
California’s Housing Crisis Reaches a ‘Breaking Point’ - jseliger
https://www.nytimes.com/2017/07/17/us/california-housing-crisis.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news&_r=0
======
thebokehwokeh2
Easy solution... triple the real estate tax on all second homes all over the
world.

There is no sensible logic in why real estate is treated like the stock
market.

~~~
avasylev
I like idea of taxing higher unoccupied homes. If someone wants to make
investment, great make investment and either pay high taxes (support folks who
do live there) or have to rent it.

~~~
blobbers
Vancouver did this.

~~~
r00fus
Sort of - they just apply a tax on unoccupied homes. As long as it's rented,
the owner does not pay the tax.

------
rajeshp1986
I don't understand why cities around SF are not building high rise buildings.
If there is no space to expand, you should build high rise building which can
accommodate more people. I understand there are zoning laws which prevent from
building taller buildings, but if you see the landscape in south-bay they are
all single story houses. The land could be utilized in a better way and build
bigger housing complexes with multi-story buildings. I don't understand why
city administrations are not taking this step and rather pushing the rent &
house prices which is forcing people to spend 50% of their salary on housing.

~~~
PeterisP
Zoning laws aren't handed out by God on stone tablets. If current zoning laws
prohibit the apartment buildings the cities need, the cities can and _should_
change the zoning laws.

~~~
AnimalMuppet
Cities don't need things. People need things. The relevant question is, Which
people are the city?

Is it the business people who own businesses there? Yes.

Is it the people who live there? Yes, them too.

Is it the people who don't live there, but want to move there? No, it's not.
That's the problem.

------
ProfessorLayton
I've said it before in other threads, but I highly recommend The Color of Law
by Richard Rothstein for anyone interested in this topic.

Much of today's housing crisis is a direct result of blatantly racist policies
that were implemented to keep out PoC out of white neighborhoods.

Ordinances like minimum lot sizes, heigh restrictions etc. are the very same
tools used by NIMBYs to keep new developments out of their neighborhoods, and
choking the US economy.

~~~
JKCalhoun
Then the jobs should simply move away from the NIMBYs.

~~~
nxsynonym
Except the jobs worth moving for are built by, and favor, NIMBYs. The jobs
won't leave city centers because they attract employees by exploiting the
culture of the city they're based in, which is built on the backs of
"undesirables".

Why are none of the 'big 4' based out of middle-of-nowhere-America? Because
nobody want's to live in a place where the idea of culture is TGI Friday's and
an old navy outlet.

~~~
ransom1538
True but a bit chicken and egg. If you brought a large company to a nowhere
place - the hipster yoga, expensive wine bars, and snooty farm to table places
move in eventually.

------
vinhboy
We need a mindset change. Jobs that can be done remotely, should be done
remotely. Making people commute to office buildings to fill cubicles is crazy.

They should be able to live where they want and not waste 2 hours a day
burning fossil fuel.

~~~
bkohlmann
It seems though that most people want to live where rents are already the
highest (which is why rents are high!). The nurse quoted in the article who
drives 2 hours to reach SF wants to work closer to her hospital in the city.
That job in particular is hard to do remotely.

From a practical standpoint, it seems like a large percentage of people in the
Bay Area would prefer to live in the City or very near it. Yet, this is a
physical impossibility. The ways to allocate scarce resources comes down to
two methods: let the market decide or let government decide. Either way, folks
will be left out.

~~~
ouid
if the market were to decide, there would be more, denser housing.

~~~
bkohlmann
If there were no zoning regulations, you are absolutely right...and this
would've resolved itself long ago. But there are strong zoning and property
rights at play. I'm very libertarian, and was priced out of the Bay Area
(recently left grad school for Texas), but I'm actually sympathetic to the
homeowners there who are using democratic means (i.e. their elected city reps)
to support their interests. Society (in the form of the state government)
could upend the property rights they are leveraging...but that would have
significant incentive repercussions down the line. It would greatly weaken
property rights...which is a foundation of Western society. There are far
deeper, and interesting, issues aside from mere housing stock.

~~~
xxpor
Zoning is the exact opposite of property rights. It restricts what you're
allowed to do.

~~~
AnimalMuppet
It's both/and, not either/or. It gives me the right to not have to live next
to an oil refinery, at the price of prohibiting my next-door-neighbors from
putting an oil refinery on their place.

------
thesmallestcat
> Heather Lile, a nurse who makes $180,000 a year, commutes two hours from her
> home in Manteca to the San Francisco hospital where she works, 80 miles
> away. “I make really good money and it’s frustrating to me that I can’t
> afford to live close to my job,” said Ms. Lile.

OK, that's a load of crap. I don't know what you're doing with your money, but
you can definitely live in SF on $180k. And if you can't, well, name your
destination that's within two hours, it'll be cheaper than most of SF. I'm
guessing she needed/found _the perfect home_.

