How Not to Subsidize New Housing in California

Timothy L. Coyle
Consultant specializing in housing issues

It is heartwarming to hear that in Richmond, with its super-high housing costs, a teacher is starting the academic year as a first-time homebuyer – affordably living in the town where she teaches public high school. Less gratifying is that this teacher and her fiancé bought their home at the expense of, say, a cop or fireman or firewoman from the same community.

Aren’t those cops and firefighters too a necessary swatch of the fabric that makes up Richmond? Essential, they are. Don’t they suffer also from the absence in all locales around California of a decent, safe and affordable place to live?

Leaders in Sacramento can do so much more to get workers – from all sectors – into housing they can afford. I’m a conservative urging more government involvement in private housing markets. But, let’s not try to appease one group – with narrow subsidies – when we can exercise leadership for the benefit of all.

Don’t get me wrong. Schoolteachers – with relatively low purchasing power – suffer greatly from today’s housing crisis in California and mostly can’t afford to live in the communities where they work. Combining average salaries of two teachers – as high as $140,000 per year – is at least $100,000 short of enough income to afford the median-priced home in most school districts.

That need, alone, justifies some kind of government help – which is what this school teacher got in a big way to buy her $510,000 house. The 23-year-old qualified for and received down-payment assistance and a low-interest-rate loan from the state. She also got a zero-interest loan of $20,000 to cover closing costs. In all, the teacher received $530,000 in government assistance.

I’m certain that even half of those benefits would be appreciated by the tens of thousands of police officers and firefighters whose housing struggles in California continue unabated. Indeed, the affordability situation is as lousy for individual police officers ($85,400) and firefighters ($84,600) as it is for teachers. It’s worse for line workers in local factories. Even at $20.00 an hour, the earnings of a family of four headed by a factory worker aren’t far from than the national poverty rate, so its chances of buying a home in the state are pretty slim.

So, I whole-heartedly believe government intervention is, in situations like these, warranted. But, what sort of government intervention? Given the number of families affected it’s not likely government has the resources to help everyone. And, where does one draw the line? Are all public employees to be covered? With subsidies of $500,000 for each person assisted? We’re probably talking about hundreds of thousands of households struggling to pay the rent or cover a monthly mortgage payment – a demand greater than state and local treasuries.

Yet, we continue to operate existing programs as if they were some kind of “housing sweepstakes”. Since there’s not even close to enough money to go around to fully fund an individual based on need, the assistance one gets from those programs is a result of good fortune more than anything else. Indeed, the subsidy one ends up getting is likely determined by how lucky they are, or what place in line they filled. Or, like the program our Richmond school teacher used, based on occupation.

That’s not fair. How does the needy cop or firefighter qualify for the aid? What about the public health employees? What about the workers at the sanitation district? The park district? The water district? Don’t they matter?

There is a solution, though – an equitable way for government to intervene. It starts by government acting responsibly when it comes to housing. What’s the subsidy for reactivating redevelopment, for example? In truth, bringing tax-increment financing won’t cost government a dime. Let the inherent value of an improved piece of property subsidize those public employees and their dreams of owning a home. Isn’t that what redevelopment used to do?

Simultaneously, state government should strip neighborhood groups of the ability they enjoy now of bringing a multi-million-dollar development to a grinding halt. Repeal the California Environmental Quality Act (CEQA) and replace it with a responsible environmental-mitigation prescription. Following that, get rid of rent control, inclusionary zoning and all other local programs which have been sold to voters as housing help for lower-income families yet, in practice, discourage new development entirely.

The state also ought to limit the fees locals charge which only add directly to the cost of new housing. And, the state should stop deluding itself, believing its current top-down prescriptions for local land use actually produce more housing. They don’t. Instead, Sacramento should assign targets for development and reward compliant jurisdictions with infrastructure funding.

More and more, the state’s business leaders are worried that without this kind of leadership from Sacramento and individual communities to alleviate the housing supply and affordability crisis, California will surely lose workers to other states. Says Maria Salinas, CEO of the Los Angeles Chamber of Commerce: “We have yet to see a wholesale, all-in commitment by leaders to treat [the housing] situation as the emergency it is. The government and the private sector must collaborate to address the barriers to more housing, whether regulations, cost inefficiencies or neighborhood opposition.”

You see, to these business leaders addressing the reforms outlined above is eminently doable. If not, what is the purpose of government, anyway? They believe as do I – and so should our elected leaders around the state – government is in its right place when it acts to benefit the greater good.

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