New Housing Laws Will Increase Housing Costs in California

A man stand by his car in front of his home facing an apartment complex in Newport Beach, Calif.,on Jan. 8, 2021. (John Fredricks/The Epoch Times)

Commentary

The housing bills Gov. Gavin Newsom recently signed into law—after the recall, of course—are being touted nationally as a way to ease California’s housing affordability crisis. Vox called it “a step toward addressing the housing crisis.”

It’s the opposite. It will make the housing crisis worse by increasing costs.

I covered the legislation in detail in The Epoch Times in July. Basically, the three measures are supposed to make it easier for people to expand housing, such as doubling the number of houses on a lot. Something sure needs to be done in a state where the median price of a home is $800,000—even more in coastal areas.

But the real meanings are 1: They undermine local control of zoning. 2. They cast uncertainty on the market.

A study (pdf) by the Terner Center for Housing Innovation at UC Berkeley summarized its view of the key bill, Senate Bill 9, by Senate President Pro Tem Toni Atkins (D-San Diego):

“SB 9 has potential to expand the supply of smaller-scaled housing, particularly in higher-resourced, single-family neighborhoods. In this way, SB 9 builds on recent state legislation that opened up access to accessory dwelling units (ADUs) for virtually all California single-family parcels. What distinguishes SB 9 is that it allows for the development of new, for-sale homes, either on a newly subdivided lot or through the conversion of existing single-family homes into multiple units.”

And: “Our analysis shows that approximately 700,000 new, market-feasible homes would be enabled under SB 9.”

But the key problem is the bills destabilize property rights. When you buy a home, you depend on existing laws to protect your ownership rights. For Americans, those property rights laws extend back far into the past, even to the Middle Ages.

If those laws are changed substantially, you even can sue the government for the loss of value, what is called “takings.” That’s named after the “takings clause” of the Fifth Amendment to the U.S. Constitution: “No person shall … be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”

This is an incredibly complex area of the law. And my old friend, the late Orange County Register columnist Alan Bock, used to invoke a libertarian, saying: You have a right to property, but not to property values. For example, suppose you buy a house with a great view of the Pacific Ocean. But the neighbor in front of you, following existing law, builds a second story to his house, partly obscuring your view. Do you have a right to sue him for the reduction of your house’s value? The answer: No, because your neighbor was following the law.

Although not directly addressing these new California laws, the Center for Progressive Reform discussed similar situations:

“Often when the government regulates the use of a person’s property, the effect on the particular person is adverse. For example, when the government zones an area for residential use, the owner of a particular property might like to open a convenience store or dog kennel, which might bring a greater economic return than a residential structure. Until 1922, the Supreme Court did not consider such diminution of the value of a particular person’s property incidental to a general regulation as raising an issue under the Takings Clause.

“In that year, however, in a celebrated opinion by Justice Oliver Wendell Holmes, the Court held that if a regulation went ”too far,” it could constitute a taking that would require just compensation by the government. Since that time, the question has remained, how far is too far.”

But let’s return to the overall big picture. By destabilizing all property rights in California, the new state laws reduce the control owners have over their property. That includes future owners, including developers. So: Why would developers pour money into new developments if they are not sure they could make a profit?

New laws beget new laws. This isn’t the end of the tinkering with property laws, but the beginning. Nobody knows what will be passed next year, during an election year, or in the years following.

Already, the state government has imposed such laws as mandating that a certain amount of new housing must be for lower-income people. Well, who pays for that benefit for the poor? The middle class that occupies the other, non-subsidized housing units, whose costs are raised to pay for the lower-rent units. The money has to come from somewhere.

The government has been avoiding building its own housing “projects” because of such disasters as the Cabrini Green Rowhouses and Extensions in Chicago, whose construction began in 1942. It became a byword for inner-city crime, poverty, and drug abuse. It was torn down in 1995.

Passing such laws as SB 9 also precludes working for such real solutions as reforming the California Environmental Quality Act and other regulations that severely limit development. California has plenty of vacant land, even in urban areas. Just look around. It just needs to be freed for development.

Here’s a simple idea. The California High-Speed Rail boondoggle already has acquired more than 1,400 pieces of property. Cancel what even Newsom called a project that “would cost too much and take too long.” Sell the property to developers for multi-family homes and return the money to taxpayers.

Doing so wouldn’t harm property rights, but strengthen them. Instead of tampering with long-existing property laws that homeowners have depended on, it would return property the government seized to private use.