Oct 28 2018

Dunn and Done: Prop 10 Will Make The Housing Crisis Worse

Scenic beaches, majestic mountains, a temperate climate and a world-class economy are a part of what makes California such an attractive place to live.

But today fewer people are able to call the Golden State home. High housing costs have created an affordability crisis unprecedented in its intensity and reach. And that crisis fuels rising poverty and homelessness while creating real headwinds for the state’s economy. Over the last eight years, median California home prices have surged 46 percent, compared to 19 percent for the rest of the nation, pushing more Californians to spend 50 percent of their incomes on shelter, to their economic peril. It’s no surprise California has the highest poverty rate in the nation.

It’s Economics 101: When supply is constrained, and a product is in demand, prices skyrocket.

The solution? Build more housing, of course. With a shortfall of 3.5 million homes in California, it’s way past time to incentivize production. Transit corridors and urban edges are ripe for creative approaches to new residential development.  Tired retail centers are a prime canvas for introducing new housing. We’re famous for creative building. We can do it. When we substantially increase housing supply, prices will moderate.

Instead, what do we get? Proposition 10.

This Nov. 6 ballot measure claims to provide a solution: Let your city or county place restrictions on the ever-increasing rent landlords can charge tenants. Current law limits their ability to control rents on apartments, and prohibits rent control on single-family homes. Prop. 10 proponents argue that expanding their authority will restore housing cost stability to the rental market and ease the affordability crisis.

In reality, Prop. 10 would drive costs higher because housing supply would be further constrained for two key reasons:

• Apartment builders, faced with artificial rent restrictions that ignore the rising costs of building and maintaining a property, are dis-incentivized to build new communities.

• Rental owners, rather than be subject to artificial rent caps, could remove their property from the market, instead placing their properties with vacation listing services.

The impacts of California’s deficient housing supply, and the corresponding high-cost of owning or renting a home, are real. Homelessness is on the rise, food insecurity and poverty increasing, educational attainment for young, vulnerable populations is continuously at risk. There is no question that increasing supply, choices and affordability of housing is the root of the solution.

How did California’s housing shortage get to be as grim as it is? Mostly it’s the result of years of insufficient new-home construction. Californians’ core values include an unparalleled love of the environment. Everyone wants miles of protected open space, clean air, thriving flora and fauna. But somehow lost in the conversation was providing roofs for our children.

Then there’s the self-centered use of California’s strict environmental rules to shake down deals, exact pet project funding, labor agreements, a new amenity here or there, or just simply tie up a project in litigation for the sole purpose to thwart change of any kind.

Orange County — known for its innovative businesses, renowned universities and diverse economy — suffers as well. Years of insufficient new-home construction resulted in as many as 70,000 homes short of what’s needed to meet current demand.  That reality, coupled with an aging population, declining enrollment in elementary schools and loss of millennials to other states threatens to turn Orange County the nation’s largest old folks’ home instead of a thriving metropolis.

Further, according to California’s Employment Development Department, more than 300,000 workers commute into Orange County for work each day, nearly 10 percent of the county’s entire population. But while the county’s booming economy and strong employment base provide myriad job opportunities for working professionals, its housing supply deficit and corresponding affordability crisis leave them with few housing options, exacerbating traffic impacts and longer commute times.

Prop. 10 is just another bad idea to “fix” the housing affordability crises in California. Vote it down. Let’s work on the real solution to affordability: Support for new homes and new families in every Orange County community.

Lucy Dunn is president and CEO of Orange County Business Council and former director of the California Department of Housing and Community Development.

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