Nothing but Palaces 5

Is America so full there's nowhere to build new housing?

California, infamous as the land of red tape and astronomically high housing prices, is finally taking action to alleviate the problem - maybe.

[SB 50] would set an unprecedented state standard for residential zoning codes in certain corners of California. Currently, it is illegal to build anything but single dwellings designed for single families, sometimes with an in-law unit, in roughly 80 percent of California’s residential neighborhoods. SB 50 would change those laws in areas that are near high-frequency transit lines, job clusters, and good schools, prying open opportunities for developers to build to taller heights, with more units per square foot [of land - ed].

In this series so far, we've examined many reasons given for the astonishing increase in housing costs. All contribute something, but none offer a full explanation.

We've also seen how many governmental efforts which are sold on the basis of helping turn out to make things worse and make people angry at the same time.  SB50 is no different, with enraged activists on both sides pouring money into the legislative efforts for and against.

On paper, the bill as described seems to make sense.  If 80% of Californian neighborhoods are legally restricted from building anything other than freestanding single-family homes, it stands to reason that housing costs would be high because land costs would be high.  Apartments for poor people are cheaper to build, operate, and therefore rent than freestanding individual houses, aren't they?

And anyway, as libertarians, we lean toward admiring anything that increase the freedom of property owners to use their property as they please.  On that basis, if plonking down a high-rise apartment where previously a ranch house stood, so be it.

Except - there may be a faulty premise here.  The argument is based on the assumptions that most of California is not legally zoned for dense housing and that dense housing is cheaper.  Are those statements, true, though?

In the lower 48 United States, only 3.7% of land is urban or suburban.  In contrast, 35% is grassland, 21% is farmland, and 29% is forests.  Is there really no place to put more homes?

Even in California, the amount of the state covered by city is almost invisible on a map.  Nearly half the state, though, is shaded as "Local, state, and federal-owned land" - in other words, the preserve of the government.  Government ownership of large tracts of land is creating an artificial scarcity of places to build, not just by zoning rules, but by hogging so much land where nothing can be built at all.

How about construction costs - surely apartment buildings are more efficient?  Actually, no:  Fannie Mae reported an average cost of $192 per square foot for apartment building construction in 2017, whereas, according to the National Association of Home Builders, the equivalent average cost of a single-family home was $103 per square foot - a bit over half!  If we want more affordable housing, we want fewer apartment buildings, and more (small) single-family or even single-person freestanding homes - exactly what lefty governments are trying to prevent through strict zoning laws, licensing delays, and opening the courts to anyone with resources to sue to block development.

Once again, we see the finger of blame pointing straight at the government.

Now, if the government simply forbade housing construction entirely, the blame would be obvious.  Our masters are too artful for that, though; we see plenty of construction all over the place.  It's just that it tends to be for luxury homes - that is, housing that most people can't afford.  That lets the government and their media allies blame greedy developers and, of course, capitalism.

The truth is more damning:

“I have to spend $80,000 before I can drive one nail into a piece of wood,” [developer] Green says. Just preparing to manufacture a house can take four to five months. This includes permits, land-use studies, appealing to various boards, and pleading with politicians. How long did he wait to reach this starting line when he began in this business in the late 1990s? “Three to four weeks.” Thus, he has seen a five- to seven-fold increase in the time needed to launch projects in just two decades...

Green once aspired to create 60 homes on land that he purchased. By the time officials finished with him, he actually wound up creating only 13 homes, a 78 percent decrease in planned housing stock. Since he had fewer homes to sell, his asking price per dwelling soared 233 percent — from roughly $300,000 to $700,000. “And you wonder why homes have become unaffordable?” he asks.

This is entirely a problem of government malfeasance.  In a supposedly free country, what possible right does a government have to arrogate the power to forbid the free private owner of land from building houses on it?  What have we come to, that we meekly accept the premise that officials should have any say at all over approving the construction of private buildings on private lands?

It's possible to make a public-safety argument that it's appropriate for government to regulate the quality of constructions standards for the purpose of saving lives in the event of fires, though as we've seen in earlier articles in this series, this can simply have the result of driving poor people out of less-than-ideal housing into low-cost firetraps or into the even-more-dangerous streets.

