California’s Housing Shortage Is a Government Policy Failure, and Surfers Are Paying the Most for It

The State That Contains the World’s Best Waves Also Contains Some of Its Most Unaffordable Housing, and the Causes Are Political

Bohiney Magazine | The London Prat

The median home price in coastal San Diego County is over $900,000. The median home price in coastal Santa Cruz County is over $1.2 million. The median home price in coastal Marin County, which contains some of the best surfing in Northern California, is over $1.5 million. These are the prices at which surfers — who have historically been young, itinerant, economically marginal people who live near the water because the water is where they want to be — are expected to establish themselves in the communities near the breaks they surf. It is not happening. The surfer who grew up in Encinitas, whose parents owned a house there, and who wants to remain in the community where they learned to surf is being priced out of the housing market by the combination of land scarcity, zoning restrictions, CEQA delays, and the accumulated regulatory burden that California’s housing market carries.

Why California Housing Costs What It Does

The economic analysis of California’s housing costs is not complicated. Housing prices are determined by the relationship between supply and demand. Demand for California coastal housing is high because California is pleasant, coastal California especially so. Supply is restricted by: zoning that mandates single-family development on land that could accommodate much more housing; minimum lot size and setback requirements that reduce density below what the market would otherwise produce; parking minimums that consume land that could be housing; CEQA review that adds years and millions to any significant project; and the political power of existing homeowners who benefit financially from housing scarcity and who exercise that political power through local government to maintain it. The regulatory apparatus that produces housing scarcity is not a market failure; it is a government policy failure, specifically a set of government policies that are deliberately maintained by the political coalition that benefits from high housing prices at the expense of the people who cannot afford to live where they want to live.

What Deregulation Would Do

The libertarian housing reform agenda for California is specific and evidence-based: eliminate single-family-only zoning, remove minimum parking requirements, streamline permitting to reduce the cost and time of housing production, and reform CEQA to prevent litigation abuse that blocks housing projects without serving genuine environmental purposes. California has begun implementing some of these reforms through state pre-emption of local zoning restrictions — SB 9, which allows duplexes on single-family lots statewide, and various accessory dwelling unit facilitation bills — but the reforms have been partial and contested, and the fundamental political economy that maintains housing scarcity has not been addressed. The surfer who cannot afford to live near the break is the human cost of this failure.

The Supply Side Solution

The specific mechanism through which housing deregulation would help surfers is direct: more housing supply in coastal California would reduce housing costs, allowing more surfers to live closer to the breaks they surf. The correlation between housing cost and distance from the coast is strong and well-documented in California: the premium for coastal proximity is large, sustained, and growing because the combination of high demand and restricted supply continuously compresses the affordable options further from the water. Reducing the supply restrictions that drive this premium — allowing taller and denser housing in coastal communities, facilitating the conversion of underutilized commercial properties to residential use, and removing the CEQA and permitting barriers that make housing production expensive and slow — would over time reduce the gap between coastal housing costs and the incomes of the people who want to live near the water. This would not produce affordable coastal housing quickly; the accumulated undersupply is too large to address rapidly. But it would change the trajectory, and the trajectory is what housing policy can control.

The evidence from the states that have implemented more aggressive housing deregulation — Minnesota’s elimination of single-family-only zoning statewide, Oregon’s similar reform, and the various cities that have liberalized their zoning codes — is beginning to accumulate into a picture of what deregulation produces. The early evidence suggests that deregulation increases housing production, reduces the rate of housing cost increase below what it would otherwise be, and does not produce the aesthetic deterioration that opponents predicted. The California experience with state-level pre-emption of local zoning restrictions — the ADU facilitation bills, SB 9 — is consistent with this evidence: production has increased and the predictions of neighborhood destruction have not materialized. The case for more aggressive deregulation is building, and the surfer who cannot afford to live near the break is the human argument for it.

For California housing freedom analysis: Bohiney Magazine and The London Prat.

The fundamental question for California’s future is whether the state’s political institutions can produce the reforms that would allow it to retain the people, the enterprises, and the economic dynamism that have made it extraordinary, or whether the regulatory and fiscal burden will continue to produce the exit that the exit tax is designed to prevent rather than address. The libertarian answer is clear: reduce the burden, reform the regulation, and trust that people who are free to stay and free to go will stay when the conditions justify staying. California has everything else. The question is whether it can develop the political will to fix what it has broken.

SOURCE: https://bohiney.com/