California’s Slow Flow of Aid, Rising Property Prices Put Renters at Risk

By Tim Shaler
Tim Shaler
Tim Shaler
Tim Shaler is a professional investor and economist based in Southern California. He is a regular columnist for The Epoch Times, where he exclusively provides some of his original economic analysis.
September 2, 2021 Updated: September 2, 2021

Commentary

The US Treasury Department may have to take back some $1.4 billion to $4 billion in funds allocated to help California (including its cities and counties) with paying overdue rent and utility bills.

According to analysis conducted for The Epoch Times of data released by the US Treasury, only a small percentage of moneys allocated to California has been allocated to people late on their rent and utility bills.

This very unfortunate news comes after recent data shows that some 10.5 percent of all California residents live within homes where the lead tenant or mortgage borrower says they are “not at all confident” they can make their next rent or mortgage payment, as property prices in the region continue to show dramatic price gains through June—pricing more and more people out of the home purchase market.

The State of California was one of the entities that participated late last week in a United States Treasury Department-sponsored roundtable to learn best practices from other jurisdictions.

In the most recent data published by S&P CoreLogic Case-Shiller property indices, home values for just the month of June in San Francisco were up 2.65 percent, 2.56 percent in San Diego, and up 1.93 percent in Los Angeles.

Looking at the one-year period, home prices in San Francisco, Los Angeles, and San Diego were up an amazing respective 21.94 percent, 18.70 percent and 17.56 percent from July 1, 2020 to June 30, 2021.

Epoch Times Photo

S&P CoreLogic uses data sets collected by CoreLogic and analyzed according to the economic theories of Robert Shiller, for which he won a Nobel Prize in economic sciences. According to many real estate economists, including this author, the S&P CoreLogic Case-Shiller indices are the best indices available to track changes in home price values in the United States. The data set looks at all home transactions that occurred in June 2021 and compares those prices to the last time that individual home sold.

Across the U.S., home prices in the top 20 real estate markets tracked by S&P CoreLogic were up 1.97 percent during the month of June and up 19.08 percent for the 12 months ended June 30th.

In the western states outside California, home prices also increased rapidly from July 2020 to June 2021. In Seattle, home prices were up 25.03 percent during that period. Phoenix home prices increased even more: up 29.28 percent during that one year time frame.

One reason why the state and municipalities may be having so much trouble getting rental and utility-bill assistance to people in need is that the entities may not have enough workers to review applications. Pension costs are generally up dramatically for many cities and counties, which means they have less money to pay for workers than they otherwise would have.

Retired California State Senator John Moorlach told the Epoch Times, “Most cities have reduced their hiring because of sky-rocketing pension costs.”

Having to spend money on an obligation rather than a higher priority item is called “crowding out.” An item that might normally be higher priority (like getting money to renters, landlords and utility customers before the Treasury may revoke the funding) may not get funded, or crowded out by a lower priority funding item, because the money has to go to the lower-priority item instead.

Many cities and counties in California are facing rapidly increasing pension costs compared to a few years ago because of contractual obligations with their unionized work forces and because of mediocre investment returns before the pandemic.

According to its website, “The S&P CoreLogic Case-Shiller 20-City Composite Home Price NSA Index seeks to measure the value of residential real estate in 20 major U.S. metropolitan areas: Atlanta, Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, New York, Phoenix, Portland, San Diego, San Francisco, Seattle, Tampa and Washington, D.C.”

All five western cities tracked by S&P CoreLogic outside California appreciated faster over the 12-month period than the national, 20-city index.

Tim Shaler
Tim Shaler is a professional investor and economist based in Southern California. He is a regular columnist for The Epoch Times, where he exclusively provides some of his original economic analysis.