Before the energy crisis, before the workers’ comp crisis, before the state budget crisis, the California housing crisis began, endured and today continues.
As California’s first permanent crisis, housing is an excellent metaphor to understand how our state came to be paralyzed with seemingly permanent emergencies–and why we tolerated them for so long.
The housing crisis began to fester in California when we convinced ourselves that we could have it both ways: On the one hand, we could stop housing (and declare a victory for the environment), and on the other, we could still have lots of homes for everyone.
These statements may not have been truthful, but they were convenient: We convinced ourselves the problem was actually the solution.
That is why today interest rates may be at an all-time low, but our inability to buy a new home is at an all-time high.
Everything wrong with California happened to housing first.
Think taxes are too high? Local governments discovered post-Prop. 13 that new housing in California could simultaneously be a whipping boy and a source of new money. Today fees and regulations routinely add $100,000 to the cost of a new home. Yet overtaxing was seen as the answer, not the problem.
Over-regulation? Thy name is housing. Planning for a new home can take 10 years or longer.
This morass of delay and bureaucratic gamesmanship goes by lots of different names: planning, environmentalism, NIMBYism, whatever. No business suffers more regulation from people who know less and do more damage than housing.
More regulation meant less housing, another problem disastrously disguised as a solution.
Insurance crisis? Twenty years ago, trial lawyers discovered that a loophole allowed them to sue homebuilders if their homes did not stay perfect for 10 years. Almost every condo project in California was sued. That is why the construction of condos plummeted 95% after insurance companies stopped offering coverage. In California, construction defect litigation drove one of our most important insurance companies, Golden Eagle, to insolvency.
And when it happened, too many shrugged their shoulders as if it didn’t really matter. What matters is that too many people started believing that going out of business was "business as usual" in California.
Many of the people involved in regulating housing will be surprised to hear they bear some responsibility for our housing crisis. After all, they will tell you, they have been sponsoring government assistance for housing for as long as they can remember.
On a good day, what they accomplished helped fewer than 1% of the people in this state make the most important investment they will ever own: Their own home.
As to the other 99% who worried about how they or their children would ever buy their first home, they didn’t really matter. What mattered was the people who destroyed housing could claim they had tried to save it.
And their credo is what essentially created every permanent crisis in this state: Trying was the same as doing.
We let them get away with it, and we are paying for that mistake today.
And the media went along with it, too. Just check the Internet for news stories of major housing projects being shut down. Last year alone, tens of thousands of new homes were swept off the market because of opposition to new housing.
Now check these same stories; and after reading about how this was a great environmental victory, see how often a story includes any hint that stopping new homes contributes to the California housing crisis.
Or flip it around and check the news clips about the California housing crisis and see how often a Sierra Club official talks about the damage to housing their policies create.
It’s a sign of how deep this crisis is that many people will deny that any such (self-evident) link even exists between crushing new homes today and the housing shortage tomorrow. They’ve been denying it for 30 years. But today it is harder than ever to deny the increasingly obvious. But still they do.
Ironically, if you want to get all the facts, figures and rhetoric on the importance of housing in California, you can find it at the website of the Governor’s Secretary of Housing, still left over from the Davis administration. They talk a great game. But if you want to get the actual policy, go to the Coastal Commission website, and there you will see how, in daily practice, the state of California shuts down new housing opportunities with stunning nonchalance.
The new governor will have to change that. For without a revival in housing, there can be no recovery in California.
If the housing crisis is California’s oldest permanent emergency, the Governor and the people around him should also know that it is the easiest solved: We don’t need $27 gazillion in government subsidies for new homes, and we don’t need new taxes.
We just need state and local government to get out of our way as we try and build what our customers are demanding so loudly: New homes for Californians. The resulting jobs and equity build-up for new homebuyers would help our economy blossom like a neatly tended German garden.
It is something the old Governor could have done anytime. Or the new governor could do right now.
Mick Pattinson is the president of Barratt American in Carlsbad, California. He is the past president of the California Building Industry Association and the San Diego finance co-chair of the Schwarzenegger for Governor campaign.