~~~
blizkreeg
It's not a load of crap. I think what she meant was she can't afford to _buy_
close to SF. The closest you can buy a decent home (not apartment) close to SF
in that pay (~800Kish home) is Walnut Creek or thereabouts, which is about
45mins away by Bart.

~~~
blobbers
With a salary of $180K you can definitely afford to buy near SF. Banks will
sign off on an $900,000 mortgage no problem on that salary. You have to put
maybe $100-200K down payment for your million dollar 2BR.

Guess what? You need to save for a few years to get that, which is easy when
you're making $15K pre tax a month and living in Manteca.

~~~
iaw
Have you purchased housing in any of the more desirable areas of California
recently? If you have, please tell me where this fantasy of your played out
and I will buy there.

What happens to someone with a $100K-200K down payment and a bank willing to
cover another $900K on top of that is that they put in a $1.1M offer with the
required bank contingencies and then someone puts in a $1.1M offer with _no
contingencies_ and the cash offer wins.

Having a bank willing to lend you money has not been sufficient to purchase a
home in most areas since the housing collapse because there's so much
speculation in cash.

~~~
echaozh
I guess most of you have never purchased housing in any of the major cities in
China.

$180,000 is over RMB 1mm, which is way above what an average Chinese white
collar can earn in a year. And an apartment can cost much more than $500,000,
with a 30%~60% down payment.

People do afford the apartments, with life's saving from parents. I am not
saying it's a good thing, but it is possible that people afford housing even
with a ridiculous price.

~~~
yladiz
The way housing and society works is significantly different in the USA and
China. It's not really fair to compare the two. I don't know anyone in USA
that has used their parent's life savings to purchase a house, because that
kind of way of doing things isn't nearly as common there compared to China.

------
mars4rp
a war between home owners and renters! as a person that recently bought a
house I don't want my house price to go down too much, I put everything I have
in it. but I really know this is the problem for renters and it needs to be
solved. when a group uses government for personal gain, other groups has to
pay the price! it is called democracy, 49% has to pay for 51% !

~~~
rpearl
the home-as-an-investment-for-profit mentality leads to some really poor
social interactions. I wish we had different social norms around housing.

For instance, after a 1980s crash, Tokyo's housing norms shifted and the
result seems really healthy:
[https://www.ft.com/content/023562e2-54a6-11e6-befd-2fc0c26b3...](https://www.ft.com/content/023562e2-54a6-11e6-befd-2fc0c26b3c60?mhq5j=e3)

~~~
dredmorbius
It does indeeed. I need to crack the paywall on that FT item, but I've had my
own recent epiphany on asset price inflation of maslovian goods (and housing
in particular).

I'm thinking a lot about land tax.

[https://www.reddit.com/r/dredmorbius/comments/608w97/asset_p...](https://www.reddit.com/r/dredmorbius/comments/608w97/asset_price_inflation_of_maslovian_and_productive/)

~~~
ac29
> I need to crack the paywall on that FT item

[https://archive.fo/Pf2Uu](https://archive.fo/Pf2Uu)

Interesting article. I wonder if any Japanese (or someone familiar enough with
the culture) could comment.

~~~
dredmorbius
Thanks, yeah, I got through -- googling the link gets through as well.

------
joe_the_user
I just want to point out that the "Cost of a Hot Economy" headline is baloney
- or rather it's part of the story but the least important part of the story,
used as a cover for the more important processes at work.

Whatever the unemployment rate, the present level of "economic growth" is very
much a product of a lot of money being pumped into the "real economy" and
large portion of this money leaking out into investments like houses that are
perceived as more solid and reliable than companies engaged in production [1].

The old effect of printing was a consumption-goods price spiral but the new,
more hidden effect is capital-good price spiral (housing bubbles etc). But, of
course, if wages aren't increasing and costs of living are, a little bit of
increase goes a long to making people's lives unlivable.

And it's worth noting that rent-increases are happening in a wide variety of
town in the US. Everywhere they're attributed to local factors and that
further muddies the wasters concerning the root cause.

