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Contra Costa County Charrette

Is the Market Already Addressing California’s Housing Problems?

When it comes to affordability and livability, we’re told that everything is getting worse in California.

Housing in California, located in prime areas, is drastically overpriced. Try finding a decent home for less than $1 million or $2 million in sought-after communities.

Taxes are high. California leads the nation in the overall tax burden on that average individual when you consider sales tax, gasoline tax, property taxes, and the top-bracket of the state personal income tax (13.3 percent).

The freeways are jammed in all major metropolitan areas in California. There is very limited parking, assuming one can find a parking space at all. The roads and infrastructure are in need of significant repair and upgrading. Public schools in many areas are overcrowded, and many of the most basic public services (police, fire protection, social welfare programs, etc.) have been decreasing for a decade.

In response, the California State Legislature keeps intervening in an attempt to remedy the state’s problems.

In recent years, the state has increasingly demanded that local communities build more and more housing in the hope that a certain portion of new homes will be set aside for low-income individuals. They have used a combination of penalties and threats, which have had little effect, because the economics of affordability simply do not “pencil.”

Undaunted by their failures, the state legislature is currently working on bills to wrest control of local land use and zoning from locally elected representatives and create the biggest giveaway -- in the history of this state -- of private property rights to for-profit real estate developers.

State Senate Bill 827, for example, would allow the state to re-zone all land within one-quarter mile of a frequently used bus route and within one-half mile of a train station. The bill would also give for-profit housing developers the ability to construct, by right, high-rise, high-density housing there. And this housing can be as high as 10 stories, regardless of environmental impacts, financial consequences, or local zoning ordinances, including local height limits. In addition, providing parking for such housing would no longer be required.

Is this plan supposed to remedy California’s problems?

While there is a loud chorus of construction unions, investment bankers, and technology employers (and their employees) advocating for even more state-government intervention, there is another approach.

The economist, Milton Friedman, who died in 2006 and was for many years a professor of economics at the University of Chicago, was a strong advocate of free-market economics and a vigorous opponent of government intervention in the marketplace.

Dr. Friedman, who held libertarian views, said many of society’s problems were caused, not solved, by government intervention. One of Dr. Friedman’s often repeated quotations is: “If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.”

So perhaps, the market is already working on California’s housing issues. Statistics indicate that more people are now leaving California than are moving in.

On March 22, 2018, the Wall Street Journal reported that “more people moved out of the San Francisco metropolitan area . . . than moved into it from other parts of California or the U.S., according to U.S. census data.”

The Journal continued, “In the year that ended July 1 [2017], the region showed a net loss of nearly 24,000 residents to the rest of the country, roughly double the loss if the previous year and a sharp reversal from net annual gains of about 15,000 as recently as 2013-2014.”

This is in spite of the fact that for two years now San Francisco apartment rents have been falling, a trend that began before the latest wave of luxury residential development, which guarantees to glut the market and reduce prices even further.

It is widely reported that the Bay Area is vastly over-priced and unaffordable. However, just looking at the Multiple Listing Service this week, one can find a well-located, one bedroom condominium for sale in Terra Linda in Marin County selling for $260,000 and single-family starter homes in the East Bay (San Leandro, Hayward, etc.) starting at about $250,000 -- hardly out of reach for the average San Francisco Bay Area couple or family. No, these towns are not comparable to glamorous places like Atherton, Saratoga, or Russian Hill, but that’s how it’s always been in metropolitan areas across the country.

Perhaps the solution to California’s problems is to do nothing at all, letting the current relocations and exodus trends continue unabated.

Once enough people have left California or relocated to different parts of the region and the state, the government won’t have to intervene or try to pass over-reaching laws that risk destroying communities and all the things that make California desirable in the first place.

In an area that is as internationally desirable as the San Francisco Bay Area, home prices will never be cheap compared to other states, but at least residents might be able to find a parking space.


Richard Colman is the founder and president of Biomed Inc., a biotechnology, publishing, and informatics company. He is also publisher and editor of The Icon, a newsletter that serves Contra Costa County, California. He lives in Orinda, California.