I was perusing the real-estate listings for Palo Alto, California, and spotted a stylish, remodeled midcentury ranch house with a whopping 1,700 square feet on a postage-stamp lot for a mere $2.6 million. What a deal! There are great jobs all around that lovely Bay Area city, the heart of Silicon Valley and home to prestigious Stanford University. But imagine the income one would need to, say, put $700,000 down and make a $13,000 monthly housing payment.
Palo Alto is near the top of the food chain, but California’s coastal housing prices — even in run-down and dangerous cities — typically top a half-million bucks. And those median prices will get you a cottage or a little condo with a view of the freeway. Bay Area friends — even ones with $150,000-plus incomes — live with roommates or rack up 35,000 miles a year commuting in bumper-to-bumper misery from the boondocks. Southern California isn’t much better.
Fortunately, the U.S. Census Bureau has taken that reality into account in its supplemental formula for determining the nation’s poverty rates. Its recently released data show a significant uptick in household income (5.2 percent) since 2014 and a slight drop (1.2 percent) in the poverty rate. But in high-cost-of-living states, particularly California, those numbers were far less encouraging. Despite its reputation for wealth, California once again had the highest poverty rate in the nation, with nearly 21 percent of its residents unable to afford the basics.
California’s leaders are proud of their continual efforts to expand the number of welfare-type programs available to residents. In fact, the Census Bureau points to all the many governmental assistance programs that boost poor Californians’ take-home income. Even if one supports those wealth-transfer programs, it’s clear they don’t come anywhere close to alleviating problems caused by the state’s housing prices.
The governor and Democratic legislators “raised the state’s minimum wage, improved overtime pay for farm and domestic workers, enacted an earned-income tax credit, expanded health and welfare benefits, and provided extra money for the educations of poor students,” explained the Sacramento Bee’s Dan Walters. But they failed “to confront the heaviest burden on poor families,” which is of course the state’s “soaring housing costs.”
Many of the coastal liberals I know blame the housing problems on the desirability of living in some of California’s magnificent coastal enclaves, but that argument has been so thoroughly debunked it’s silly to even bring it up any more. Yes, it’s always going to cost more to buy a house in Santa Barbara or La Jolla than Fresno or El Centro, but the housing-price problem is almost entirely the result of state and local government policy.
All of these coastal enclaves are surrounded by vast amounts of open space, almost all of it off limits to development. As I’ve reported for the Spectator, 40 percent of the price of a new single-family home in the San Diego area is attributed to government fees and permits. That regulatory cost — around $260,000 — is about 20 percent more than the median home price in the United States. Is it any wonder poor people struggle to live here? And consider the cost of land, which is driven up by the artificial scarcity of developable acreage. I know developers who have spent decades just trying to get a single project entitled.
In the Bay Area, officials are blaming Airbnb and its small number of units rented out to vacationers for reduced housing supply. They also blame booming tech companies for creating new high-paying jobs that increase demand for housing. That’s a novel approach — punish companies that create good jobs because they increase demand for housing!
Yet San Francisco alone has thousands of vacant rental units that will never be put on the open market. That because the city’s rent-control law essentially gives renters the right to live there forever at below-market rates. You get less of what you punish and San Francisco severely punishes “greedy” landlords for offering apartment units for rent.
And the problem is about to get worse. I’ve heard policymakers argue there’s no more room to build in San Francisco. That’s nonsense. There are plenty of underdeveloped areas even in that densely populated city and developers can always build upward. But even if that were true, the argument ignores that housing markets are regional. If developers could more easily build subdivisions in suburban areas, it would reduce the price pressure across the region and lead to a more reasonable situation even in tony San Francisco.
Instead, smaller cities are emulating the failed policies of bigger ones. Six suburban Bay Area cities have rent-control measures on the November ballot. As the San Francisco Chronicle reported, rents throughout the region have gone up 66 percent, or $1,000 a month, since 2010. That’s driving angst among the area’s residents. The reason is a lack of building, something educated Bay Area voters ought to figure out. Knowing them, however, they will “solve” the problem by making it far worse.
Even the liberal Chronicle focused on overwhelming opposition to rent control by economists, noting that 81 percent of those surveyed disagreed that rent control has “improved the quantity and quality of affordable rental housing.” The article pointed to the nonpartisan Legislative Analyst’s Office, which concluded rent control results “in a decline in the overall quality of a community’s housing stock.” That’s no doubt true, although the Bay Area’s embrace of insanity certainly will help values in the bedraggled Central Valley.
That’s the farm region where wannabe homeowners from the Bay Area move, and there’s an incredible flight of them over the coastal ranges. But in those communities, poverty is exacerbated not so much by home prices — they tend to be high by national standards, but within reason for working families — but by a lack of jobs. California’s liberal policymakers are busy chasing such jobs to other states. The latest villain is the oil-and-gas industry, which is one of the few industries left that provide those supposedly sought-after high-paying blue-collar incomes. The governor recently signed into law yet another aggressive anti-climate-change package that even some supporters admit is a radical attempt to achieve a rapid reduction in the amount of oil produced here.
Democrats here accuse Republicans of using anecdotes to illustrate their point that high taxes and regulations are driving away businesses. But Joel Kotkin and Wendell Cox, writing for Newgeography.com, look at the data and it’s unmistakable: “For generations, the Golden State developed a reputation as the ultimate destination of choice for millions of Americans. No longer. Since 2000 the state has lost 1.75 million net domestic migrants.… And even amid an economic recovery, the pattern of outmigration continued.” Our magnificent state ranked well behind “longtime people exporters Ohio, Indiana, Kentucky and Louisiana.”
California legislators and even the governor have recognized the need to boost housing supply, but their solution amounts to making it a little easier to build subsidized housing developments along rail lines, along with a few more of those subsidies. The governor never acknowledges his signature achievement — the passage of climate-change legislation — is probably the single-biggest factor in reducing the number of suburban-style housing units across the state. We’re all supposed to live in dense cities with a smaller carbon footprint, which means setting aside ever-more land for permanent open space. Battling climate change is fine, but how does it help to cause such misery?
As political analyst Tony Quinn explained in a Fox & Hounds article last month, the results are falling heaviest on the state’s growing and mostly blue-collar Latino population. Yet Latino politicians are siding with the wealthy coastal officials on most key issues. The results are entirely predictable: Things are great for people can afford those $2.6 million tract houses — and dismal in many other places. All the welfare and rent subsidies in the world aren’t going to fix this problem.