[1][https://en.wikipedia.org/wiki/Quantitative_easing](https://en.wikipedia.org/wiki/Quantitative_easing)

~~~
ac29
You'd be hard pressed to see where quantitative easing began and ended looking
at this graph of home prices in California, San Francisco, and Santa Clara
County [0] (from a longer report here[1]).

From your linked article, QE in the US lasted approximately 2008-2014, with
some of the steepest decrease in home prices occurring during that period, and
steepest increases occurring after it ended.

I'm not entirely sure there is compelling evidence QE contributed to housing
price increases in California or the Bay Area, but I'd be interested if anyone
had data to the contrary.

[0] [http://www.lao.ca.gov/reports/2015/3305/Bay-Area-Home-
Prices...](http://www.lao.ca.gov/reports/2015/3305/Bay-Area-Home-Prices-
Outpaced-the-State.png)

[1]
[http://www.lao.ca.gov/Publications/Report/3305](http://www.lao.ca.gov/Publications/Report/3305)

~~~
joe_the_user
Sigh...

The processes involved here are much larger scale than the particulars of the
California housing market (indeed, if you read my original you'll I already
mentioned that California is just one blip in world-wide trend). California
just happens to be a place which attracts money when money is being
"manufacturer". Whether one has quantitative easing in particular or too-big-
to-fail banks issuing bonds or simple bubble-dynamics, you have a process
where money flows from productive assets to stores of value.

If someone wished to learn something about the current financial climate, I
would refer that someone to Doug Noland's Credit Bubble Bulletin.

[http://creditbubblebulletin.blogspot.com/p/credit-bubble-
bul...](http://creditbubblebulletin.blogspot.com/p/credit-bubble-
bulletin.html)

------
brudgers
Housing prices reflect decades of public policy decisions. For example, HOPE
VI took hundreds of units out of San Francisco [2] and about half a million
units of public housing out of circulation across the US. [1] Even if there
was a strong shift in public policy, the housing market in California would
take decades to express the effects in a way that would be noticeable to most
people...and that's assuming that the affordable housing policies don't simply
enable more construction that quickly moves upmarket.

[1]:
[http://www.bbc.com/news/magazine-35913577](http://www.bbc.com/news/magazine-35913577)

[2]: _According to James Tracy, training institute coordinator at San
Francisco 's Community Housing Partnership, only by organizing did North Beach
residents win a guarantee from the San Francisco Housing Authority and Bridge
Housing that all of the units would be replaced. In fact, North Beach Place
actually added units, from 229 units in the original project to 341 units
today. (At Plaza East in the Western Addition, 276 high-rise units were
replaced by 193 townhouses and flats; Hayes Valley saw 294 units demolished
and 193 rebuilt; Bernal Dwellings replaced 208 units with 160.) "The success
of Hope VI depends on your standard," Tracy said. "For the housing authority
and developer, once a new building is up, that defines success. But from a
standpoint of community preservation, losing units in the San Francisco
housing market is not a successful project."_
[http://www.spur.org/publications/urbanist-
article/2005-03-01...](http://www.spur.org/publications/urbanist-
article/2005-03-01/hope-vi-san-francisco)

------
Mz
One of the problems is that the average size of a new single family home has
been increasing for decades:

[http://eyeonhousing.org/2014/01/average-size-of-new-
single-f...](http://eyeonhousing.org/2014/01/average-size-of-new-single-
family-homes-continues-to-rise/)

 _According to data from the Census the Quarterly Starts and Completions by
Purpose and Design survey, the average and median size of single-family homes
that began construction rose during 2013. For the third quarter alone, the
average single-family square footage increased from 2,646 to 2,701, while the
median rose from 2,446 to 2,491._

In the 1950s, average size of a new home was less than half that, at around
1200 sq ft. It also held, on average, more people.

I strongly suspect this is partly driven by tax incentives that are aimed at
upper class families and help create or fuel a growing divide between the Have
and Have Nots.

~~~
pfranz
I don't know if that's the case for the large cities in California. As far as
I've seen in Los Angeles, it's not new construction. If it is, it's major
renovations to old buildings (tearing down a 80yo bungalow that had been
extended to 1br and building a modern 2br) and they're limited by the lot
size.

In LA there's new luxury condos being built, but I've been in half a dozen
apartments in the 12 years I've lived here and the newest was built in the
80's. You can definitely see the living space increases since the 20's, but it
hasn't ballooned to the size of new construction in most of the rest of the
country.

Looking at my peers in houses, it's fairly similar. They all moved far out of
the city, but none of it is new construction.

~~~
Mz
Funny, I have lived in several California cities over the years. I am
routinely appalled at the not terribly old, ginormous houses that I walk past.
This has been true every place I have lived.

