as “the next slums.”

The unsurprising slowdown in housing after the Great Recession was further hampered, once the economy began to recover, in large part due to tough regulations. By 2017, California metros like Los Angeles-Orange and even the Bay Area were producing housing at half to one-third the rate, on a per capita basis, of places such as Nashville, Dallas, Houston, Orlando and even Indianapolis and Columbus. The shortfall in single-family home production, greatly discouraged by state policies, lagged even further. Stronger land-use regulations have been associated with higher land cost and regulatory delays driving house prices well beyond historic norms, as recent research indicates.

Toxic realities

Due to lack of affordable new product, prices have remained high, absurdly so in some areas. New state legislation, seeking to expand Jerry Brown’s climate jihad, including new mandates for solar roofs for new houses, promise to raise prices by at least $20,000 and without doing much for the environment, warns environmentalist Mike Shellenberger.

This is all part of a toxic regulatory overreach that led California housing prices, relative to incomes, to grow at three times the national rate since 2010. By one recent calculation by howmuch.net, California, with the exception of Hawaii, has by far the highest statewide gap — almost $50,000 — between the salary needed to buy a house and its price.

With more of the economy built around low paid “gig” and service workers, the pool of potential buyers is shrinking. California home sales overall are falling — down over 12 percent in the largest market, Los Angeles-Orange County. The biggest losers have been minorities and the young. Already barely 25 percent of people 25 to 34 in California own their own home compared to 37 percent nationally.

Ways toward a new bust?

We could be setting the stage for a new kind of housing debacle — and not only here. Higher interest rates tend to undermine the viability of high-priced markets in particular. There are other clear disturbing signs, such as the rising percentage of buyers paying 45 percent of their income on mortgages; the number is four times the percentage in 2010. Then there’s the return of the home equity loan market back to its pre-recession level.

The rising cost and declining sales also reflect to some extent the inability of governments and developers to catch new demographic trends. Instead of flocking permanently into dense cities, more millennials are following in the footsteps of previous generations by locating on the periphery of major metropolitan areas and sunbelt cities, most of which are simply agglomerations of suburbs. Over the last year, according to the Census, the ranks of renters decreased while homeownership increased 1.8 million. A recent National Homebuilders Association report shows more than two in three Millennials, including most of those living in cities, would prefer a house in the suburbs, findings confirmed as well by the Conference Board and Nielsen.

By trying to stamp out suburbia, California is playing fire with its own future. Already the price differences between our state and the rest of the country are greatest, notes demographer Wendell Cox, at the lower, “starter” end of the market. The state, sadly, seems to have little interest in meeting the demand of young families, posing a long-term demographic threat.

A different kind of debacle?

Instead, we may be overbuilding small expensive apartments. Already many analyses show that the apartment markets here, and elsewhere, including places like New York and Seattle, are doing worse than before, with rents stagnating or even declining.

Other factors such as the gradual withdrawal of Chinese buyers, in large part due to Beijing’s own financial problems, could play a role, particularly in places like California and New York. Now, for the first time in recent memory, there are more Chinese sellers than buyers as sales falter. Ironically new measures to address the housing shortfall, notably rent control and inclusionary zoning, may help some people, but will likely further slow new construction.

So what would a new bust look like? Some of the same people — middle- and working-class families as well as minorities — would be hurt. But the biggest pain may be felt more in expensive speculative markets like Manhattan, San Francisco, West Los Angeles or downtown rather than in the distant, and disdained, outer suburbs. To borrow from the late Yogi Berra, it could be “déjà vu all over again,” but with a somewhat different cast of victims.

ditor of NewGeography.com and Presidential fellow in urban futures at Chapman University

This piece originally appeared in The Orange County Register.

Cross-posted at New Geography 

Berkeley Officials Reject Plan to Fast-Track New Housing

HousingAs CalWatchdog reported July 2, the city of Cupertino’s decision to stop fighting a massive mall makeover project enabled by a far-reaching 2017 state law meant to promote more housing construction could someday be seen as a milestone in state planning.

Senate Bill 35 by Sen. Scott Weiner, D-San Francisco, requires cities that have not met their affordable housing requirements to approve projects that are properly zoned, pay union-scale wages to builders and have at least 10 percent of units in “affordable” ranges.

After months of objections from Cupertino elected officials and activists, in June, the city signed off on developer Sand Hill Property Company’s plan to convert the largely empty 58-acre Vallco Mall site to a huge multi-use project with 2,400 residential units, 400,000 square feet of retail space and 1.8 million square feet of office space

Given that 98 percent of cities have been found to have an inadequate supply of affordable housing, according to a state evaluation, the Cupertino precedent seemed potentially huge.

Two months later, new developments related to SB35 appear to point in the opposite direction.

Last week, Berkeley officials rejected a plan to use the law to fast-track approval of 260 apartments and 27,500 square feet of commercial space at 1900 4th Street just east of the Berkeley Marina despite evidence presented by developer Blake Griggs Properties that it was properly zoned and otherwise met SB35’s edicts.

City tactics in fighting project have familiar ring

The tactics that Berkeley is prepared to use mirrored the ways that construction projects have been fought in California for decades: raising a variety of legal objections that could cost developers millions of dollars because of delays, even if they have little or no validity or applicability.

