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A Possible Solution to California’s Housing Crisis

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Most people who buy a new home believe the neighborhood is perfect, and after they move in, any additional residents will ruin the neighborhood with more traffic congestion. Most new residents don’t notice the glaring hypocrisy.

California needs more housing. Everyone recognizes this fact, even the NIMBYs who oppose all new developments. California builders and developers fail to produce sufficient quantities of housing because they meet opposition at every turn. Nobody wants more housing because they associate housing developments with increased traffic congestion, pollution, and the destruction of the natural environment.

California suffers from an economic malady known as the Tragedy of the Commons, an economic situation within a shared-resource system where individuals acting on their own behalf allocate resources in a way contrary to the greater good. So how does this apply to California housing?

Each individual in California wants to be the last new resident in their neighborhood. The NIMBYs lobby their local politicians to block new development because they believe it will improve their quality of life. And since local governments directly control development approvals in California, politicians pander to NIMBYs or face defeat at the polls; thus almost no new residential developments obtain approval in California, creating a shortage of housing that adversely impacts everyone.

Most economists believe the only solutions to Tragedy of the Commons type problems is for a government entity to step in and force cooperation for the greater good because individuals acting in their best interest fail to produce a desirable result. So how could the NIMBY problem be addressed in California?

The State established the California Coastal Commission to address a similar problem. The actions of individual developers along the coast was ruining a valuable resource used by everyone. The Commission regulates all land use within the coastal zone and serves as another layer of regulatory approval. We need something similar in housing.

California Housing Commission

A California Housing Commission would have a simple mandate, “To ensure sufficient housing is provided to meet the needs of a growing population and economic growth.” This agency would oversee County and City General Plans to ensure a balance between residential and commercial development. Further, the Commission would exercise discretionary approval power over projects of a certain size to confirm the residential and commercial balance is maintained throughout the cities, counties, and regions in California.

Do we really need another agency to approve plans? Unfortunately, yes we do. Without this agency, each local governing body will continue to act in its own best interest and exacerbate the housing shortage.

For example, the City of Brisbane, California, has a site with a Caltrain stop where the developer wants to put in 4,400 housing units in addition to commercial and retail development. The City rejected this plan in favor of an alternative with 8.3 million square feet of commercial space.

“We’ll provide the commercial,” Clifford Lentz, mayor of Brisbane, told the Chronicle. “San Francisco will provide the housing.”

I appreciate his honesty, but I find his statement appalling. It’s a clear example of why a California Housing Commission is necessary.

If California created a Housing Commission, projects like the one above would have a large housing component in order to obtain the commercial development they want. If the City of Brisbane wants the tax revenue from several million square feet of commercial space, then they must provide housing for the people who will work in that space. Doesn’t that seem like a fair compromise?

San Mateo County created more than 50,000 new jobs since 2011, but only 3,000 new housing units. Without adding housing, building out 8 million square feet of commercial space in Brisbane will dramatically exacerbate the problem for the City’s workforce and the entire region.

Municipalities all want commercial and retail space because it generates sales tax revenue. None of them want residential development because it incurs the same costs for city services, but provides far less revenue, creating the Tragedy of the Commons problem.

Governor Brown recently tried and failed to push as-of-right development approval for high-density housing. While this would have helped provide more housing units, it failed to address the root of the problem.

The simplest solutions are often the best solutions. Mandating the County and City governments must provide sufficient housing in their General Plans and project approvals is a simple solution that would solve the problem over time. It would eliminate the preference for commercial development at the exclusion of housing, which is the source of the long-term shortage. This solution would work.

Would such a solution be politically feasible? I don’t know. How much worse does the problem need to get before we are willing to act?