Housing Costs Make More Problems

We’ve noted before that housing developers are reluctant to build in our area, largely because various regulations and fees drive up the cost so much that it becomes difficult for anything short of luxury units to pencil out. Of course, the San Fernando Valley has few neighborhoods that can accommodate many luxury homes, so we don’t have many new units being built. As a result, supply is constrained, making housing prices go up even higher than they would otherwise. And a lot of folks suspect that as a result of the pricey housing here, homelessness is higher than it should be. Earlier this month, a report came out which confirmed that suspicion. Homelessness is greater where housing prices are high. Called “The State of Homelessness in America” by the White House Council of Economic Advisors, the report said, “a large body of academic literature confirms that higher home prices are indeed associated with higher rates of homelessness.” A 1 percent increase in median rent is associated with roughly a 1 percent increase in the rate of homelessness, according to those academic studies. And since rents here are, ahem, numerous percentage points higher than most other places, it follows that homelessness is numerous percentage points higher here. Among the five cities with the highest rates of unsheltered homelessness, four are in California. They are San Francisco, Los Angeles, Santa Rosa and San Jose. The other is Seattle. These are cities with very high housing costs. And for those of you who think that we have a problem mainly because our fine weather attracts the homeless, think again. The report points out that most other warm places – such as Arizona and Florida – do not have the high rates of homelessness that we have. In other words, the homeless may be attracted to warmer areas, sure, but the homeless are more likely to score permanent shelter in those other warm areas because housing prices are closer to earth. (Of course, other things likely are at play, too. The report says, “policing of street activities may play a role in these differences.”) So, the solution is simple. If you want to reduce homelessness, slash housing prices. But how do you do that, exactly? We actually could do that. If many of the regulations and fees were scaled back or eliminated, housing developers would be incentivized to build more. Much more. And that would have the beneficial effect of gradually – not immediately but gradually – cutting housing costs and paring back homelessness. The report estimated that if the housing industry were substantially deregulated, homelessness would fall by 40 percent in Los Angeles. And it would fall by 54 percent in San Francisco. Nationwide, the drop would be 13 percent. California homebuilders, of course, face all manner of environmental reports, various fees and requirements to hire union labor and set aside affordable units, etc. Those costs and delays – time is money, after all – get added to the price of the house or apartment. Those are costs and delays that many other regions simply don’t have, or don’t have in the abundance we do. (And, I might add, they seem to get by just fine.) Almost half (47 percent) of all unsheltered homeless people in the United States are in California. That is four times as high as the state’s share of the overall population. We are the homeless capital of the country. There’s one big reason why, and it’s not the weather.