There is simply no logical argument whatsoever why a government should have the ability to flatly prevent construction on private property.  Why does this Mr. Green even have to negotiate with town officials?  Why cannot he simply proceed to build, as long as he follows national construction safety codes as he does so?

In yet another headache, authorities blessed Green’s application to cultivate a different property. They allowed him to develop 13 lots, combining homes and open space. But first, officials played the green card. He says that they mandated that he “purchase 22 additional acres in a mitigation land bank for non-native grasslands.” Green recaps: “So, I bought land and could not build on it until I bought even more land someplace else.”

Once again, we see governmental action working to drive up housing prices coming and going: by making the cost of construction vastly more expensive than it has to be, and while doing so, by causing more land to be taken out of circulation and presumably unable to be built on by anyone, forever.

We're now closing in on two major reasons why we no longer build enough homes to go around.  First, our government has, for no good reason, blocked off vast swathes of America from being used for any construction whatsoever.  Second, in those areas which history and tradition have already apparently established the right for private enterprise to build, our government has stripped the private owners of the natural right to build as they desire by a thicket of outrageous regulations and out-and-out blackmail.

We've all heard that "you can't fight City Hall."  You can, however, bribe - illegally, yes, but also legally through campaign contributions, and other sacrifices to greedy and power-hungry special-interest bureaucrats.

What happens, though, when even that's not enough?  We'll look at an example in the next article in this series.

Petrarch is a contributing editor for Scragged.  Read other articles by Petrarch or other articles on Law.
Reader Comments

Wow. This series is hot. Nice job of zeroing in on what matters. One thought is the value of a great education for your kids in the " privilege" communities. It isn't just about housing, it is about housing plus education. You can get super cheap homes. But it often leads to a super crummy education that leads to a lifetime of below average results for your kids. Pretty big stakes for most people. Possibly beyond the scope of this series, but a significant consideration in housing costs and aspirations.

September 25, 2019 6:33 PM

"...Why does this Mr. Green even have to negotiate with town officials? ..."

Answer: To give employment to the regulators, bureaucrats and other bloodsuckers in the public sector.

September 26, 2019 7:37 AM

Change the rules for land near 'high frequency transit lines, job clusters' and allow high rise buildings? Agenda 21 anybody? The governments own large swaths of land? Ever feel like people are being herded toward something they haven't had any say about?

September 27, 2019 11:33 PM

P Long: you’ve got it! This isn’t accidental; it’s a plan.

September 30, 2019 2:08 PM

Bloomberg agrees with scragged:

After explaining hte problme, they said:

How did we get here? Simply put, bad government—from outdated zoning laws to a 40-year-old tax provision that benefits long-time homeowners at the expense of everyone else—has created a severe shortage of houses. While decades in the making, California’s slow-moving disaster has reached a critical point for state officials, businesses and the millions who are straining to live there.

This fall, as President Donald Trump blamed Democrats for the situation on his swing through the state to raise money for his reelection, lawmakers in Sacramento passed some of the most sweeping legislation in years to address housing affordability. Google, Facebook Inc. and Apple Inc. are throwing billions of dollars at the issue. But nobody’s kidding themselves that it’s enough.

“Broadly speaking, there is no solution to the California housing crisis without the construction of millions of new houses,” said David Garcia, policy director for the Terner Center for Housing Innovation at the University of California, Berkeley.

McKinsey & Co. estimated in 2016 that California needed some 3.5 million more homes by the middle of next decade—a figure that Governor Gavin Newsom made a central part of his administration’s goals. A more recent analysis suggests it may take the state until 2050 to meet the target.

As severe as this sounds, the rest of the country is becoming more—not less—like California. During the longest economic expansion on record, the U.S. has been building far fewer houses than it usually does, pushing prices further out of reach for a vast portion of the population that has barely seen incomes rise.

“California is not alone,” said Chris Herbert, the managing director of Harvard’s Joint Center for Housing Studies. “It’s just more extreme.”

November 8, 2019 1:01 PM
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