I am currently at the research stage for trying to buy a house. My magic 8
ball increasingly suggests "not in California -- please move elsewhere, since
you have portable income."

~~~
pfranz
If that's the case, I'm pretty sure the rest of the country is the same. My
experience is in LA and the little bit I've seen in SF. Both of those places
are terrible unless you're quite rich.

I am envious of people with a bedroom for each kid and a back yard, but I have
heard anecdotes of people who move from a place perceived as high tax, like
California, to a place perceived as low tax, like Texas, and their tax
liability went up (because property taxes are much higher even though income
taxes are lower).

------
technojunkie
Related:
[https://news.ycombinator.com/item?id=14728194](https://news.ycombinator.com/item?id=14728194)

There's no simple solution to this crisis and I'd bet we'll see several more
states go through this sooner than later.

------
sliken
Seems silly to allow cities to allow development to add jobs but not housing.
It's terrible for the environment, the state, traffic, pollution, etc. Doubly
insane is that seems like it's standard procedure to mandate parking space per
square foot of commercial space, but not a place for the workers housed within
to live. What's more important, a parking space or a bed?

------
MK_Dev
How about taxing 2nd, 3rd, Nth properties, unoccupied properties and foreign
investors? Right, the "T"-word...

------
cjensen
Housing and Jobs need to be in balance. If there is "not enough housing" what
you are really saying is "cities permitted more business capacity than housing
capacity." Those two markets really need to be tied to each other. Doesn't
matter if your personal view is "too much growth" or "let's keep growing",
either way the capacities need to be in balance.

------
dredmorbius
If you go back to read the early classical economists -- Adam Smith, David
Ricardo, Robert Malthus (who didn't just talk about births and food), John
Stuart Mill ( _and_ his father), etc., you'll find a that much discussion is
given to the price behaviour of certain economic goods and services, in ways
that sounds odd today: commodities, wages, stock, interest, and rent.

Wages and rent most especially.

The reason for the discussion is that the price behaviours are, well,
_interesting_. Economic rent (not quite the same as what you pay for an
apartment) in particular, _rises to absorb surplus value_ , whilst wages _fall
to the bare minimum necessary for survival_ (if that -- Smith's story of
economic decline is _bleak_ ).

[https://en.m.wikisource.org/wiki/The_Wealth_of_Nations](https://en.m.wikisource.org/wiki/The_Wealth_of_Nations)

There's an added dynamic -- one I've only just realised, though I'm sure it
shows up in the literature, of the tendency for those holding any given
economic asset (some store of value) to do what they can to see that its value
_increases_. And why not: free money!

This becomes quite problematic where those assets are themselves productive,
or worse, Maslovian (that is, essential) goods:

[https://www.reddit.com/r/dredmorbius/comments/608w97/asset_p...](https://www.reddit.com/r/dredmorbius/comments/608w97/asset_price_inflation_of_maslovian_and_productive/)

The upshot is that the prices of such goods, including housing, tends to
increase.

(This applies as well to professional certifications and licenses, taxi
medallions (viz: Lyft, Uber), guilds, educational access, etc. etc.)

The classic response suggested has been a land tax: a tax which applies to the
_unimproved_ value of a given lot.

The economic notion is that the supply of land is inelastic (that is:
suppliers cannot provide more of it, and won't withdraw from the market). The
tax increases the costs of carrying unimproved land, or occupying land below
its full utilisation. By tweaking the rate of tax reduction as land value
falls (based on income-earning potential), it would be possible to encourage
or discourage sprawl (slightly underpace value decline to concentrate
development, overpace value decline to encourage wider development).

The idea is most associated with Henry George (who came up with the idea ...
faced with skyrocketing rents in San Francisco), but is absolutely grounded in
classical economics and economists.

What I'm slowly coming to realise is that what's almost certainly required is
a _joint_ policy which targets wages, on the one hand, and rents (or land
value) on the other (and probably a few others). In addition to a land tax,
some sort of employer of last resort which would pay at _least_ a minimum
living wage (possibly then bidding out labour to other entities, or utilising
it for itself). Some form of UBI or needs-based support (children, elderly,
disabled, students) would cover other cases. Without a land tax, this income
is simply pocketed by rentiers. The combination of EoLR/UBI _and_ Land Tax
puts the income back into flow within the real (that is, commodities and
services) economy.

[https://en.m.wikipedia.org/wiki/Land_tax](https://en.m.wikipedia.org/wiki/Land_tax)

I've also learnt just earlier today that the Lincoln Institute of Land Policy
started as a Georgian Land Tax advocacy organisation, though I'm not sure if
they continue to pursue this interest.

[http://www.lincolninst.edu](http://www.lincolninst.edu)

And yes, California's Prop 13 legacy is one hell of an albatross.

[https://ballotpedia.org/Article_XIII_A,_California_Constitut...](https://ballotpedia.org/Article_XIII_A,_California_Constitution)

