I’ve long heard stories about how good people are moving out of California because of high housing costs. But those departing souls have always been kind of ghostly; it was always someone who knows someone who’s leaving – not anyone I could name.
But as you can see in the op-ed below, I now have a name. It is Elizabeth Hawley. She’s the soon-to-be-former legislative affairs director of the Valley Industry and Commerce Association, and she is leaving because the cost of housing is too high.
It’s a pity. She likely would have been among tomorrow’s leaders in the Valley area. You have to wonder how many Elizabeth Hawleys are leaving, each taking with them a slice of tomorrow’s promise.
(By the way, she correctly points out in her op-ed that the San Fernando Valley suffers more than most. That’s because average wages in the Valley are relatively low, making home prices here seem even steeper.)
You know what really irks me? It’s the fact that people keep acknowledging that housing is a “crisis” in California, then doing things to make it worse.
Just last fall, the legislature passed statewide rent control, limiting increases for rental buildings more than 15 years old. While it is an understandable impulse to try to hold down escalating rents, legislators made the wrong decision. Virtually every economist will tell you that rent control makes matters worse by incentivizing landlords to convert their rental buildings into something else, thereby reducing supply.
Politicians aren’t the only ones to make housing costs higher. Voters do, too. Measure JJJ, passed a few years ago in Los Angeles County, mandated that affordable housing units be included in many new housing developments, regardless of whether the units are to be rented or sold. Again, everyone wants affordable units – I know I do – but imposing them on new construction makes it difficult for a builder to recoup his costs. As one developer said, JJJ is an “apartment killer.” This is not adding to supply.
And Ventura County voters have made new development very difficult, mainly by passing a series of restrictions under the banner of SOAR, or Save Open Space and Agricultural Resources. Even though the county’s economy has flatlined for years, largely as a result of underbuilding, residents seem satisfied that traffic and crowds are held down.
Of course, local governments make development very time intensive, thanks to the often years-long process it takes to get entitlements and other approvals. And time is money.
All these restrictions add costs, making it chancy to build living units and discouraging developers, who aren’t in business to lose money. We need to add to our supply of housing big time, but we are going backwards. The state’s 110,000 housing starts last year were well short of the 180,000 units state officials believe is needed just to keep up with job growth, let alone adding to supply. By the way, those 110,000 housing starts in the state last year were down 7 percent from the year before, according to the Construction Industry Research Board.
If you want an example of what could happen, take the Warner Center area of Woodland Hills. (I wrote about this in the last issue of the Business Journal; sorry to repeat.) Billions of dollars’ worth of development is slated to occur – including thousands of new housing units – in a 1.5 square mile area. Another big project was announced just last week for the site of the Fry’s Electronics store on Canoga Avenue.
The reason for this flurry of activity: The Warner Center 2035 Plan allows for fast approvals, generous size limits and no mandate to include affordable housing units (although that may be changed soon). If the Warner Center plan could be magically expanded to include the entire state, the housing crisis would soon go kaput.
Since you are reading a business news publication, I assume you understand the power of supply and demand. We need supply – a big increase in supply – of housing units before prices can go down. But, except for the Warner Center plan, we keep making decisions that lower supply.
Until we can agree to take action to increase supply, we will continue to see tomorrow’s leaders move from California.