Skip to main content

Is it only California?

The Economist ran a special report last week comparing Texas and California strengths and weaknesses.  What's unavoidably obvious is that many of California's weaknesses stem from housing affordability.
  • The finances of their schools are severely hampered by 50% higher salaries for teachers.  That's not largesse, it's driven by the higher cost of housing.  Teachers in California need that money to afford to live there.
  • Net migration is negative (though population is still growing), and the overriding factor here appears to be housing costs.
  • California spends a lot to help it's low-income population, almost 120% more money than Texas per person, yet still ends up with only a marginally lower rate of poverty after transfers despite a much higher average wage.  Housing explains about 80% of the higher cost of living that negates California's more substantial efforts to have less poverty.
So, if you care about any of these issues, you should ask, are high property values helping California address any of them?  In theory the property taxes help, but California has a complicated thicket of property tax freezes and abatements.

To the degree that property value is driven by demand, driven by higher job opportunity, that helps California, but that's second order effect, and demand is only half the equation.  Where property value is driven by supply limitations, it's hard to see a positive aspect for these issues.  It might benefit property owners, but if it's harming the state's economy overall, that's only going to be a short-run benefit.  And they won't benefit until they sell, at which point they are either:
  1. Moving to another house in state, in which case the negatives are greater as the positives, since now their cost of relocation via closing costs, broker fees, transfer taxes are all higher.  Only if downsizing can they realize a "gain".
  2. Dead and passing on their estate.  Not much personal benefit there.  Certainly not much for California.
  3. Moving out of state.  Not much benefit there.
With this in mind, how does California not take an initiative like SB50 seriously? Local zoning rules will never incentivize the type of change necessary to tackle that problem.  Why?  Well, who has influence and is harmed? It's not the people out of state who might move to California in the future.. they have no influence.  It's not the residents who will move out of state, they aren't harmed.  It's the residents who will move in-state.  To a lesser degree, those that just stay put are harmed too, but they're often protected temporarily by rent freezes and property tax freezes, so tend to be more of a force for status-quo.

Will local zoning changes help a in-state mover? No, because they can only vote where they live, not where they're moving too, and those are likely different places. They can vote to weaken zoning locally, keeping their own property value from rising too high, but they can't cast a vote that has any relevance to the property value where they are moving too.  The only vote they have that is relevant to a policy that would help their plight is at the state level.

California is the apex of housing affordability problems, yet their local zoning issues apply to many other places.  It sounds great to be for local control, but we might want to remember that the U.S. is not just a country made from international migrants, but from an even larger amount of domestic migration.  I don't have to live in a place today to have some stake in its future.

Inspired by reading https://www.economist.com/special-report/2019/06/22/california-and-texas-have-different-visions-for-americas-future
Labels:

Comments

Post a Comment

Popular posts from this blog

Who are the rentiers?

American cities need more housing. That is obvious to the YIMBY movement. I've heard some attempts to contest that statement, but in the overall range of discourse, it's rare for those who defend opposing viewpoints to respond to that statement directly. Instead, those discussions experience a topic change, either focusing on personal experiences, homeowner "rights", or an attack on landlords. Part of the reason for that topic change is that contending that there is enough housing in cities has to confront the supply and demand topic, and if you're not going to provide more supply, you have to change demand. That line then leads to somewhat hollow arguments about how people don't "belong" in cities and should be elsewhere. It's hard to make that argument without being oblivious to the individuals who are currently making that choice to live in a city despite the very high housing costs, or who would prefer to if they hadn't been forced out by...
Post a Comment
Read more

Commit to Long Term Testing

Expanding testing is very important now.  It's also clearly an area we were unprepared.  We should commit to having testing capacity long term, to both provide more certainty to anyone expanding testing capacity today, and to be prepared in the future. I had some thoughts about how this testing would be best structured.  It's not possible to test for an contagious disease you're not aware of, but much of the infrastructure for doing so can already be in place, ready to be adapted.  That infrastructure would roughly boil down to a) sample collection b) sample handling c) sample preparation d) sample analysis e) materials: reagents, etc. Scaling these up from scratch is quite a bit more work than adapting to a new contagion.  A commitment to having that infrastructure would have helped a lot with the current crisis. Right now, the focus is rightfully on health care workers, suspected cases and essential workers.  In terms of preparation though, in...
Post a Comment
Read more

How to create a resilient Oil & Gas industry

Use Less As part of the current crisis, oil usage is down, and storage around the world is filling up, to the point that oil has traded at negative prices.  As a reaction, many Republican lawmakers want to bailout the oil industry, by providing free access to storage or no-collateral loans.  While it would make sense to ensure oil doesn't get dumped in the ocean, the right way to do that is by producing less oil. These proposals from the Republicans undermine the motivation for the industry to do so.  Workers are important, but they have the same access to unemployment as the other 25 million Americans who are out of work. What this crisis should illustrate is something that has been illustrated many times before, the oil industry is a fragile thing.  In the past this fragility has been demonstrated by massive spikes in prices and fears of shortage, in this case it's the inverse.  Why the fragility?  The simplest explanation is, we use too much....
1 comment
Read more