Lessons from three years covering the politics, policy and absurdity of trying to fix one of the state’s most vexing problems.
Back in 2017, I wrote a fairly unremarkable piece about a state lawmaker’s proposal to take away a tax break on California vacation homes to fund more low-income housing. More precisely — believe me, among housing nerds it’s essential to be precise — the bill would have eliminated the mortgage interest deduction on second homes, generating an estimated $300 million annually to build publicly subsidized apartments.
In antiquated journalism terms, the bill — which would take away a dubious tax benefit from richer Californians who don’t really need it to fund housing for poorer Californians who do — was a “talker.”
But my best “talkers” in the past didn’t get the attention this story did. There were three times as many readers for this relatively small-stakes housing piece as anything else I had published that year. There aren’t enough vacation homeowners in the state to justify that many eyeballs.
At some level this made sense to me. All anyone in California seemed to talk about — or at least anyone who didn’t buy their homes in 1997 seemed to talk about — was how expensive it was to live here. Rents in San Francisco had surpassed New York as the priciest in the country, with Los Angeles, Oakland, San Jose and San Diego not far behind. After cratering during the Great Recession, in 2017 the median statewide price of a single family home was over half a million dollars and would crack an astounding $700,000 by 2020. For the price of one average California home, you can now buy two in Phoenix.
Particularly among younger Californians, there was a gnawing sense that the “California has always been expensive, everyone wants to live here” shrug offered by older generations, or “it’s the tech bros ruining everything” bromides submitted on Twitter, were inadequate (although tech bros do ruin a lot of things). Something felt more deeply broken in California housing, and a wide swath of the state just wanted to know why things were so screwed up, and how we could begin to unscrew them.
After the vacation home bill wound up where lots of housing legislation winds up in Sacramento — buried by opposition from a prominent interest group — I started reporting more housing stories. That surprisingly large audience showed up reliably to read them, so much so that within a year CalMatters had launched a wonky housing podcast with enough nerds listening to justify its existence. Within two years, I became our housing beat reporter.
At the same time, the housing crisis vaulted to the top of the state’s political agenda. Prior to the pandemic, when asked what issues they were most concerned about, California voters placed homelessness and housing affordability at the top of their anxiety list, over perennial priorities like the economy, education, and the environment. On the 2018 campaign trail, then-candidate Gavin Newsom memorably called for a “Marshall Plan” to fix the state’s housing woes, implying that the solutions were on a scale of rehabilitating a postwar Europe bombed back into the 19th century.
It’s now 2021, and even as the coronavirus pandemic consumes much of our daily lives, the state’s housing crisis persists. Strained and mutated by the virus, it will be there waiting for us once the vaccines are distributed and life is pseudo-normal again. It will just look different.
After three-plus years covering California’s housing crisis and the state’s mostly abortive attempts to fix it, I’m leaving my post here to pursue a job at “Marketplace,” a radio program of American Public Media. But before I left, in the tradition of other journalists with an inflated sense of self-importance, I wanted to share a few lessons I’ve learned that I think the average Californian should know about housing politics and policy.
These observations are my own, and not everyone agrees with them. But they are the conclusions I’ve drawn about why this problem is so difficult to solve and the most realistic ways of solving it. Don’t worry, there’s gifs so it won’t be too boring.
Lesson 1: There is not ONE housing crisis. There are really THREE housing crises. Be specific about which one you’re talking about.
At some point, the phrase “housing crisis” became so ubiquitous in California politics that its ambiguous usage in press releases and stump speeches began sapping its urgency. One lawmaker was so enamored with the phrase that he wanted to create a specialized license plate to connote its importance.
I’m going to fix this right now. There are really three distinct housing crises roiling California. While often stemming from the same underlying problems, they impact different segments of the population and warrant different (and sometimes competing) solutions.
The first and most urgent crisis is the 150,000 homeless Californians sleeping in shelters or on the streets. Gov. Newsom has devoted more attention to this dimension of the housing crisis than any other. It’s the most shameful symptom of how things have gone so wrong here, and is trending in the wrong direction.
