Housing Hurdles in California
by Thomas Sowell
(February 4, 2004)
A new study shows that you need an income of about $104,000 to buy an average home on the San Francisco peninsula with a 20 percent down payment. Since the average price of a home in this area is more than half a million dollars, the 20 percent down payment itself would be more than $100,000.
These aren't mansions we are talking about. Often they are little nondescript houses packed pretty close together.
Who can afford to buy a home in such an area? Not many. California is among the states with the lowest rates of home ownership. Moreover, many of those who do own homes in coastal California bought them back before the state's home prices went sky high in the wake of severe building restrictions promoted by environmental extremists.
Things are not much better when it comes to renting. A calculation of how many hours someone making the minimum wage would have to work to pay the rent on a one-bedroom apartment in this general area showed that, in San Jose, a minimum-wage worker would have to work 168 hours just to pay the rent.
At 40 hours a week, that means working the whole month to pay rent, with nothing left over for frills like food and clothing. Tell this to someone on the Left Coast and the answer will come back immediately: Raise the minimum wage!
If people cannot afford even a one-bedroom apartment while making minimum wages, they certainly cannot afford it when they are unemployed -- and minimum wage laws have a track record around the world of increasing the unemployment rate.
Many people are so struck by California's outrageous housing prices that they do not realize that money is just one of the costs of the innumerable restrictions and requirements imposed on anyone who wants to build anything in those parts of California where environmental zealots are dominant -- which includes most of the coast and the whole San Francisco Bay area.
Whether costs take the form of money or of long commutes, highway congestion and the deaths that inevitably result, the fundamental problem is that few people stop to think through the consequences of turning fashionable notions into laws.
Among the many restrictions on building in those parts of California dominated by environmental zealots are restrictions on the height of buildings. Some people think that it is enough to say that they don't want California to start looking like Manhattan.
But what if we stop and think through the consequences of height restrictions? First of all, rents are going to have to be higher, but that is just the beginning.
Why are rents going to have to be higher? Because two five story buildings take up twice as much land as one ten-story building housing the same total number of people.
In a state like California, where the cost of land is often higher than the cost of what is built on the land, using twice as much land per apartment means that rents are going to have to be much higher -- perhaps twice as high or more -- to cover the additional costs created by height restrictions.
With more land being required to house the same number of people, this means that the whole metropolitan area is going to have to be larger than it would be if it could expand upward instead of just outward. More people are going to have to commute to work.
Those who impose height restrictions can ignore such things. A few blithe words about not wanting their community to look like Manhattan are usually about all the thought they give to the subject. It would never occur to them to ask the real question: How much don't you want it to look like Manhattan? How high a price are you prepared to pay?
A doubling of rent and 3 additional highway fatalities a year? A tripling of rents and 10 additional highway fatalities a year? Whatever the answer, the point is that height restrictions are not a free lunch -- whether the costs are measured in money or in lives.
A lot of people who cannot afford it are paying heavily for the ego trips of environmental zealots.
Thomas Sowell has published a large volume of writing. His dozen books, as well as numerous articles and essays, cover a wide range of topics, from classic economic theory to judicial activism, from civil rights to choosing the right college.
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