There were smiles all around and a lot of back-slapping the other day, when Gov. Gavin Newsom signed a package of bills he firmly believes will work quickly toward ending California’s undeniable housing problems of high prices and low availability.
The package imposes rent controls statewide, despite last year’s vote on Proposition 10 which saw the majority in 56 of 58 California counties oppose similar controls for fear they would discourage building of enough new apartments to seriously dent the availability shortage. There are also new limits on single-family zoning, designed to encourage building of backyard “grandma” units, and provisions that may encourage some companies to buy up existing homes, then install new partitions to create a dozen or more rental units in one house.
The new laws will also lower fees on low-income housing projects and forbid local moratoria on new housing.
But one underlying question remains unanswered: Can California legislate its way out of the housing crisis? It’s a query similar to what was asked during the 1960s, an era when the federal government passed myriad laws banning racial discrimination in voting, housing, employment, education and other parts of life. “You can’t legislate morality,” critics said then. But it’s turned out differently. America is far from free of discrimination, but official racial discrimination has been largely turned around, to the point where some cities and states now face lawsuits over alleged “reverse discrimination,” which claim minorities get hiring preference over whites who are equally or more qualified.
California realtors don’t phrase it the same way opponents of civil rights laws once did, but their argument is essentially the same: The state can create conditions it thinks should increase or enhance the building of new homes, be they apartments or condominiums or individual houses, but it can’t make anyone build or buy them.
Before developers turn their first shovel of dirt, they must be convinced they’ll make a profit. These days, they apparently don’t feel that way. As of early fall, just over 111,000 permits had been issued statewide for new houses this year, 12 percent less than a year ago, according to the California Association of Realtors. Apartment development, the realtors said, was down 52 percent.
At the same time every developer in the state knew the housing law package was sure to pass the Legislature and get Newsom’s signature. Which means the new laws may not spur even nearly the 500,000 new housing units the governor has said are needed each year for the next seven in order to solve the state’s problems.
And yet…officials charged with fighting the parallel problem of homelessness report that for every 33 persons they can place in the transition quarters now going up in various parts of the state, 150 more persons will become homeless, largely because of high rent and other affordability problems.
This poses an enormous conundrum: High rents have driven thousands to live in the streets, either in tents or vehicles, but without high rents, who’s going to build enough new apartments to resolve the shortage?
If there’s a solution to this problem, it may be geographic. Why not build much of the new housing where land is cheap rather than forcing cities in the state’s most expensive, affluent ZIP codes to allow more construction? For in many areas, especially along the coast and in the Silicon Valley, land prices are the single largest expense in homebuilding and – along with demand – the foremost driver of high prices.
Newsom has tried to be completely egalitarian about enforcing his policies, which dictate that all cities approve new housing permits in amounts proportional to their existing population. That has not worked. The inventory of unsold homes did not shrink in the last year, stymying new development that could resolve at least part of the problem.
The new laws, wrote CAR president Jared Martin the other day, will “make it more difficult for hard-working Californians to find an affordable place to live.”
So why not earmark some of the state’s current $21 billion budget surplus for building new housing where land is cheap, fees low and regulations minimal? That would be the Central Valley and some desert areas of Southern California.