The second housing crisis involves the 7.1 million Californians living in poverty when housing costs are taken into account. While not homeless, 56% of these low-income Californians see more than half of their paychecks devoured by rising rents. Skewing Black and brown, these are the renters who face intense displacement and gentrification pressures, live in overcrowded and unsafe housing conditions, and have fled urban cores for cheaper exurbs over the past two decades.
California’s third housing crisis afflicts a younger generation of middle-class and higher-income Californians. In the late 1960s, the average California home cost about three times the average household’s income. Now it costs more than seven times what the average household makes. High rents make saving for a downpayment that much more difficult. While lower-income Californians have struggled to afford the state for decades, the term “housing crisis” and its attendant publicity really only came into vogue once richer Californians started seriously considering moving to Austin or Portland or Las Vegas.
All three of these crises are obviously related and stem from the same root problem: not enough housing.
But it’s important not to conflate them. While a lack of affordable housing is at the core of why our homeless population is the largest in the country, mental health and addiction issues complicate its solution. A new first-time homeowner tax credit may be a boon to higher-income earners, but it’s not going to help those on a Section 8 waitlist for government-subsidized housing.
In a world of limited government resources and short political attention spans, when your elected representatives says they want to solve the housing crisis, ask them, “Which one?”
Lesson 2: The rise of telework is going to dilute demand to live in dense, urban environments. (I think).
There’s a very dumb debate happening right now over whether the pandemic-necessitated rise in remote work will spell the death of major cities. Post-vaccine San Francisco is not going to be reduced to roving bands of ex-Twitter employees eyeing the Fisherman Wharf’s sea lions for sustenance after the last bottles of Soylent go bad. Desirable California cities will still exist, and will still be expensive places to live.
The real debate is whether a meaningful number of households will eschew the priciest, densest parts of the state for cheaper, larger spaces once they’re guaranteed they’ll only have to commute two or three days a week. I believe a large enough number will move, so that rents will generally be cooler in the San Franciscos, Los Angeleses and San Diegos of the world than they were before the pandemic. Meanwhile the price of single-family homes and larger rentals in mid-size cities, suburbs and exurbs will rise.
My prediction mostly hinges on millennials aging into a desire and capacity for homeownership and more space, buttressed by cheap mortgage rates and remote work. This was happening before the pandemic, and I think it will accelerate.
Smart people can disagree — we very well may end up right where we were in February 2020, before San Francisco rents plunged25% and there was no cool bar around the corner to justify cramming four people into a two-bedroom.
If that doesn’t happen, the locus of the housing crisis shifts slightly eastward and outward — think Sacramento, Fresno and Bakersfield, where rents and home prices have shot up during the pandemic. While telecommuting likely means less tailpipe emissions, lawmakers will have to develop policies that reduce the other car trips that tend to increase once you move away from BART or Metro. Displacement pressures will mount on the last bastions of affordability for lower-income workers: exurbs and the Central Valley.
Lesson 3: The big dividing line in housing politics is whether you think one more unit of market-rate housing is a good thing or a bad thing. It is mostly a good thing, but it depends.
Housing doesn’t follow traditional left-right political fault lines in California. Last year’s most controversial housing production bill, which would have forced single-family-only neighborhoods to allow duplexes and lot splits, was opposed by a Republican from the High Sierras and a Democrat from Culver City. Democrats from San Francisco and a Republican from Bakersfield voted for it.
At its core, the fundamental dividing line for many Californians is whether you think a new apartment building going up somewhere in your community is going to help or hurt you. It really is, philosophically, whether you buy into supply and demand.
A progressive skepticism of market forces is what ostensibly unites the residents of Marin County and Compton in opposing new housing. For lower income communities, the fear is the new apartment building is going to lead to rising rents they can’t afford. For more affluent suburban areas, the fear is that more condos mean more people who will add traffic and ruin the “character” of their communities.
