Op-Ed: 10 points to keep in mind about housing affordability in California


Many politicians and activists push simplistic solutions when it comes to California’s housing woes. Some promote subsidies; others density. Some sell infill as the solution; others blame everything on the state’s byzantine laws. Maybe I’m getting old, or maybe the election of 2016 just reminded me to beware of politicians appealing to the masses with buzzwords. We live in a complex world, and remedies for complex problems such as housing are complex.

Nuance and straight talk will help us solve this crisis. With that in mind, I crafted these 10 points to inform the debate.

1. Subsidies for affordable housing average around $357,000 per unit. Do the math — that’s unsustainable. If Sacramento were to subsidize just Los Angeles’ needs for just one year, that would consume the entire state budget.


2. I generally support density, but it is not a panacea, as places such as Manhattan prove. Many cities’ natural boundaries mean that prices there will always be rather high. Furthermore, supply can actually create, rather than sate, demand. When more people can move to a place, others must also live nearby to service the growing population. This, in turn, pushes up prices.

Rather than bring housing where there are jobs, maybe we should try to foster more jobs where there is abundant housing.

3. Many of the same people freaking out about high home prices at the top of the market were those petrified of buying at the bottom. Today is not forever. California real estate prices have been subject to clear and regular cycles since statehood. In three to five years, housing might well be cheap again. But the consequences of bad decisions can last much longer.

4. Several factors explain the high cost of construction. For example, our building and zoning laws are needlessly byzantine. Because there is no single problem, there is no single, magical solution. Developers in Monaco face nothing similar to California’s bureaucracy, but a combination of other factors still make housing there quite expensive.

5. We’re not going to change immutable economic truths such as supply and demand, and we’re unlikely to change human nature. Many people are revolutionary when they are young and NIMBY when they are old.

6. Affordability solutions create new responsibilities. For example, if a city increases its housing stock, it must make sure it has enough water and transportation options. Otherwise, those cities will just shrink later as they become unlivable.


7. People want to live where there are jobs and culture. For years, government has tried to subsidize housing in expensive areas. But rather than bring housing where there are jobs, maybe we should try to foster more jobs where there is abundant housing. Making inexpensive areas more livable would also help bridge the gap between rich and poor in California. If an employer is willing to relocate to an area with cheap housing and core infrastructure (transit, water, healthcare), then our policies should facilitate that.

8. Housing in Manhattan, San Francisco, Silicon Valley and many Los Angeles neighborhoods has become a Veblen good. Like a Fendi purse, the more exclusive some goods appear and the more expensive their price, the more desirable they become to certain consumers. The people engaging in absurd bidding wars, driving up the cost of real estate in tony neighborhoods, are not dissuaded by stratospheric prices. In fact, it makes those neighborhoods even more attractive to some.

9. One factor in skyrocketing home prices in the last decade has been the Federal Reserve. It has been creating trillions of dollars to buy government bonds and prop up the economy. That makes the value of dollars (and interest rates) sink and the value of assets (such as houses) rise. Programs such as housing subsidies that reduce costs are just a drop when compared to the immense bucketful of money that has increased asset prices. Activists should start focusing some of their attention on national monetary policy.

10. While having a roof over your head is a human right, being hip is not. Even during times of unprecedented price increases, there are often bargains to be had in places that are a little less trendy. Some, but not all, of the complaints about affordability come from people who are simply frustrated that they can’t live in the stylish neighborhood of their choice.

Mike Gatto served four terms in the California Assembly. He is an attorney and legislator in residence at USC’s Unruh Institute of Politics.


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