California housing prices are through the roof. The state’s median home price is already more than double that of the national average. In large part, this is due to restrictive zoning and a closed-minded attitude towards reform that has left the state with the second-lowest rate of housing density in the country. Absolutely the last thing California should be doing is inserting unnecessary regulations that make homes even more expensive.
Of course, that’s exactly what California is doing.
A decree handed down from the California Energy Commission requires that all new homes in the state be built with solar panels on the roof, though there are exceptions for homes in shady areas. Looks like if you want to build a house without a surcharge for solar panels you don’t want, your only recourse is to find a plot of land surrounded by redwoods.
Putting solar energy panels on your roof is hardly cheap. California’s government estimated that the average home would cost $25,000-$30,000 more due to the solar mandate, but suggested that consumers would save $50,000-$60,000 in energy bills over 25 years. Overall, the government estimated, homebuyers would save a net of $23 per month. That’s a nice sentiment, but there’s a few problems.
One problem is that the government did not take into account the fact that most people (especially people contending with the out-of-control housing market in California) don’t buy houses in cash, they get mortgages. Taking into account increased interest costs, that net savings of $23 per month disappears, leaving homebuyers with a net $11 per month cost.
The other problem with this calculation is that not every Californian home is “average,” which is generally the problem with these across-the-board mandates. Currently, only 15 to 20 percent of California homes have solar panels installed. It’s not because Californians hate money or revere the Sun God too much to harvest his energy—it’s because not every home benefits the same way from installing solar panels. What makes sense economically for one family may make no sense at all for another. As Tim Worstall at the Washington Examiner points out, if solar panels made so much economic sense, California wouldn’t have to force residents to put them on their roofs.
It’s also important to note the secondary effects here as well. Artificially increasing the demand for solar energy by mandating its consumption will drive up the price, acting as a subsidy for the solar industry. It doesn’t help that those who will pay the price of higher utility bills are primarily the poorest Californians, as increases in utility bills are regressive. In effect, California is taxing its poorest residents to provide a subsidy towards a politically favored industry. If that’s not textbook cronyism, I don’t know what is.
Does this mean that Americans would be foolish to install solar panels on their homes? Not at all—for many Americans, solar is the most efficient way to power their homes. Even after controlling for the effect of subsidies, the price of solar power has dropped dramatically over the last ten years. Yet this should just function as further proof to environmentalists that the government does not need to put its thumb on the scale and punish the poorest among us to convince people to transition to renewable energy sources—it’s happening naturally as technology makes renewables more economically viable.
Policies such as this make California appear dead set on keeping its housing prices unnecessarily high. Yet there is no need for California to continue shooting its residents in the foot like this. The state should avoid unnecessary taxes on its poorest residents, direct or no, in order to subsidize industries that don’t need it.
