California’s Message: You Built That, Now Get Out!

The people who build our homes increasingly can no longer afford them. As the state elite and their academic cheering crew celebrate our progressive boom, even the most skilled, unionized construction workers, notes an upcoming study, cannot afford to live anywhere close to the state’s major job centers.

In fact, notes the study, soon to be published by Chapman University, not a single unionized construction worker can afford a median-priced house in any of the major coastal counties, including Orange, Los Angeles, San Mateo, San Francisco, Santa Clara, San Diego, Alameda, Sonoma and Napa. Even with incomes averaging over $73,000 annually, notes author and economist Dr. John Husing, most can afford median-priced homes only in the further reaches of the Central Valley or the Inland Empire, requiring huge commutes.

This gap between blue collar and professional and entrepreneurial wages is even greater among the majority of construction workers who are not unionized. Husing suggests that most of these workers could only afford the cheapest starter house in the furthest reaches of exurbia and beyond.

California’s growth model

For many progressives and futurists, California’s growth model represents a beacon to a prosperous future. It’s repeatedly pointed out that California is now the world’s fifth-largest economy, largely the product of massive wealth concentrated in the Silicon Valley giants, as well as a much stronger dollar versus the pound and Euro, and sub-par growth throughout Europe.

To be sure, California came out of the recession with a robust recovery, paced by increased property values, a soaring stock market and, critically, huge growth in the Bay Area, which represents roughly 17 percent of the state’s population. Yet overall, California’s post-recession growth, according to the BLS, is now only marginally above the national average, and in many regions, notably Southern California, somewhat below. The contrast is greatest with our strongest rivals: California is now growing jobs at a rate 50 percent or more below the rate of Texas, Arizona and Nevada.

Even in the Bay Area, growth is slowing, particularly in the San Francisco-Oakland area where job growth has plummeted from nearly 5 percent in 2015 to less than 2 percent last year. The bulk of the job growth there now is at the low and high ends, leaving little in the middle. Nearly half of millennials in the Bay Area, according to a recent survey, plan to leave; since 2012 millennial outmigration from Los Angeles, as a new Brookings study reveals, lags only metro New York in exporting its youthful workers.

Future threats to the working class

The California economic model is based largely on income and capital gains accruing to a relatively small part of the population, one reason the state ranks second in inequality to New York, and is becoming ever more unequal. To be sure, the new wealth has driven housing demand, largely for expensive new homes and apartments, but overall construction employment remains considerably below its 2007 levels. Growth in the sector has actually fallen from 2013, and now lags well behind the rate enjoyed in Nevada, Arizona, Florida and Texas.

Other key blue collar sectors such as manufacturing have also under-performed national average. The sector is now growing at one quarter the national rate, a shortfall exacerbated by state climate policies that have increased both energy costs and imposed ever more rigid regulatory burdens that encourage producers to move to other locales.

How sustainable is the “California Model”?

If the rest of the country wants to adopt the “California model,” it should be aware of what this means for the middle and working classes. The likely further acceleration of our state’s tougher climate regulation polices, as well as the prospect of more taxes on things like soda, guns and tires may please our green gentry and the oligarchs, but inevitably will hurt job prospects and raise the cost of living for most California workers.

Pushing our construction workers to the far fringes, particularly as state policy seeks to concentrate employment in expensive core cities, makes it less likely that new workers will enter the labor pool necessary to address our housing shortage. With residential sales dropping across the state, and California’s rate of new housing permits per new resident roughly half the national average, the prospects facing construction workers may be dimmer than necessary.

State measures to encourage the creation of subsidized housing could help some, but in reality would make only a tiny dent in the problem. Increasingly the political class focuses not on expanding the land for development, or bringing jobs to the more affordable interior, but on mandating subsidies, set-asides and rent control. Some, including certain oligarchs, suggest offering regular cash outlays so working people can subsist but never enter the property-owning classes.

