California Politicians Not Serious About Fixing Housing Crisis

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This article first appeared in The Orange County Register.

California’s political leaders, having ignored and even abetted our housing shortage, now pretend that they will “solve it.” Don’t bet on it.

Their big ideas include a $4 billion housing subsidy bond and the stripping away of local control over zoning, and mandating densification of already developed areas. None of these steps addresses the fundamental causes for California’s housing crisis. Today, barely 29 percent of California households, notes the California Association of Realtors, can afford a median-priced house; in 2012, it was 56 percent.

At the heart of the problem lie “urban containment” policies that impose “urban growth boundaries” to restrict — or even prohibit — new suburban detached housing tracts from being built on greenfield land. Given the strong demand for single-family homes, it is no surprise that prices have soared.

Before these policies were widely adopted, housing prices in California had about the same relationship to incomes as in other parts of the country. Today, prices in places like Los Angeles, the Bay Area and Orange County are two to three times as high, adjusted for incomes, as in less-regulated states. Even in the once affordable Inland Empire, housing prices are nearing double that of most other areas, closing off one of the last remaining alternatives for middle- and working-class families.

How did we get here?

Largely in response to regulatory constraints, the state has been underproducing housing since the 1970s. So far this year, Los Angeles, the nation’s second-largest metropolitan region, has produced fewer homes than much smaller areas like Dallas-Fort Worth, Houston and Atlanta.

The California Environmental Quality Act and other laws and restrictions have helped to make building the number of houses needed by California’s middle-income families unattainable. The state’s more recent draconian climate change policies are also making the building of more affordable homes, usually on the fringe of urban areas, almost impossible.

Some developers and planners blame much of the problem on NIMBYs, or “not in my backyard” activists, who oppose high-density development in their communities. NIMBYism, often aligned with green policies, is part of the problem, but high-density housing is expensive, and there are not enough people looking for “micro-apartments” to solve the affordability crisis.

Indeed, housing in buildings of more than five stories requires rents approximately two-and-a-half times those from the development of garden apartments, notes Gerard Mildner, academic director of the Center for Real Estate at Portland State University. In the San Francisco Bay Area, the cost of townhouse development per square foot can double that of detached houses (excluding land costs), and units in high-rise condominium buildings can cost up to seven-and-a-half times as much.

Policies based on planning fantasies, not reality

The state of California calls for high-density development near transit stops, while requiring a certain percentage of lower-income units. Yet, the experience with this kind of “inclusionary zoning” is not a happy one. Such laws tend to increase the prices for market-rate housing, raising the prices for everyone else, including the more numerous poor who do not win the “affordable housing” lottery….

Read the rest of the article at The Orange County Register.

Photo credit: Great Valley Center, via Flickr under CC 2.0 License.

McIntyre In The Morning Interviews Joel Kotkin on California Transit

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By: KABC 790
On: McIntyre In The Morning

Joel Kotkin interviewed on KABC. Joel discusses California transit policy, Measure M — and whether or not the way we are spending money makes sense.

Click the Play button to listen.

California’s Coming Youth Deficit

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This article first appeared in The Orange County Register

Images of California, particularly the southern coast, are embedded with those associated with youthfulness — surfers, actors, models, glamorous entrepreneurs. Yet, in reality, the state — and the region — are falling well behind in the growth of their youthful population, which carries significant implications for our future economic trajectory and the nature of our society.

Read more

State Governments Are Oppressive, Too

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Historically, the battle over the size and scale of government has been focused largely on “states’ rights.” This federalist notion also has been associated with many shameful things, such as slavery, Jim Crow laws and other abuses of personal freedom.

Yet, increasingly, the clearest threat to democracy and minority rights today comes not just from a surfeit of central power concentrated in Washington, D.C., but also from increased centralization of authority within states, and even regional agencies. Oppressive diktats from state capitals increasingly seek to limit local control over basic issues such as education, zoning, bathroom designations, guns and energy development.

This follows a historical trend over the past century. Ever since the Great Depression, and even before, governmental power has been shifting inexorably from the local governments to regional, state and, of course, federal jurisdictions. In 1910, the federal level accounted for 30.8 percent of all government spending, with state governments comprising 7.7 percent and the local level more than 61 percent. More than 100 years later, not only had the federal share exploded to nearly 60 percent, but, far less recognized, the state share had nearly doubled, while that of local governments has fallen to barely 25 percent, a nearly 60 percent drop. Much of what is done at the local level today is at the behest, and often with funding derived from, the statehouse or Washington.

Diversity vs. regimentation

This trend is particularly notable in the country’s two megastates: California and Texas. Each is increasingly controlled by ideological fanatics who see in their statehouse dominion an ideal chance to impose their agenda on dissenting communities. In California, Jerry Brown’s climate jihad is the rationale for employing “the coercive power of the central state,” in his own words, to gain control over virtually every aspect of planning and development.

In Texas, the impetus comes from the far right, which has been working to strip localities of their traditional ability to control their own affairs, which, as two Houston scholars recently pointed out, has been critical to that state’s success. These efforts cover a host of issues, from fracking and ride-sharing to transgender bathrooms, a topic which affects very few but has, absurdly, become the key issue for a legislative special session.

Just as Californians find themselves increasingly controlled by climate warriors and anti-suburban ideologues, diverse Texans in cities like Austin now must conform to the dictates of strident demands by a “liberty caucus” that eerily resembles their authoritarian doppelgangers in Sacramento.

