California to Take Over Housing Market

California to Take Over Housing Market

Bruce Bialosky
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Posted: Mar 11, 2018 12:01 AM
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The California Legislature passed many bills this past session that were signed into law which gave the government greater control of the housing market. This is a perfect example of invasive government creating a problem, blaming others for the problem and then creating even more rules to destroy the market even further.

The cost of housing in California is certainly a problem. The Business Insider identified that 18 of the top 25 most-costly housing markets in the U.S. are in California, with all of the top 10 being in the state. In a recent study by UC Berkeley, 56% of residents are looking at relocating due to the costs of housing, many moving to another state. Today just 28% of California households can afford a new home versus 56% in 2012 per a study by the California Association of Realtors.

Governor Brown signed 15 bills related to housing that were passed through the Legislature. These included a bill which would put a $4 billion bond initiative on the 2018 ballot. There is also a new fee of up to $225 on the sale of a property that would drive up the cost of housing, but be used to lower the cost of housing. One bill signed by Gov. Brown would revise the Housing Accountability Act and subject local governments to a $10,000 fine per housing unit if they do not meet the new rules and build affordable housing.

State Senate President Pro Tem Kevin De Leon (a candidate for the U.S. Senate) stated he was privately informed by members of the Los Angeles City Council that “We have been strangled, we have been handcuffed by NIMBYism and the threats from Neighborhood Councils.” This started a firestorm of outcry from the 2,000 members of local neighborhood councils who themselves are elected officials. This is all part of the fight over the interests wanting further housing development and others wanting preservation of neighborhoods. De Leon was characterized as bigoted and anti-diversity by some.

Many of the bills countered the mission of lower cost for housing. One bill signed requires that any private housing project that receives any public funding and is under agreement with a government agency pay union wages. The legislature got so detailed they passed another law which required union wages be paid to remove a tree – yes, a tree. Now the people who cannot afford housing in the first place cannot work on many of the projects that would enable them to live in that housing.

I spoke to Roger Davila, an Orange County housing developer, who told me that after 20 years he has gotten out of the low-income market. He said between the requirements placed on low-income housing by California and the local governments, together with the negative attitude of local residents toward the housing, it became impossible to build anything affordable. Davila said the bill to have the prevailing wage on private projects will drive the cost of development out of sight. He stated “They may be well intentioned, but they really don’t understand the effects of their legislation.”

The National Association of Home Builders (NAHB) study showed the regulations add just shy of $85,000 per unit of housing nationally. You can be assured those costs are even higher in California. But none of these bills addressed those costs.The bills just created more invasive government involvement in the housing market.

This is a patented process by the Left to take over an area of the economy. First, they see a problem; then they express outrage at the problem and suggest governmental solutions to the problem. When the governmental solutions fail, they suggest more governmental solutions and then more governmental solutions until they have nearly completely destroyed the free market. When that happens they completely take over that area of the economy and point fingers at the free market and say it is their fault.

Two prime examples of this are in California (and many other states’ legislatures) which loaded up health insurance -- adding minimum requirements like covering pre-natal care and chiropractors -- that the cost of health insurance became unaffordable to most. They then declare a crisis and further interceded in the market by passing Obamacare. Now that market is falling apart because their solutions have driven costs out of sight. The other example was when the federal government took over the housing loan market through Fannie Mae and Freddie Mac. They kept on layering the program with requirements for ridiculous loans. The market collapsed and they pointed fingers at the bankers instead of the laws.

Joel Kotkin, the Presidential Fellow in Urban Futures at Chapman University in Orange, CA, stated in a recent column “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.”

You can believe that these 15 laws will further destroy the free market for housing and do next to nothing to resolve the homeless crisis in California which has to do with the cost of housing and other factors such as mental illness.

In five years, they will be back addressing the newly-branded crisis that these 15 laws did nothing to resolve with 15 new laws further taking over the housing market until there is no affordable housing in California. And then we will become Venezuela.