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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