Having sought accommodation with the green, anti-suburban regulators, both developers and labor need to recognize that it’s time to challenge a policy agenda harmful to the prospects both of business and most working Californians. Rather than doubling down on policies that reinforce our state’s descent into feudalism, we need to forge a new agenda that encourages instead broad economic growth and greater opportunity.

This article first appeared on The Orange County Register.

Joel Kotkin is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. He authored The Human City: Urbanism for the rest of us, published in 2016 by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He is executive director of NewGeography.com and lives in Orange County, CA.

Homepage photo credit: Rishichhibber via Wikimedia under CC 3.0 license

This Train Won’t Leave the Station

Governor Gavin Newsom has canceled the bulk of the state’s long-proposed high-speed line between Los Angeles and San Francisco, leaving only a tail of the once-grand project—a connection between the Central Valley’s Merced and Bakersfield, not exactly major metropolitan areas. “Let’s be real,” Newsom said in his first State of the State address. “The project, as currently planned, would cost too much and take too long. There’s been too little oversight and not enough transparency.” The project’s cost, originally pegged at $33 billion, ballooned over the last decade to an estimated $77 billion (or maybe as high as $98 billion), with little reason to assume that the cost inflation would end there. Read more

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Virtually everyone, including Gov. Gavin Newsom, is aware of the severity of California’s housing crisis. The bad news is that most proposals floating in Sacramento are likely to do very little to address our housing shortage.

Newsom has promised to have 3.5 million homes built over the next seven years to solve the problem. That is, conservatively stated, more than 2.6 million that would be built at the current rate of construction.
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Gentrification is Failing in Los Angeles

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Yet for all the changes in the city, have things improved for most Angelenos? Sadly, the answer is no. For all the speculative capital pouring into the city from China and elsewhere, the L.A. area suffers the highest levels of crowding, the greatest levels of poverty, the least affordable housing, the lowest homeownership rates and the second-largest concentration of homeless in the nation.

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Emmanuel Newsom?

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Today Macron’s presidency is adrift, paralyzed by grassroots opposition to his policies — mostly from the middle and working classes — and a popularity rating about half of that suffered by Donald Trump. Is this the fate that awaits our new governor, Gavin Newsom?

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Already anointed by The New Yorker as the “head of the resistance,” Gavin Newsom could well think he’s also king of California politics. He can both sell himself as the model of progressive virtue and also lord of the world’s fifth-largest economy, home to three of the world’s most powerful and influential companies.

California, along with New York, epitomizes what the French Marxist economist Thomas Piketty has aptly called “the Brahmin left,” which trades in digits, images and financial transactions. The other side, “the merchant right,” trades in more tangible goods such as cars, steel, oil, gas and food.

Yet here’s the rub: The vast majority of Californians are not entitled Googlers from Stanford who can spend their time obsessing about the climate or the meaning of their sexuality. The Brahmin model has worked well for the top earners, and their offspring, but most Californians were left out of the boom.

The Other Guys are gaining on us

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The Golden State Won’t Glitter for Republicans

California’s Republican Party was once a force to be feared, not only in the state, but across the country. Nowadays, it’s at most a mild irritant and sometimes a convenient whipping boy for the Democratic progressives, who run the state almost entirely. Nothing is working much for the GOP this year. The Republican gubernatorial candidate, John Cox, has little charisma, no discernible local roots, and no compelling message. He sneaked into the runoff election because too many Democrats vied for the job. He’ll be thrashed by Lieutenant Governor Gavin Newsom, likely by a wide margin. As governor, Newsom will probably preside over a legislative super-majority that will marginalize the Republicans even further.

Read the entire piece at City Journal.

Joel Kotkin is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, was published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He is executive director of NewGeography.com and lives in Orange County, CA.

Homepage photo credit: Tommy Lee Kreger (John Cox-6), under CC-BY-SA-2.0 license, via Wikimedia Commons.

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