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Golden State Blues
Why California Can’t Build More Housing

The State of California (and the San Francisco Bay Area in particular) has become ground zero for the housing affordability crisis besetting major metropolitan areas across the country, eating up incomes, driving up inequality, and slowing economic growth. Governor Jerry Brown, who seems to recognize the threat that a dwindling housing stock poses to his state’s ongoing vitality, proposed a bold piece of legislation that would streamline the development process and sidestep onerous local stumbling blocks to new construction and in the process slow the meteoric rise in rents.

But now Brown’s bill seems to be dead in the water, due in large part to resistance from an unlikely interest group. The San Francisco Business Times reports:

One of the most powerful opponents of the bill was a sector that could directly benefit from more development: construction labor unions.

“The death blow was dealt by the construction trades,” said Matt Regan, senior vice president of public policy at the Bay Area Council, the region’s largest business group, which supported the proposal. With such strong opposition, no state senators or assembly members publicly supported the measure. […]

Construction unions sought a major modification in the proposal: requiring projects that benefitted to ensure minimal construction salary thresholds equivalent to union wages through prevailing wage agreements. Ben Metcalf, director of the state’s Housing and Community Development, told the Los Angeles Times that requiring prevailing wage would discourage some developers from using the program. Requiring higher wages would remove the financial advantages of using the program in some cases, he said.

This episode is a tragically characteristic of the blue model’s tendency toward self-contradiction—in this case, pitting unions against the poor and middle-class. The most sustainable way to make housing affordable to low and modest-income people is to relax rent-seeking regulations that block new construction for the sake of protecting the real estate values of property owners. But labor unions—which ostensibly stand for working class interests—will not stand for new construction unless it is accompanied by carve-outs and cronyist regulations that artificially boost their compensation.

So despite the best of intentions, the California blue coalition has proven once again unable to deliver smart, broadly appealing, pro-middle class policy, forced instead of concede to one of the many powerful special interests that makes up its vast and increasingly incoherent political base.

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  • Greg Olsen

    Welcome to the one-party state that is California. With a moribund Republican party that is anathema to a majority of the state’s voters (an R after your name on the ballot is a death sentence, but Republicans fare well in nonpartisan elections) the Democrat-dominated legislature is beholden to the unions (principally the teachers and prison guards, but obviously the building trades still have clout) and the environmental movement to the detriment of smart public policy. One idea that I have floated is that if NeverTrump can successfully fracture the Republican party in the state, it may be able to constituted a viable opposition party under a new name with new leadership. It needs to be the party of good government, something that could succeed in the state.

  • f1b0nacc1

    Davis-Bacon for housing….

    • Nevis07

      Precisely, Fib. In my line of work it is one line of red tape over the next. Affordable housing development is already far more expensive than market rate housing because of regulations. The latest cause is “Passive Housing” – an effectively German concept on green housing. The idea is that it is building green housing for the same price, but it is not. I recently attended a seminar for passive housing, which proclaimed it would cost no more to build passive housing than other modern methods. Our architectural firm’s owner also sitting next to me at the seminar kept whispering in my ear throughout the seminar about the hundreds of thousands of dollars that the concept was adding to the process each step of the way.

      Whatever’s one’s views are on green development, one thing for certain is that if you want more green housing you can expect higher costs and therefore more inequality in quality of living. Just one of those things that the left conveniently ignores. All I know is that the more government adds regulations, the more it prices out demographics.

      • f1b0nacc1

        This is the problem with most of the Left’s initiatives, they add costs and the fools are incapable of understanding the simple truth that incentives matter. Make something more expensive, you get less of it…it is as simple as that.

  • rheddles

    What is the problem? If you want a job and cheap housing move to Texas. If you want to wait for the reconquista and become a lord or a peon, stay in Caliphornia. I don’t understand what TAI has against state’s rights.

    • seattleoutcast

      If the Supreme Court had not made the state senate moot, then I would agree. To truly have states rights, we need to repeal Reynolds v Sims. Then, just as on the federal level, the state senate would have a check on the legislature. As it stands now, the cities dominate state legislatures and the rural counties have absolutely no say.

  • Andrew Allison

    Further confirmation, as if any were needed, that California is governed by Unions.

  • CaliforniaStark

    In a recent Orange County Register article, Joel Kotkin and Wendell Cox effectively point out it is Governor Brown’s own radical environmental policies are causing California’s housing crisis:

    “Some have seen Brown’s recent suggestions to loosen up some regulations and add to housing subsidies as positive, although they have little chance of making it through Sacramento due to environmental, labor and municipal opposition.

