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Wednesday, December 30, 2020

How California Politicians Created a Homelessness Crisis

Cumbersome regulations make housing in California too expensive to build.

Image Credit: Wikimedia

California has more homeless people than any other state, with large homeless tent camps occupying the sidewalks of many of its streets. California also has the second most expensive housing of all states, lagging only behind Hawaii.

Writing at the Washington Examiner, Timothy P. Carney wonders to what extent the state government’s regulatory environment is contributing to both problems.

Land-use regulations make housing more expensive. The Los Angeles metro area ranks as the 15th most restrictive in land-use regulation.

People who own houses in housing-restricted places often don’t want to deregulate. They like the space. They fear the traffic. And they know that adding more housing could harm their home values. Of course, preserving scarcity in housing to keep your housing investments valuable is not really something most people want to admit to, so they make other arguments.

They suggest that the regulations drive up home values not by curbing supply but by giving people what they want: green buildings, safe buildings, adequate parking, and uncrowded neighborhoods.

But the one study that has looked into this finds that more than 90% of the price effect of regulation comes not from making the homes more desirable but from limiting supply. So regulation is affecting the market mostly by preventing homes from being built.

That finding raises a question. How many regulations has California put in the way of building homes?

According to QuantGov, last year the state government of California imposed on businesses and residents a total of 395,503 restrictions, as defined by the number of times that words like “must”, “shall”, “required”, “prohibited”, and “may not” appear within the online version of the California Code of Regulations (CCR).

Those regulations haven’t come about by accident—they are the result of years of effort on the part of California politicians and regulators.

Not only is that number more than any other state, it is nearly 88,000 more than the number of similar government-mandated restrictions imposed by New York’s government agencies, the state that ranks second in this measure.

Within the CCR, California’s Building Standards Code (Title 24) contains more restrictions than any other section, totaling no fewer than 75,712 restrictions. At the same time, the section for Housing and Community Development (Title 25) contains 12,204 restrictions, the tenth largest of all sections (or titles) contained in the CCR.

Combined to total 88,186 regulatory restrictions, these two sections that effectively dictate what housing may be built in California account for over 22 percent of the total regulatory burden set by all the state’s government agencies.

How does that compare with New York? QuantGov’s 2017 report for New York suggests the Empire State imposes far less of a regulatory burden on homebuilders, but since the state’s building code contains fewer than 12,474 restrictions, it doesn’t even make the list of the Top 10 contributors to that state’s regulatory burden.

It occurred to me that California’s building code might be more restrictive than a state like New York because much of the state is prone to natural disasters like earthquakes, mudslides and wildfires. So I looked at my former home state of Washington, which is prone to similar disasters. Its building code does make the top ten in QuantGov’s list of the state’s biggest contributors of restrictive regulations for 2019, where the state’s Building Code Council (Title 51) ranks ninth by accounting for a total of 4,585 restrictions.

California has over 19 times that number of restrictions limiting what housing and other structures may be built within the state. Those regulations haven’t come about by accident—they are the result of years of effort on the part of California politicians and regulators.

If you remember the sky-high oil and fuel prices of a decade ago, the political slogan of many seeking to bring the runaway prices of that day was “Drill, Baby, Drill.”

These advocates recognized that increasing the supply of oil was the only effective path to bring oil and gas prices back down to more affordable levels, so they worked to remove regulatory barriers to producing more supply. It may sound corny, but it worked.

If California’s politicians and bureaucrats ever want to get serious about building a larger supply of affordable housing, they need to start demolishing the artificially restrictive environment they have built and that has produced the opposite outcome they claim they want. The right slogan for California to improve the lives of the state’s neediest residents is “Build, Baby, Build.”

This article has been reprinted with permission from the Independent Institute.