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California Can’t Fix Its Housing Problems

Sacramento

Even California’s liberal Democrats are starting to understand that the state’s housing crisis is fundamentally a supply-and-demand problem. Home prices have soared to astronomical levels, with a median price above $750,000 in the nine-county Bay Area and nearly $700,000 in Orange County. Years of growth controls and local regulations have restricted housing supply and added as much as 40 percent to the price of every new home that’s built.

Housing is the key reason California has a 24 percent poverty rate (using the U.S. Census Bureau’s new cost-of-living-adjusted index), the highest in the nation. Even a six-figure salary can’t buy a median-priced home in most of the state’s big metro areas, so you can only imagine what exorbitant home and rent prices mean for those people on the lower end of the earnings scale.

As legislators head back to Sacramento after summer recess, a housing package tops the agenda. That’s a troubling idea in and of itself. The same leftist legislators who have created this crisis are offering to fix it. It’s the equivalent of what Ronald Reagan called the nine most terrifying words: “I’m from the government and I’m here to help.” It might be best to run for the hills, or at least contact U-Haul about the price of moving to Nevada.

Still, those of us who long have pushed for an easier permit process are heartened to find such an idea gaining traction in the Legislature, as well as the support of Gov. Jerry Brown. Brown wants to loosen local zoning restrictions, even though his battle against climate change has made it far more difficult for localities to permit construction of new subdivisions.

The main, encouraging piece of legislation is Senate Bill 35, by Sen. Scott Wiener, D-San Francisco. The bill “creates a streamlined, ministerial approval process for development proponents of multi-family housing if the development meets specified requirements and the local government in which the development is located has not produced enough housing units to meet its regional housing needs assessment,” according to the bill analysis.

Ministerial approval is a great idea. Builders would have a right to a permit provided they meet several standards, thus eliminating the drawn-out approval process that has doomed so many California housing projects over the years. The bill has gotten even better in recent days, as Wiener agreed to an amendment that expands its application not only to infill sites in “urbanized areas” but also to so-called “urbanized clusters.”

“That greatly expands the bill’s impact, covering hundreds more small and mid-size cities,” according to a recent Sacramento Bee report. That’s good news. But don’t be too encouraged. The legislation also includes language that undermines a lot of the good stuff — and reveals the fundamental reason reform always is impossible here.

As the Bee explained, the California Building Industry Association “objects to provisions requiring developers who want the expedited approval to pay prevailing wages on those projects and comply with worker training standards.” Prevailing wages are union wages. So the Legislature giveth on one hand and taketh away with the other.

Most of what Democrats want to do with regards to housing involves the subsidized variety. There’s no problem that, in their view, doesn’t have a government solution, even though government policies caused the problem in the first place. “They raise taxes and build government-specified projects constructed with union work rules,” I wrote for the Spectator last month. “They won’t let the market do its magic and let builders just build houses.”

Like virtually every other “crisis” here, the problem centers on the power of the state’s unions. They control the Legislature. There’s little difference of opinion on that point. California’s public services are crumbling. We have some of the worst public schools in the nation, but the power of the teachers’ unions assures that the state’s public-school systems cannot get rid of ill-performing teachers.

In the Vergara case challenging the state’s system of teacher protections, a Los Angeles Superior Court noted that 1 in 3 of the state’s teachers are “grossly ineffective.” That means that 2,750 to 8,250 teachers remain in the classrooms, inflicting harm upon those students unfortunate enough to be stuck with them. The judge tossed the union-backed tenure protections, but was later overturned by higher courts. Of course.

In yet another example, the bulk of the state’s policing problem comes down to a small number of bad actors. Yet, as I reported for the Orange County Register last week, “police unions have successfully gone to court to stop the Los Angeles County Sheriff’s Department from turning over to the district attorney the names of around 300 deputies accused of ‘moral turpitude.’” Those officers remain on the job. Because of the legal action, their names can’t be provided to criminal defendants, even though their credibility as witnesses could be questioned.

California has the lowest rate of outsourcing of public services, thanks to union power. The Legislative Analyst’s Office has pointed to thousands of unnecessary workers at the California Department of Transportation. Instead of getting rid of highly paid and pensioned deadweight, the governor and Legislature embraced gas tax hikes as the only way to direct more money to road building. Did I mention that our road system often resembles one found in a Third World country? Meanwhile, union pension agreements are pushing many cities to the fiscal brink.

Most of these examples involve public services. In every area of government control, those services are abysmal. But legislative wage demands for private unions takes its toll, as well. The housing issue is clear cut. Build more housing. It’s not as if builders need to have their arms twisted to build homes in a state with median prices above $500,000. But first, the government artificially restricts supply. It offers to loosen those restrictions, but only if builders create a certain type of housing and conform with unions’ cost-inflating rules.

Democrats are at least acknowledging a basic market reality — that the state needs to make it easier for builders to create more supply. But until they are willing to stand up to their union allies, the rest of us should abandon any hope that the new reforms will do anything about the problem. And that’s one thing California Democrats will never do.

Steven Greenhut
Steven Greenhut
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Steven Greenhut is a senior fellow and Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.
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