California Housing: If You Build It, They Will Stay

By Kevin D. Williamson

Thursday, April 01, 2021

 

John Cox is running for governor of a big western state with a long and proud history of electing conservative Republicans. But Cox’s adopted home state isn’t George W. Bush country — it’s Nixon and Reagan country, sunny California, and so the top item on his agenda isn’t transgender bathrooms. It’s housing — followed by housing, housing, and housing. 

 

Cox, a real-estate developer who made his fortune in the Midwest until he was wealthy enough to live comfortably in Southern California, isn’t a single-issue candidate, but it might be better for him if he were. In fact, it might be better for California Republicans if they were, for the next few years, something pretty close to a single-issue party. 

 

Housing is one of the few issues that will grab and hold the attention of a large cross section of Californians, and one that naturally pulls them in a conservative direction. Get a couple of rich techy progressives from San Francisco talking about housing prices after a glass of Screaming Eagle and they start to sound like Milton Friedman: “Obviously, if you artificially limit supply while demand is strong, prices are going to soar!” Even those Birkenstock-sporting hippies up in Berkeley have started to figure things out and are talking seriously about liberalizing their zoning laws in order to permit new housing, hopefully more affordable, to be built. 

 

Everybody understands the demand side of the equation: California is beautiful, it has great weather, and it has a lot of great jobs for highly skilled professionals. The housing problem in California is a supply-side issue: It is difficult to build housing, and it is nearly impossible to build affordable housing. That’s only partly a function of land prices that inevitably are high around such places as Silicon Valley, where a lot of people with a lot of money want to live. Land prices are only a relatively small part of the price of housing, which is very high in California even outside of the most superheated markets. How high? Too damned high. The median price of a single-family home in Texas is about 3.5 times the median household income; California has a higher median household income than does Texas, but its median single-family home costs almost ten times that bigger figure. So the median Californian family is richer on paper but poorer when paying the mortgage or the rent. 

 

Practically speaking, the median Californian family cannot even come close to affording the median house in California. And that’s a problem — a problem that Republicans should be using to repopulate their decimated party in the Golden State. 

 

John Cox has run for . . . a lot of offices. Given the sheer variety of elections he has run in — one for an Illinois congressional seat in 2000, the Republican primary for a U.S. Senate seat from Illinois in 2002, a low-level municipal race in Chicago after that, president of the United States of America in 2008, governor of California in 2018 — it’s kind of amazing that he’s never won one, or even come close. In fact, his campaign against Gavin Newsom (D., French Laundry) in the 2018 California gubernatorial race was one of his better showings, hitting 25 percent in the state’s multiparty primary and almost 40 percent in the general — not too shabby for a guy who hadn’t cleared 30 percent running for Cook County recorder of deeds in 2004. He likes his chances against Governor Newsom, who is, after all, a contemptible grifter and high-living hypocrite who currently is fighting off a recall effort. Who knows — maybe Cox will turn out to have one of those 20-year-overnight-success stories. 

 

Whatever happens with California’s flighty voters, Cox is right — and generally sensible — about the big issue. And being right about one big thing is enough for a politician. “When I’m elected” — when, he says — “housing is the first issue I’ll address. I’ll call a special session of the legislature to introduce the necessary reforms.” 

 

California’s housing problems are very Californian. Tight zoning and land-use regulations are part of the mix, but the big problem is that it is so expensive to build where you can build. That is driven in part by the California Environmental Quality Act (CEQA), a veritable litigation factory that gives activists a general license to sue on environmental grounds almost anybody building almost anything anywhere in the state. These lawsuits are irresistible to a certain kind of radical ideologue, but they also give wealthy homeowners who want to fortify their asset prices by preventing the construction of new projects a useful way to greenwash their crass self-interest. According to a study of CEQA-litigation abuse put together by the law firm of Holland and Knight, one in five actions brought under CEQA targets residential developments. 

 

And CEQA is just one aspect of a cumbrous and byzantine network of regulatory impediments to building new housing in California. Beyond the state-level regulations, most California municipalities subject housing developments to heavy-handed oversight. A team of UCLA researchers found that every city they studied requires design-driven “discretionary review” of “almost all housing projects in their jurisdiction, even those that comply with the local zoning code,” as California journalist Melanie Curry reports. “That is a local option, not something that the state or CEQA requires. The pace of development seems to be driven by that discretionary review. . . . In other words, cities are using aesthetics to slow down housing production.”

 

California is not going to gut its state environmental laws. But Cox thinks that voters might be persuaded to back reforms limiting the extent to which CEQA is applied to residential developments and streamlining the process, or maybe even exempting housing altogether. 

 

“A lot of politicians talk about zoning or subsidies,” he says, “but we are never going to have affordable housing in California until we bring down the cost of building housing. That’s essential. And the cost structure is so high because of mandates, lawsuits, environmental reports, impact fees, and the multiple levels of approvals you need. What you end up with is a cost that is multiples of what it is in other states.” Cox puts the numbers into perspective: “In Indiana, I can build apartments for $100,000 to $125,000 per apartment. Here, the same apartment will cost $300,000 to build in the Inland Empire and $700,000 in San Francisco.” He doesn’t expect Californian housing prices to be midwestern housing prices but argues that they could be dramatically lower if sensible reforms were enacted. “The land is obviously going to be more expensive in California than in other places. But the difference in the price of housing is primarily the regulatory process and all the government-imposed cost.” 

 

California lost a net 70,000 residents in 2019. But that figure doesn’t really tell the whole story: California has been losing native-born population since the 1990s, with its population numbers sustained largely by international immigration: Almost 30 percent of Californians are immigrants, while only 16 percent of Californians are transplants from other states. That makes sense: California is shockingly expensive compared with Florida, but it is pretty reasonable compared with London or Singapore. California has been losing population to other states — predictably, to those immediately adjacent to it as residents in the inland and northern parts of the state hop the line to Nevada or Oregon. The other big destinations for Californians are Colorado (similar culture, outdoor beauty, sensible tax regime under the 1992 Taxpayer Bill of Rights) and the anti-California, Texas, which is today home to three-quarters of a million people who have fled California. 

 

California is home to a great many billionaires who like to lecture the proles about “social justice,” but one of the reasons the state’s median income continues to rise is that people of modest means are simply being driven into economic exile: Those leaving California are typically young and working-class, mostly households headed by workers under 35 years of age and earning less than $50,000.

 

California is politically dominated by progressives who lead a coalition of those who are too rich to worry about high housing prices and those who are too poor to worry about high taxes. But, of course, those things go together: The high price of housing makes everything in California more expensive, from food to clothing to — inevitably — state and local government. The median teacher salary in California is more than $82,000 a year, about $20,000 more than the national average. California police and sheriff’s deputies earn — on average — well into the six figures. Some of that is driven by the union-managed politics of the state, and some of it is housing prices driving wages. But all of it lands on taxpayers, rich and poor alike, in the form of property taxes and state income taxes. 

 

Pare regulation, get the trial lawyers out of everybody’s pockets, let markets work, and then maybe even reform some taxes — if Republicans can’t make the case for housing reform in California, they should go the way of the Whigs.