The median price for a house now tops $600,000, more than twice the national level. The state has four of the country’s five most expensive residential markets—Silicon Valley, San Francisco, Orange County and San Diego. (Los Angeles is seventh.) The poverty rate, when adjusted for the cost of living, is the worst in the nation. California accounts for 12% of the U.S. population, but a quarter of its homeless population.
Local jurisdictions in California hold enormous sway over what gets built. Officials have often caved to NIMBY (“not in my backyard”) pressure against new development, much of it in the name of protecting the environment or preserving “neighborhood character.”
Parts of the state were downzoned starting in the 1970s, making it harder to build dense urban areas and contributing to racial segregation and sprawl. Three-quarters of the residential land in Los Angeles is restricted to single-family homes, according to UrbanFootprint, software that helps government and businesses understand cities and urban markets. In San Jose, the figure is 94%.
California also has a distinct burden: Proposition 13, a measure approved by voters in 1978 that limits property-tax increases on homes until they’re sold. That’s been a boon for Baby Boomers who’ve lived in their houses for decades and aren’t assessed at anything close to their property’s market value. But it’s especially unfair to their children, who are in effect subsidizing their parents’ generation.
Prop 13 also created a fiscal incentive for many cities to favor new commercial development over residential construction—and heap fees on developers to fund budget gaps.
For decades, many Californians have just moved farther out of town to find cheaper places to live. But as climate change increases the intensity and frequency of wildfires—leading to devastation and billions of dollars in costs—officials may decide to put some areas off-limits for new construction.Thomas Fuller at NYT:
The reasons for California’s high costs, developers and housing experts say, begin with the price of land and labor in the state. In San Francisco a construction worker earns around $90 an hour on average, according to Turner & Townsend, a real estate consulting company.
But non-construction costs also weigh heavily.
Not taking into account the price of land, around one quarter of the cost of building affordable housing goes to government fees, permits and consulting companies, according to a 2014 study by the California Department of Housing and Community Development.
For a building to be defined as affordable housing it typically obtains tax credits and subsidies. A single affordable housing project requires financing from an average of six different sources — federal, state and local agencies, said Carolina Reid, a researcher at the Terner Center at the University of California, Berkeley, and an author of a forthcoming analysis of affordable housing costs.
She called the process “death by a thousand cuts.”Some cite the California Environmental Quality Act.
California law permits anyone to object to a project under the act, which when it was signed by then Governor Ronald Reagan in 1970 was seen as a landmark effort to protect the environment from reckless development.
Today the law is often used as a legal battle ax by anyone who wants to slow a project down or scuttle it altogether, Mr. Jones and many developers and experts say.
“At very little cost one individual can take a project and tie it up in years of litigation,” said Douglas Abbey, a lecturer on real estate at the Stanford Graduate School of Business.