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The Not-So-Secret California Crisis that’s Coming for the Rest of America

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Affordable housing is the kind of issue that people love not to think about. It rarely generates a lot of political heat, and in rural areas it’s barely an afterthought.

But guess what the top issue in the California legislature is this year.  In California, and increasingly in much of America, a lack of affordable housing is the key issue, and also a burning problem that drives a lot of the other things we think about in policy.

On the Great Ideas Podcast with Matt Robison, guest Sibley Simon – an innovative affordable housing developer – described how California is sending the rest of America a scary postcard from the future of what an affordable housing crunch looks like, and he explained the kinds of fresh ideas they are trying and that we will need to solve the problem.

Listen to the full conversation here:

 

This conversation has been condensed and edited.

Why does housing matter so much, and why is it becoming a crisis in California?

It has become a defining issue that affects where most people can live, what jobs they can have, what healthcare they can afford, whether they can pay for education, how much we have to spend on transportation, and how big a problem we will have on climate.

The definition of affordable housing is people spending no more than 30% of their gross income on housing. In California, the majority of households are now spending more than 50%. That’s why it’s the issue that has the most bills in the state legislature: 31 bills were signed by the governor last month that were all housing bills.

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But it’s not just California. It’s a growing problem in a lot of places. In Maine, one out of every 5 households is spending half of their gross income on housing.

What’s driving the issue in California?

To mix metaphors, California is the 800 pound canary in the coal mine. There are two factors. One is that we make land use decisions at the local level. So between our various laws and zoning restrictions, we’ve managed to just about outlaw creating most types of housing in most places. The second is that California has been really great at creating jobs. In the San Francisco area, in the last decade it created over eight jobs for every unit of new housing built. And of course, we see these two factors elsewhere around the country, and we will continue to see more and more of it.

How big a problem is it?

In California, we would have to build 200,000 units of housing a year just to keep up with increasing demand. In a typical year, we create less than half of that. We build about 20,000 units a year with public funding that goes strictly to affordable housing for lower income people. And then there are developers seeking a high return investment, something that gets them a 20% return, so they build to the high end of the market. That amounts to maybe 80,000 units of housing a year. So together, we get only half of what we need, and neither of those models build for the middle class or lower income working households or retirees on fixed incomes.

That leaves a giant gap. We’re talking about a couple of trillion dollars to build the housing that’s missing just in California. In the last decade, if everywhere that needs more housing had built all there was demand for, there would be 7.3 million more homes in the country.

But if there’s not a high rate of return on this type of housing, and nowhere to build it in California, how on Earth are you able to do it? How can we solve the problem?
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We fill the financial gap by working with investors who are seeking low risk, solid, dependable returns, and who are glad to be doing something positive with their investments.  It turns out that there is a good amount of capital out there looking for investments like that. It’s a lower return, but a fixed rate, and socially responsibly investing is popular.

And how do you find land? Especially the kind you don’t have to pay for, so we can make housing more affordable? It turns out that there’s a ton of non-profit owned land in the hearts of our towns and cities.  Some of it is social service non-profit…but then there’s a whole huge category that no one ever thinks of, which is churches and other religious institutions.

And as they’re seeing their members moving out because of housing costs, we’re actually getting overwhelmed with churches calling us saying “we want to build housing on this land.” The maximized-profit developers aren’t a fit for it. And usually their sites are not a fit for public dollars either because of federal rules. So we’ve devised a model that works for them. It builds their balance sheets and income to that institution, and they’re doing incredible charitable work in their community.  This is especially true for churches that are predominantly serving minority racial and ethnic communities, looking to reduce displacement of people of color from the urban and suburban areas where there.

And this is the kind of thing that gets support from both parties?

Yes.  For example, there’s one problem we often run into working with churches, which is that they’re required to have a lot of parking. And they only fill that parking up on Easter Sunday, but they’re also typically not allowed to use any of that parking for some other use.

We worked with a state legislator, Buffy Wicks, who is a former Obama administration official, on passing a bill saying that if churches want to build housing and some of it is affordable housing for lower income people, then the church can decide how to share its parking between its use and the housing use. And it wasn’t a Republican/Democrat thing.  It was a hey, here’s a sensible change that we can all agree on thing.

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We share edited excerpts from the Great Ideas podcast every week that explain how policies work and present innovative solutions for problems. Please subscribe, and to hear more about fixing the affordable housing crisis, check out the full episode on Apple, Spotify, Google, Anchor, Breaker, Pocket, RadioPublic, or Stitcher

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