    But even if it is passed, Brown’s proposal would hardly affect housing supply or prices, in large part, because the governor’s people-last radical environmental theology rules out what Zillow economists identify as the one of “tried-and-true” means of reducing housing costs: single-family tract housing developments on the periphery (where the city meets the countryside). In contrast, Brown’s housing proposal focused on larger, multifamily developments in urban core areas.”

    http://www.ocregister.com/articles/shocked-727185-jerry-casablanca.html

    Prohibiting new development to all but certain core urban areas is going to result in artificial scarcity and increased cost. What Brown is proposing regarding streamlining the development permitting process is only a band-aid on a gaping wound that Brown created.

    Agree that construction unions have also substantially raised the cost of construction of new housing by obtaining the passage of prevailing wage laws and other union benefits. The added regulatory burden of complying with Brown’s greenhouse gas and sustainable construction regulations makes costs even higher.

    When California politicians are faced with the added costs of the increasing burden of regulations, they often come back with some plan to streamline regulations; what is actually needed is massive regulatory reform.

    • Jim__L

      I’m inclined to think that the entire premise may be flawed.

      I’m seeing major new mid-rise apartment projects around my own stomping grounds — there was one recently built over by Vallco, across 280 from the new Apple campus. There’s another going up on San Antonio Road at the Palo Also / Los Alto border.

      Granted, I see a lot more commercial properties going in — 101 in Santa Clara in the neighborhood of the new stadium is booming, and Nvidia has a new place on San Tomas, although that might just be a function of residential construction being done a bit off the beaten track, and commercial being done right on the main arteries.

      If you’re concentrating on the utterly insane laws in San Francisco, sure, things are really bad. (One of my civil engineer friends told me recently in a conversation about apartment complex bedroom / parking space ratios, sane cities have about a 3:4… but SF sometimes has a 4:0 ratio. That’s right, ZERO parking spaces for every apartment in the complex. Either they like their peons to be completely immobile, or they expect only jet-setters who are only ever in town on trips to fill up the places. Talk about elite disconnect…

      • VictorErimita

        Nah. It’s just the anti-car religion of the Left. Cars are bad. Therefore if you outlaw parking, everyone will magically walk, bike and mass transit everywhere. The people must be denied whatever they want. For their own good. By their betters.

    • AnotherPattyJ

      Yes, all the building must conform to Brown’s ideology. IOW we will get more huge apartment buildings next to train tracks, in the ridiculous belief that people will then take trains to work instead of drive. Very few modest, single family homes. Because lawns are evil!

      Kotkin has also written how multi-story pack and stack costs much more to build than single family, so that’s why the apartments and “lofts” are still out of reach for middle class people, or they are packed with numerous roommates.

      • LarryD

        More cost driving regulations http://www.newgeography.com/content/005375-jerry-brown-s-housing-hypocrisy

        Brown has long been at the forefront on drafting and enforcing regulations that make building housing both difficult and very expensive. And now he has pushed new legislation, which seems certain to be passed by the Legislature and signed by the governor, that makes it worse by imposing even more stringent regulations on greenhouse gas emissions, mandating a 40 percent cut from 1990 levels by 2030.

        The press and activists may cheer the new bill, which will require massively expensive and intrusive measures likely to further raise housing costs. A 2012 study by the California Council on Science and Technology found that, given existing and potentially feasible technology, cutting back carbon emissions by 60 percent, roughly comparable with the new legal mandate, would require that “all buildings… either have to be demolished, retrofitted or built new to very high efficiency standards.” Needless to say, this won’t do much for housing affordability.

  • VictorErimita

    Like all terms invented by the Left, the term “prevailing wage” means exactly the opposite of what it sounds like. Nationally, about 7% of construction workers beling to unions. So construction wages that actually…prevail in the marketplace are nonunion wages. The so-called prevailing wage laws were originally passed to keep blacks and other minorities out of public construction projects, because they charged less for their services. Another example of the Democratic Party’s history of racism. It hasn’t changed much. Central Americans, legal and illegal, now comprise a substantial percentage of (nonunion) construction workers. As with blacks, the Democratic Party poses as the champions of immigrants and so-calld “Hispanics” while acting to undercut them. And like blacks, the Hispanics will probably vote for them anyway.

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