Does California really have a housing crisis?
For the 30 years I’ve been a journalist at the Orange County Register, it feels like we Californians have hopped from crisis to crisis to crisis.
I’m beginning to think with have a crisis of crises.
We apparently just got over our water crisis, aka “the drought.” That followed the budget crisis with the ongoing prison and pension crises, after the foreclosure crisis which preceded old housing crises and the state’s hand in the savings and loan crisis, not to mention the energy crisis.
And I’m sorry if I failed to mention a crisis that touched you even more personally.
Let me say when there’s pretty universal agreement in California that we have a “crisis” — from both sides of the political aisle, no less — I get concerned. Both in logically finding the purported causes of the “crisis” to ignoring any unintended consequences of any alleged cure of said “crisis.”
So, let a guy who’s written more than a few stories about real estate — yes, probably too many — anger just about everyone by asking the almost unthinkable: “Do we really have a housing crisis?”
Yes, I look at the stats. Yes, I’ve read the studies. Yes, it’s pretty obvious that lots of housing in California is very expensive. Yes, there’s limited choices for house hunters and tenants seeking rentals. And I do very much feel for the numerous households who are impacted by the fallout of the shortfall of decent-priced housing.
But some recent research I’ve done on migration trends prompts me to ask the question — if a basic need like housing is supposedly in such terrible shape, why aren’t Californians fleeing to places with less costly and congested living?
My trusty spreadsheet tells me migration stats from both the U.S. Census Bureau and the IRS show California is arguably the best state in the nation at retaining its citizens on a relative basis. California’s often-quoted “net” loss of residents to other states is a tiny sliver of the population and is primarily due to the state’s horrible inability of attracting people here.
Equally confusing is a hunch that California’s housing “challenge” — and part of it may very well be a high price for paradise — may simply be the result of too much of a good thing. California’s housing has been expensive for a long time. The rare times it’s been cheap — amid broad economic slowdowns — few folks would (or could financially) grab their slice of the real estate pie.
You know, it wasn’t too long ago this state was flooded with foreclosures nobody wanted and vacant apartments. Part of today’s housing shortfall can be attributed to the economic rebound, which has created a slew of new jobs that have far outpaced developers’ willingness — some would argue ability — to aggressively jump into the construction game.
“Crisis” or mere “challenge,” there’s plenty of blame to go around for whatever ails housing!
Policymakers: Legislators, municipal leaders and regulators at all levels of government must be bolder in rethinking how housing is developed. Such bravado might even mean doing things that cost a politician at the ballot box. That said, pillaging many of California’s charms for the sake of adding development of any stripe could make the state less desirable to most residents — no less, folks thinking about moving here.
Builders: You cannot honestly brag to Wall Street about how profitable homebuilding is in California then complain at City Hall that it’s hard to build here. Everybody has made it far too easy for builders to “compromise” and simply build more profitable upscale housing — often best-suited for new California residents, from elsewhere in the U.S. or other nations. Developers, why not fight the good fight and build more homes and apartments for the masses?
Landlords: Please, enough with the supply vs. demand arguments to justify huge rent hikes! (Any parent knows to ignore the “everyone does it” arguments.) Many of you simply overpaid for those investment properties. Should tenants pay for your mistakes? And while you’ll fight hard against rent controls, do landlord lobbies fight equally hard to construct a massive new supply of rentals? But if you want statewide rent control, and I agree it’s not a good solution, don’t change a thing.
NIMBYs: Do you think your home magically was plopped on its foundation without impacting the community? Not-in-my-backyard often sounds at best, short-sighted, or at worst hypocritical. I’m bemused by how many folks support new stores in their neighborhoods — as do cash-starved municipalities who collect sales tax — but protest new housing. Guess which one creates more traffic, this cycle’s hot-button beef? Of course, NIMBYs are typically against new roads, too. Well, unless that byway is in ANOTHER city!
YIMBYs: Just heard this phrase! The yes-in-my-backyard crowd, apparently a largely millennial movement, wants more cheap housing. Who can argue that? But these proponents seem to simply dismiss slow-growth chatter. Not every NIMBY fear is irrational. As California morphs from a state of nomads into one of families growing personal roots here, it’s going to be harder to seek any major change. And I have little sympathies for younger house hunters who frequently say they don’t want to buy “starter” condos.
Advocates: As in any policy debate, all sides are backed by professionals to wage the front-line battles. Remember, this group — from political and legal types to trade associations to community groups to environmentalists to so-called experts — get paid to keep their side’s arguments in the public mindshare. Not be to too jaded, but if the “crisis” was solved … would these advocates need new jobs? Be warned: Hyperbole is an important tool in this craft and “crisis” is great battlefield verbiage.
Yes, whether it’s a housing “crisis” or “challenge” seems like a game of semantics. But it’s not. To me, one deserves careful consideration. The other, emergency action.
And looking back over the years, just think of the ebbs and flow of public sentiment that drives public policy both before and after various California crises.
Water challenge: Conservation efforts drove consumption down so low in certain places it led to rates hikes to keep water agencies solvent. Water-inducements — like landscaping rebates — were often used more for business refurbishments than household help. And was anybody prepared for the drought to end with a record-setting wet winter?
Prison challenge: Tough sentencing laws were seen as a good deterrent to crime. But two decades ago that filled state prisons to nearly twice their capacity because funds were not spent on sufficiently boosting incarceration capacity. Judges then found the crowded state prisons violated prisoner rights, which led to early releases. Seemingly, we’re back to square one.
Energy challenge: In an attempt to lower electricity prices, utilities were stripped of market control around the turn of the century. Unfortunately, the deregulated market was gamed by crooks from Enron that led to power shortages, some of which were manufactured for profit. The initial fix, quick approval and construction of new power plants, plus popularity of green power created a near glut of power statewide today.
S&L challenge: A national problem that was made far worse in the 1980s by states like California which allowed the housing-friendly savings and loans it regulated to stupidly play with federally insured deposits. Cheap and aggressive real estate lending led to massive overbuilding of commercial and residential properties — an oversupply that eventually sunk the S&L industry and hurt the state’s property market for much of the 1990s. To add insult to history, a similar story line was pioneered in California last decade: Crazy “subprime” lending to promote homeownership led to a global housing bubble that burst, creating great financial injury in California.
Be warned. Fixes have consequences, too. Yes, housing costs are an excessive burden for many Californians. But the whispered solution preached by some of the crisis promoters — create enough supply to depress prices of property and rents — will have its own financial pain if it comes to be.
California has suffered a real estate debacle — all with broad economic fallout — in each of the past three decades. Can we avoid another one?
Because no easy cure or quick fix exists to the housing challenge. Any change will beget winners and losers. We need solutions that benefit current Californians as well as allow the state’s economy to flourish. So, adults are needed at the bargaining table.
And my latest migration findings make me wonder: If it is so expensive to live here, why does California’s per-capita rate of departures top almost every other state? Am I being sold another “crisis?”