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Heating Up a Housing Crisis

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Heating Up a Housing Crisis

California’s solar-panel mandate for new homes will keep the cost of living unaffordable. May 15, 2018
California
Economy, finance, and budgets

California, where a modest, burned-out home in San Jose just sold for nearly $1 million, well above its asking price, is in the throes of a housing-affordability crisis. The state’s latest response to the housing crunch: a mandate that builders install solar panels on every new home in the Golden State.

It’s tough to overstate the high cost of housing in California, even relative to the state’s high incomes. In San Jose, the average home costs 10.3 times the area’s median income, according to Demographia’s International Housing Affordability Survey. This high ratio is not due to some local bubble—it’s 9.4 in Los Angeles, 9.1 in San Francisco, and 8.4 in San Diego. Elsewhere in the country— even in relatively prosperous cities with high growth—housing is more affordable. In Columbus, Ohio, and in Atlanta, for instance, home prices average only about three times the median income. Even New York City, considered “severely unaffordable,” scores just 5.7.

Regulations that stifle building are a big part of the problem. Reason illustrated the absurdity of California’s building rules when it profiled a laundromat owner in San Francisco who has spent four years and $1 million trying to develop apartments on the site of his one-story, non-historic building in a city starving for new housing. It’s so tough to find an affordable place to live in San Francisco that people in their late thirties are living in dorms.

But beyond the zoning and regulatory barriers, mandates that raise prices are an underreported part of the housing price challenge in California. The New York Times estimates that the solar-panel requirement will add $8,000–$12,000 to the cost of a home—close to the price of a year’s in-state tuition at UC Berkeley. One local chapter of Habitat for Humanity says that the charity will have to raise an additional $80,000 to $100,000 per year just to keep building the same number of homes. Advocates insist that solar power saves money in the long run, but if it’s such a great deal, why does California have to legislate it?

The state’s rationale for imposing the directive is, of course, climate change. But as New York Times climate reporter Brad Plumer tweeted, adding 10,000 new apartments in San Francisco would reduce carbon-dioxide emissions in the state by three times as much as the solar-panel mandate because urban apartment-dwellers use less energy than single-home occupants. California is already a green-friendly state. Building more housing that lets more people live in California, even at current energy-efficiency levels, would have a positive effect on emissions. The alternative is forcing people to move out of state and into more polluting jurisdictions.

State legislators made an attempt to expand housing availability with Senate Bill 827, which would have preempted local zoning rules by requiring cities to allow midrise construction near rail stations and major bus stops. The legislation should have pleased climate-change activists by facilitating the construction of new transit-oriented development and increasing density. But powerful environmental groups in California, including the Sierra Club, lined up against the bill, which failed in committee.

With its heavy-handed, top-down approach to zoning, SB 827 raised legitimate concerns about local control over land use—but the bill’s opponents block any plan that would materially increase housing supply in transit-accessible areas. California’s environmentalist-NIMBY axis has been highly effective in driving housing costs to unsustainable levels. The failure to build new housing in America’s most climate-friendly locales suggests that the underlying rationale for California’s rules is not climate, but exclusion.

Photo by Justin Sullivan/Getty Images

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