Advising leadership and management

Solving the Housing Crisis in California

Developers should sue the state of California for tortious interference in accordance with the natural economic law of supply and demand.  Instead we have the state suing Huntington Beach for not accommodating low income high-density housing. Could the lack of housing in the state come from driving the middle class out of the state? 

In 2018, California lost 156,000 residents to other states including Arizona, Texas, Utah, North Carolina, Tennessee and Washington. An overwhelming majority of these folks found middle class jobs, discovered reasonable rents, and bought affordable homes elsewhere.

Consider all the legislation and propositions in California that cause the state’s residents and businesses to be among the highest taxed and regulated in the nation.  Top business corporations do not include California in its list of places to open new facilities or relocate headquarters.

New Governor Gavin Newsom has pledged to build over three and a half million homes in the next seven years. How will he do this?  Simply sue the cities that do not bend to his will; beginning with Huntington Beach.

In 1967 California created the Regional Housing Need Assessment (RHNA). These dictated cities are required by law to create a housing plan every eight years.  The assessment included accommodating a “fair share” of regional housing needs. Anytime I hear the term, “fair share” a chill runs down my back. The state further mandates providing housing for low income, high-density, lower cost housing in the plan.  Each city must become a “regional” mirror of each other, with no concern for traditional or local desire.

Fewer than half of the one and a half million homes, promised by the RHNA allocation have been built from 1967 to 2013. A major factor is there is no accountability for the housing numbers on the part of cities and counties.

Now then comes AB72 taking effect January 1, 2018.  This is the “stick” to the Progressive housing “carrot” allowing the state to reject city or county housing plans and refer them to the state attorney general.

Is the Governor’s new tactic the right answer to solving the housing crisis?  Absolutely not. Again, the tactic of Progressives is finding ways to punish for lack of compliance. You can sue cities, or you can withhold money due to cities, such as gas tax funding, if they do not bend to the will of Sacramento. This is apparently fine with the Governor, but when the federal government offers the same solution when dealing with Sanctuary Cities/State that becomes an entirely different issue.

California’s legislature needs to look inward to discover the best way to solve this housing problem. The natural economic law of supply and demand could easily see a doubling of the number of new housing units build in the state each year and go a long way to stabilizing the housing market. Anyone who has either rented, purchased, or sold a home comprehends this law directly.

Governor Newsom himself has admitted that housing affordability has led to the state’s poverty rate which is the highest in the nation.  Burdening millions of Californians with high mortgage and rent rates has created a more than $100billion annual deficit to the state’s economy by simply lowering personal disposable income and crippled building construction.  Californians spend more on housing that any other state in the union leaving little to spend on other necessities.  How could this not be true when your mean cost of purchasing a home is $625,000.

Consider the cost of building a home must include the cost of land, labor, materials, financing for the developer, cost of state, county and local permits and fees, as well as how interest rates affect the ability of the consumer to purchase.  Now add to this, cities that restrict population, or cap housing growth and even establish height restrictions.  A UCLA study offers that for each of these government intrusions on production would add 5% to the cost of the finished project.

It is time to rearrange the political rules and regulations chairs on the ship USS California.  Removing stifling regulatory barriers to business development and usury taxation must begin immediately.  Priority to stop the out migration of the state’s middle class with attractive jobs and wealth creating opportunities for all.  A rising tide lifts all ships.  Bringing back our middle class will lend itself to a rising tide in California; bringing the USS California off the rocks.

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