In other cases, such as in North Carolina, social conservatives, like their Texan bedfellows, seek to circumscribe progressive policies in places like Raleigh or Charlotte. Businesses, in particular, are concerned that some bills, like the state’s transgender bathroom legislation, could lead to painful boycotts by corporations and event planners. Conversely, some blue-state policies, like high mandated minimum wages and policies restricting fossil fuels, hurt disproportionately poorer areas, like upstate New York and rural California, which have lost much of their political clout.

Read the entire piece in the Los Angeles Daily News.

Photo by LoneStarMike (Own work) [CC BY 3.0], via Wikimedia Commons

What’s the Future of Beleaguered Fossil Fuels?

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This article first appeared in The Orange County Register.

Perhaps no economic issue — even trade — is as divisive as the energy industry. Once a standard driver of economic progress, the conventional energy industry has become increasingly vilified by the national media Read more

High-Flying California Charts Its Own Path — Is A Cliff Ahead?

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This piece originally appeared at Forbes.

As its economy bounced back from the Great Recession, California emerged as a progressive role model, with New York Times columnist Paul Krugman arguing that the state’s “success” was proof of the superiority of a high tax, high regulation economy. Some have even embraced the notion that California should secede to form its own more perfect union. Read more

Is California Anti-family?

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This article first appeared in The Orange County Register.

In its race against rapidly aging Europe and East Asia, America’s relatively vibrant nurseries have provided some welcome demographic dynamism. Yet, in recent years, notably since the Great Recession and the weak recovery that followed, America’s birthrate has continued to drop, and is now at a record low. Read more

Can California Survive a Tech Bust?

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This article first appeared in the The Orange County Register.

California’s economic revival has sparked widespread notions, shared by Jerry Brown and observers elsewhere, that its economy — and policy agenda — should be adopted by the rest of the country. And, to be sure, the Golden State has made a strong recovery in the last five years, but this may prove to be far more vulnerable than its boosters imagine. Read more

How to Take Advantage of the Retail Apocalypse

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This article first appeared in The Orange County Register.

Amazon’s stunning acquisition last week of Whole Foods signaled an inflection point in the development of retail, notably the $800 billion supermarket sector. The massive shift of retail to the web is beginning to claw into the last remaining bastions of physical space. In the last year alone, 50,000 positions were lost in the retail sector, and as many as 6 million jobs could be vulnerable nationwide in the long term. Store closings are running at a rate higher than during the Great Recession.

Yet, there’s an opportunity opening for cities and regions to take advantage of new space for churches, colleges, warehouse space and, most importantly, housing. Nationally, an estimated 15 percent of all mall space will need to find new uses within the next decade. As many as 275 malls, according to Credit Suisse, will close in the next five years — roughly a quarter of the total. America already has four to five times as much retail space per capita as countries such as the United Kingdom or Japan.

The Infill Opportunity

The biggest opportunity for Southern California lies in the production of new housing, which would help to make up for providing less than half the needed supply for the past decade. To date, misguided state policy has created a raft of poor outcomes — rising prices, low inventory, declining affordability, the second-lowest homeownership rate in the nation — in effect, chasing middle-class, younger families out of the state.

State policy has made things worse by putting ever more regulatory burdens on housing, particularly for those who build single-family homes on the peripheral areas, where lower-cost residences have historically been built. But the state’s policy of pushing “infill” development has also foundered, as the price of new apartments has shot up, in part due to the limited land for developments.

These policies understandably upset residents of many urban neighborhoods, who feel that developers are seeking carte blanche to make their areas ever more congested and uniform. In contrast, a strategy of focusing on redundant retail properties — think attached townhomes or detached townhouses — would actually produce fewer cars than even a poor-performing mall, and would appeal to such key demographics as first-time homebuyers, immigrants, minorities and downshifting baby boomers.

The Future of Retail: A Physical Community

Despite the grim predictions, physical retail does have a future, and a potentially bright one. In some cases, the more high-end malls, such as The Grove, South Coast Plaza or Fashion Island, will continue to thrive by attracting tourists and high-end customers. Primarily, it’s the low- and mid-range retailers, such as Sears, JCPenney and Macy’s, that are in the deepest trouble, while chains like Nordstrom seem to be able to maintain their businesses.

The real revolution will take place in declining older malls, as well as the ubiquitous strip malls. In these places, there’s already a noticeable trend toward those businesses that are hardest to duplicate online, such as restaurants, gyms, tutoring academies and professional services. Traditionally, these developments are anchored by food stores, an area of brick-and-mortar commerce that has shown more resilience, and part of the reason why Amazon decided to buy Whole Foods.

Savvy developers like LAB Holding’s Shaheen Sadeghi are now focusing largely on artisan-driven retail — which is far less vulnerable to online business — that will also include housing and workspaces in cities across Southern California. LAB is working to revive a small-town, communal feel to once interchangeable and utterly predictable developments. In many cases, such as the Haven City Market in Rancho Cucamonga, the focus is less on traditional retail, with a greater emphasis on food and dining, something that Amazon may not be able to provide.

A Need for a Historic Compromise

California now has a unique opportunity to address its deepening housing crisis by combining some peripheral development with bold infill of retail space. This would replace the current doctrinaire “cramming” approach that clearly has failed to reduce prices or rents, and has made it increasingly difficult to build the single-family product preferred by the vast majority of consumers, including older millennials.

This transformation would be greatly helped if cities were given incentives….

Read the rest of the article at The Orange County Register.

Photo credit: Coolcaesar via Wikimedia under CC 3.0 license

Joel Kotkin on California’s Descent into Socialism

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This piece first appeared at KFIAM640

California prides itself on being the resistance. Resist Trump, fight climate change, be progressive, it’s all a bunch of nonsense. There’s no way the left’s ideas can really work. California has become a dangerous liberal experiment. Read more