The Guru Is In
The leadership California needs
By David A. Smith
4 min read
Over the last eight years, California’s Bay Area added 167,000 new homes, while adding four times as many jobs: 750,000. Yet when voters were asked to explain the causes of California’s runaway unaffordability, the worst in the nation, they cited lack of rent control first; restrictive zoning came in last.
For half a century—up through the recently departed Grover Cleveland of California politics, Jerry Brown—elected officials have given the voters what they wanted in housing policy. Their collective resultant product is the nation’s most dysfunctional housing ecosystem, topping even New York City’s, a truly impressive achievement in auto-asphyxiation. Despite abundant land, and the energy and water resources to develop it rationally (witness Palm Springs), with housing costs included, California has the nation’s highest level of supplemental poverty.
It also has among the highest levels of spatial socioeconomic segregation – the rich live here, the poor live over there, and daily the poor commute for work to the rich. Equality is worsening: San Francisco is being hollowed out of its middle class and nearly all of its poor except the homeless. For all its brave liberal talk, coastal California is the most exclusionary area in the nation, a consequence of an undeclared but unending policy civil war over housing that has cost the state half a trillion dollars-plus of housing damage.
In America, housing, real estate taxes, zoning and public education are inextricably entangled. Residential real estate taxes are the backbone of every locality’s budget, where they pay for local services, including local schools. Because of this, in the late 1960s antipoverty advocates argued that the disparity of local school funding, a direct consequence of differential property values by community, was discriminatory. In Serrano (1971), the California Supreme Court agreed and ordered state equalization of school funding.
I went down to the demonstration
To get our fair share of abuse
Actions trigger reactions. Within seven years, a voter backlash by those same suburban home owners led to Proposition 13 (1978), capping property taxes, and indirectly compelling a steady rise in state income taxes and sales taxes, both of which are poverty creators and employment inhibitors.
During the 1980s and 1990s localities and the state wrestled over funding streams, with the creation of Redevelopment Authorities (RDA’s) and increasingly creative/dubious use of Tax Increment Financing being countered by county educational revenue augmentation funds (ERAFs). Along the way, the state’s periodic efforts to mandate inclusionary development (the ‘housing element’) on localities had been rendered toothless by local NIMBYs’ weaponization of the California Environmental Quality Act (CEQA), and its potential for endless litigation, to strangle affordable housing in its city-council crib. In 2011, the California Supreme Court once again intervened: it ruled RDA’s unconstitutional, and abolished them.
Singing, “We’re gonna vent our frustration
If we don’t we’re gonna blow a fifty-amp fuse”
Now has arrived in Sacramento governor Gavin Newsom, who campaigned on an ambitious goal of building 3,500,000 affordable new homes in five years. Though necessary, this objective cannot be achieved with mere money alone. At (say) $300,000 apiece, and assuming that the economically supportable value based on affordability targets is half that, the subsidy shortfall is at least half a trillion dollars.
You can’t always get what you want
Instead, Governor Newsom is changing the rules. Aside from promising $2.0 billion in various state funding, and jawboning tech employers to contribute $0.5 billion, he’s impressively challenging the very voters and communities that propelled him into office by hitting localities right where it hurts: in the gas tank. The state intends to develop new home production targets, and then to withhold state transportation revenue sharing from places that fall short. “If you’re not hitting your goals,” he says, ”I don’t know why you get the money.” His administration is also attacking the root of inequity – exclusionary land-use policies enacted and fiercely defended at the local level. The state attorney general will sue Huntington Beach to compel it to approve more affordable housing.
Leadership is doing what is right. Political wisdom is investing in the future by aggressively spending your political capital, and the incoming governor of a de facto one-party state has plenty of it. Governor Newsom is investing heavily in both California’s and his own political future, judging that by the time he next has to face the electorate, the change momentum will be irreversible and the change’s benefits visible.
But if you try sometimes you just might find
And he has another big target in his sights. When it comes to reform of the state’s taxation structure, he says that “Everything will be on the table,” including the most sacred of cows: the previously untouchable Proposition 13.
You get what you need
