Ditch the subsidies to get more housing
There’s little disagreement that California has a housing-affordability crisis, as the state’s average home value is close to $800,000 and well over $1 million in coastal markets. These astounding prices have put a squeeze on lower-income Californians and exacerbated the homelessness problem, so lawmakers — and voters — continue to approve subsidies for affordable-housing projects.
As is common any time the government subsidizes something, the influx of cash is inflationary. Recent affordable-housing projects in Los Angeles and the Bay Area have cost $600,000 to nearly $1 million a unit. The bureaucratic rules that come with such funding are largely to blame. The state will never provide enough homes at those kind of rates.
In March, The Wall Street Journal pinpoints an obvious and inexpensive solution: Provide fewer subsidies. The article looks at a South Los Angeles project where the developer rejected government assistance and built 49 affordable units at $291,000 each. It also is completing the project quickly, whereas subsidized projects “typically move at a snail’s pace.”
Per the Journal: “Publically funded affordable housing must typically be built with labor agreements that dictate construction wages and working conditions, as well as energy-efficiency standards. Funding often comes from a variety of agencies, each of which has its own set of approvals and regulations that can slow construction and add to costs.”
We shouldn’t be surprised. Government rules and outrageous fees slow the construction of everything. Government impediments are the core reason California has a housing crisis in the first place. It takes too long to get approvals. The California Environmental Quality Act (CEQA) ties up projects in lawsuits. Who would think more government is the answer?
The California State Auditor last month reviewed some cities’ homeless programs: “(W)e were unable to assess the cost-effectiveness of three other programs we reviewed because the state has not collected sufficient data on the outcomes of these programs.” Unlike projects built by private investors, the state doesn’t track its spending.
If California wants to improve affordability, it should try markets to work.