The American Dream is at risk of being extinguished by a lack of housing, strangled by costs and delays and lawsuits and overregulation. That’s the headline news from a group of experts brought together to create “California’s Homeownership Affordability Challenges & Proposed Solutions,” a report recently issued by the Center for California Real Estate (CCRE).
CCRE brought together experts from civil rights, labor, law, public policy, academia, finance, and housing. They offered a sobering look at the challenges facing non-zillionaires in the state who hope to afford a home, along with proposed solutions.
In the past, former Milwaukee Mayor John Norquist has talked about what cities lost during the mid-20th-century “urban renewals” that flattened traditional neighborhoods and replaced them with newer, often single-use developments. Years ago, he laid out the natural progression that previous Milwaukee populations made: German immigrants came in, built a street side store with an apartment above, where they lived; as they prospered, they moved away and rented the apartment to newly arrived Polish immigrants, who got settled, prospered, maybe bought the entire building, and then rented the apartment to a newly arrived family from Vietnam. And so on. Neighborhoods were threaded with vital street side family businesses, and a functioning ladder of housing mobility existed.
That’s not the case anymore. CCRE notes, “Participants repeatedly emphasized that the state lacks enough homes that are suitable, attainable, and financeable for first-time, moderate-income, and middle-class buyers. Starter homes, small-lot homes, townhomes, condominiums, row homes, and move-down options for seniors were all discussed as essential pieces of a healthier ownership market.”
CCRE’s panelists aren’t the only ones looking at the issue, of course. Noting that the median Los Angeles home is priced above $1 million (twice that of Dallas), Republican gubernatorial candidate Steve Hilton has cited a RAND study that says building multifamily housing in California costs 2.3 times as much as it does in Texas, where it is also able to be completed in much less time. “We made it impossibly expensive and a horrendous hassle to build anything,” Hilton recently told a San Francisco audience. “And then the politicians who did it feign outrage at our housing shortage.”
Hilton’s solution is a rollback of some regulations, as well as building single family homes on currently undeveloped land in the state; he said if we increased the amount of California land that is developed by just 1 percent, it would allow new housing for as many as 5 million people.
“We made it impossibly expensive and a horrendous hassle to build anything … And then the politicians who did it feign outrage at our housing shortage.”
In high-cost infill markets, CCRE panelists “noted that ownership often struggles to pencil. Condominiums can face construction-defect liability, insurance challenges, reserve requirements, and financing constraints. Land costs are high, infrastructure needs can be complex, and local opposition can increase uncertainty. As a result, rental projects may move forward in places where for-sale housing does not, even when demand for ownership is strong.” The CCRE experts were not rubber-stamping a Hilton-esque approach of targeting “greenfields” of undeveloped land; they urged addressing the costs and regulatory burdens.
In a state where people already largely congregate in massive megapolises or supercities, extending urban sprawl would seem a tough sell; promising to add another hour to someone’s commute is an unlikely vote-getter. But Hilton is basically addressing the capture of our communities by NIMBY forces and suggesting that we just go around them and build elsewhere.
Hilton’s solutions might be a decidedly Republican way of approaching the problem, but there’s bipartisan agreement that the country faces serious problems because of the lack of housing. Former Obama Chief of Staff Rahm Emanuel has been stressing the threats to our democracy itself that happen when enough people come to believe that the American Dream is no longer achievable.
The CCRE group’s proposed solutions are detailed, but they address a large array of issues of the housing affordability crisis. They include streamlining permitting processes and reducing the regulatory hurdles along the way; lowering the cost burden by reinterpreting impact fees, CEQA mitigation costs, commuting time requirements, and other state and local mandates “through a lens of homeownership affordability”; expanding supply by building more starter homes, townhomes, condos, row homes, small-lot homes and other options affordable to people who don’t live off Google stock; change mortgage and credit evaluation standards to include more nontraditional inputs; expanding construction and development financing; exploiting the innovation that’s taken place in prefabricated, modular and off-site construction that can greatly reduce costs; make condo ownership a key part of the state’s homeownership strategy; and measure housing policies against their ability to increase California’s homeownership affordability.
That’s a big paragraph of proposals, and it’s only a summary. You can read the entire report on CCRE’s website. But if CCRE’s cross-section of experts is correct, then the state’s problems are fixable — man-made solutions to a man-made problem.