Berkeley planning chief Timothy Burroughs said the project could not proceed because:

  • It would have been built on land designated as a historical landmark because of a Native American burial ground. As a city with its own charter government, it is given deference in protecting its history.
  •  It would have considerable low-income housing but not enough housing for those with very low incomes.
  •  It would have increased traffic in the area in ways not allowed by city laws.

The objections were of the sort that Weiner sought to bypass with SB35. This is why the developer warned of a lawsuit earlier in the summer after the city put up roadblocks to approval.

But in a surprising move reported last week by the San Jose Mercury-News, West Berkeley Investors – part of the group backing developer Blake Griggs Properties – has backed out of the project without explanation. The assumption of many is that it saw the hassles as outweighing the chances for success.

The Mercury-News also reported that a spokesman for Berkeley City Hall said officials would welcome it if developers chose to reactivate a previous application that had far fewer residential units – 135 – and slightly more commercial space – 33,000 square feet.

In his Sept. 4 letter rejecting the latest version of the project, the city planning chief emphasized the historical significance of the Native American burial ground. Why that significance would lose weight in planning decisions if a smaller project were being considered was not explained.

But Burroughs pushed back against the idea his city was hostile to adding housing stock. He said 910 housing units have been built since 2014, 525 are now being constructed and 1,070 are cleared and in the pipeline.

This article was originally published by CalWatchdog.com

UC Berkeley professor blames rent control for California’s housing crisis

UC BerkeleyKenneth Rosen, a UC Berkeley economist and real estate consultant, published a paper Wednesday titled The Case For Preserving Costa Hawkins, in hopes of swaying voters against Proposition 10.

Proposition 10, which will go before voters in November, would repeal the 1995 Costa-Hawkins Act, a state law that severely curtails rent control in California cities. For example, under Costa-Hawkins, only San Francisco apartments built before 1979 may be subject to rent control.

Passing Proposition 10 would not in and of itself create any new rent control housing, but it would allow cities to expand rent control stock for the first time in decades if they so choose.

Rosen, however, argues that turning the clock back to 1994 will stifle new housing and drain apartment stock. …

Click here to read the full article from SF Curbed

It’s no mystery why the cost of housing is so high in California

HousingIf Sherlock Holmes was investigating the mysterious disappearance of new housing construction in California, he and Watson might be in Los Angeles County right now.

There they would have observed the county Regional Planning Commission this week as it approved the project known as Centennial, a new community of 19,000 homes on 12,500 acres in the Antelope Valley on the Tejon Ranch.

The Centennial project has been in the works for so long that a news story about the approval was accompanied by a photograph of Gov. Arnold Schwarzenegger looking over maps of the land with the developers in 2008.

Approval by the Regional Planning Commission is just one step in the process of getting the go-ahead to build the new homes. The project now goes before the L.A. County Board of Supervisors.

You really need good genes to be a housing developer in California. If the average life expectancy in your family is less than 95 years, choose another field, or another state.

Holmes and Watson might have been puzzled by the ferocious resistance to the Centennial project, as speaker after speaker voiced objections during more than two hours of public comment ahead of the Regional Planning Commission’s vote.

A representative of the Center for Biological Diversity complained that “isolated leapfrog development” was a threat to “the affordability and health of the entire metropolitan area,” when “L.A. could be an innovative leader in urban planning” by “prioritizing transit-accessible affordable housing.” The Center for Biological Diversity is unhappy that an estimated 75,000 new vehicle trips a day will be generated by the Centennial project as residents drive into Los Angeles to work. …

Click here to read the full article from the Orange County Register

Elected Officials to Blame for California’s Homegrown Housing Problem

house-constructionWe see the headlines daily — California has an affordability problem when it comes to housing. People have to live further and further away from their jobs, and even a median-priced condo is out of reach for many. Since this affects so many of us, and since California now has about a fourth of the nation’s homeless population, compassionate people want to do something. But that something could make a bad situation even worse. As former U.S. Sen. Tom Coburn, R-Oklahoma, says, “the best way to make something expensive is for government to make it affordable.”

After emigrating from Jamaica as a child and settling in Florida, I came to California as soon as I could. Our amazing state — with its lack of humidity and flying bugs — has always been attractive to aspiring actors, creators and entrepreneurs, so a higher cost of living was expected as a down payment on living the California Dream. What’s happening now, however, is causing sleepless nights for many.

First, we need to understand how we ended up with this problem. California has lots of people willing to build, so how did we not keep up with the clear demand for so long? For years, the state has consistently added about half the housing needed to keep pace with the population. Our elected officials shoulder much of the blame, by constraining supply due to mandates and regulations. Now, of course, they’d like to be part of the solution. Central planning, however, has never worked, even though it’s been tried in myriad ways and in many different variations.

The first hurdle that politicians enacted was the California Environmental Quality Act. Instead of being used to address real environmental concerns and protect our unique topography, it’s often used as a cudgel to enact wage and other concessions from developers. Over a third of the lawsuits filed under CEQA have to do with housing. This, of course, adds costs and delays to development, and gives pause to anyone considering building in the state. …

Click here to read the full article from the Orange County Register