Walters: Housing Crisis — Fits and Starts

The latest developments in California’s housing crisis are, as usual, mixed.
In September, according to the Legislature’s budget analyst, permits for 10,580 new housing units were issued, a 13% increase from August and a 40% boost from September 2018.

However, overall housing starts are still running below 2018’s level, meaning the net gain for the year, including housing that’s burned or been demolished, will likely be well below 100,000 units, or about half of what the state says we need to build each year.
There was better news in an announcement from Apple, Inc., that it is committing $2.5 billion to housing construction and mortgage assistance in the San Francisco Bay Area. That would more than double the two $1 billion housing investments previously announced by Silicon Valley behemoths Alphabet, parent company of Google, and Facebook.
It calls to mind the observation attributed to the late Sen. Everett Dirksen: “A billion here, a billion there, pretty soon you’re talking real money.”
Yes, $4.5 billion is real money in anyone’s language, as is the $6 billion state housing bond that voters approved last year.

All of the Hurdles Are Becoming Higher

But as large as these amounts appear, they pale when placed in context.
Housing production in California is running at least 80,000 units a year below what the state says is necessary to keep up with population growth and make a dent in a very large backlog that has sent housing costs skyrocketing.
The state also calculates that building one unit of so-called “affordable” housing — available to low- and moderate-income families — costs about $350,000 statewide, and twice that much in the Bay Area.
So even using the average cost, increasing production by 80,000 units a year would require another $30 billion investment every year, not just the one-time injections from state bonds or high-tech employers.
Moreover, even if developers (and their bankers) are willing to put that kind of money into housing, they must clear several other hurdles, such as having land zoned, specific projects approved and, finally, recruiting enough carpenters, plumbers, electricians and other workers to build.
All of those hurdles are becoming higher, particularly those controlled by local governments whose constituents tend to oppose anything that will bring more traffic congestion and other downside factors to their neighborhoods.

Newsom Set a Goal of Building 3.5 Million New Housing Units by 2025

The not-in-my-backyard sentiment is powerful. It explains, for instance, why cities successfully opposed legislation, Senate Bill 50, that would have overridden their much-cherished control over land use issues for some kinds of housing.

Gov. Gavin Newsom had called on the high-tech community to help solve the housing crisis its explosive prosperity helped create and, therefore, was quoted in Apple’s announcement as praising the company’s commitment.
“The sky-high cost of housing — both for homeowners and renters — is the defining quality-of-life concern for millions of families across this state, one that can only be fixed by building more housing,” Newsom said in the announcement.
True enough, and the high-tech industry’s commitment will help, but only a tiny bit at the margins — and assuming it can overcome other impediments to construction. SB 50 would have been a serious step toward ramping up construction, albeit only one of many needed, but Newsom was noticeably quiet when the state Senate killed the bill without even a vote, and he signed a rent control bill that sends the wrong signal to housing developers.
During his campaign for governor, Newsom set a goal of building 3.5 million new housing units by 2025, or 500,000 a year. Housing production is a fraction of that level and is, if anything, declining.
CalMatters is a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters. For more stories by Dan Walters, go to calmatters.org/commentary