The housing market is not as simple as a supply-and-demand graphic from an Econ 1 textbook. But fundamentally, the vast majority of housing researchers agree that adding more market-rate housing units will generally lead to a reduction in regional housing prices.
At the city block level or neighborhood level, things get a little more thorny. There are legitimate disputes within the research over whether that first shiny new condo building going up in a lower-income area inflates nearby rental prices or deflates them by adding more rental stock.
But not building anything anywhere —pretty much California’s strategy for the past half-century — results in too few units for too many people and astronomical housing costs.
Lesson 4: The state construction workers’ union has way more influence than you think it does.
Housing politics in California is a hornets’ nest of powerful interest groups. Developers, Realtors, big tech, cities, counties, environmental groups, landlords, anti-gentrification advocates and homeowner groups all lobby lawmakers and the governor one way or the other. It’s part of the reason inertia is the default state of things.
But there’s a king hornet that is by far the most effective and powerful: the State Building and Construction Trades Council.
A major donor to Calfornia Democrats, the construction workers’ union plays political hardball both publicly and behind the scenes. You very, very rarely hear a Democratic lawmaker criticize the trades to the media, although they will frequently tell you on background it’s a fool’s errand to cross them.
I have yet to see major legislation opposed by the trades actually become law. A bill to allow churches and universities to convert spare land to low-income housing without time-consuming environmental reviews? Opposed by the trades and buried. A bill to force higher-income neighborhoods to allow denser, low-income housing with expedited review? Opposed by the trades and buried. In one instance, an unexpected torrent of hearing testimony from union workers opposing a bill to streamline motel conversions into apartment buildings left an Assemblymember on the verge of tears.
You’d think the construction workers’ union would want to make it easier to build homes: More homebuilding means more jobs. But the status quo mostly works for the trades. They can leverage lengthy local government review processes in negotiations with market-rate developers to guarantee union-level wages and other protections.
In recent years, the trades have been even more aggressive, requesting additional labor protections be attached to low-income housing that affordable housing advocates say make building subsidized housing more expensive.
Lesson 5: Newsom is not Dr. Manhattan. But I don’t think even Dr. Manhattan could have reached his housing goals.
If you haven’t read the graphic novel “Watchmen” or watched the HBO series, Dr. Manhattan is a godlike being who can destroy, create and manipulate matter in any way he sees fit.
But I doubt even Dr. Manhattan could have fulfilled a campaign “goal” to build 3.5 million homes in California in seven years.
On the campaign trail, Newsom’s Marshall Plan called for building 500,000 homes per year to bring down housing costs. That level of construction would have been unprecedented in modern California history. In his two years in office, he’s nowhere near meeting that mark.
The 3.5 million number comes from a McKinsey study which I wonder how much time the Newsom team spent reviewing. Other housing experts and developers could have told you it was pretty impossible to ramp up development that quickly without massive, politically unpopular reforms. And even then it’s dubious.
You shouldn’t get distracted by the 3.5 million number, which Newsom’s challengers for the governor’s seat in 2022 will hang on him whenever they get the chance. But the governor is going to have a hard time claiming he made housing significantly easier to build in his first term.
On homelessness and tenant protections, Newsom deserves a good amount of credit for doing things he pledged to do, or at the very least things his predecessors largely ignored. Project Homekey, Newsom’s ambitious plan to acquire vacant motels for permanent homeless housing during the pandemic, stands to acquire 6,000 units in just six months, an incredibly short time period. Last year Newsom made good on his post-election promise to broker some type of tenant protection package between landlords and renters, successfully leading the charge for first in the country anti-rent-gouging law.
But on the housing production side, the policy has trailed the rhetoric. After threatening to take away transportation dollars from cities that don’t approve enough housing, Newsom retreated after local governments and lawmakers pushed back.
We’ll see if Newsom’s post-pandemic normal means a renewed push to make it easier to build.
Note: Following an editing error, this story has been corrected to note that “Marketplace” is a radio program of American Public Media.