By David M. Greenwald
Executive Editor
An op-ed published in the San Francisco Chronicle caught my eye: “Why California liberals turn into raging conservatives over housing”—Davis is now a microcosm of the state, only a lot worse.
I learned this lesson early on in my time in Davis—Davis only looks deeply progressive. Clearly, on some issues it is—about 11 percent of Davis voters, for instance, voted for Trump in 2020. It is a community with a strong environmental record.
But when it comes to issues like civil rights and housing, not so much.
As Michael Manville points out this weekend, “California is arguably the deepest blue state in America… But California’s housing shortage threatens to make a mockery of its other progressive accomplishments.”
The bad: “Our state remains deeply segregated by income and race. Its poverty rate, when living expenses are accounted for, is the nation’s highest. Soaring rents and home prices force many people to live far from where they work, contributing to long commutes and climate change. Most visibly and tragically, in a state that prides itself for offering opportunity, over 150,000 people are homeless.”
As he argues: “These problems stem, at least in part, from California’s longstanding hostility to development.”
He allows that simply “allowing more housing cannot by itself solve California’s crisis,” and he points out “it’s also true that California’s crisis has no viable solution that doesn’t involve allowing more housing. And that’s a problem because California’s version of liberalism doesn’t include liberal housing laws.”
Substitute Davis for California and the sentence still works.
The question I had is which way did he want to go with this argument. I actually see two things at work. One is that many have bought into the line of protecting the environment over attacking economic inequality. This is not true for everyone, but there does seem to be a dividing line between the crunchy granola left and the civil rights left.
But that’s not the way Manville goes. He goes right at the comfortable, upper middle-class privileged left.
It is easy for the left to attack housing because housing is generally built by developers, who are seen as their own version of big business capitalists. Developer is a dirty word on the left.
“Our version of progressive politics espouses limits on new housing development,” he writes.
But there is a bit of hypocrisy here as well: “Many liberals own homes, and an old idea in political science suggests that homeownership bends local politics to the right.”
As he pointed out: “Homeowners, though they probably don’t see themselves as such, are capitalists.” He continues: “For homeowners, new development is competition. And no capitalist likes competition. It’s a threat to a vulnerable stock of wealth.”
While I’m not sure I agree with all of this, Manville, an associate professor of urban planning at UCLA’s Luskin School of Public Affairs, cites research that backs this up.
His own research examined statewide public opinion data from Californians and found that “homeowners, even liberal ones, were more likely to oppose housing of every kind.”
He also found that “owning a home did not influence attitudes about national policies, like gun control or health care; it only shifted opinions about housing.”
Manville of course points out that not only does every liberal not own a home, but “perhaps (a) larger issue is that allowing more development just doesn’t seem liberal.”
But what we have seen is that homeownership seems to account for opposition to new housing—most of the time. In other words, here in Davis, we have seen the dividing line, between support for more housing and opposition to it, being age—but age as a proxy for homeownership, with people who own homes less likely to support new housing.
Manville does dive into what I think is a big problem as well—allowing more development really doesn’t seem liberal or progressive.
He writes, “Denser development requires deregulation — relaxing zoning and other rules — and deregulation is an ideologically charged concept often associated with conservatism. So even if development creates liberal outcomes (more affordability and less segregation), it might do so through what looks like an illiberal process.”
Furthermore, “many liberals might not think new housing generates liberal outcomes.”
I’ll admit it took me a while to figure this out. I had a knee-jerk reaction against more development and housing—because a lot of developers and development were “reckless and destructive.” Developers were gutting neighborhoods “to make room for freeways or star-crossed megaprojects.” They were tearing down low-income houses to build expensive condos, creating gentrification, driving out the poor Blacks.
Manville points out: “Development earned some of its bad reputation, and many liberals internalized the idea that fairness required opposing it.”
Finally, Manville points out that “a lot of people, liberal and otherwise, believe more development makes housing more, not less, expensive.”
This also has a rational basis. He writes: “Market-rate development is, at least superficially, strange medicine for a housing crisis, in that it carries all the outward hallmarks of the disease it purports to cure. The housing it produces is often expensive, and the developers who build it aren’t trying to cure anything: They’re trying to make a profit. And because the new housing is expensive, the people who move in tend to be well-off.”
We see this argument all the time.
“Using market-rate development to alleviate a housing crisis involves rolling back regulations to let profit-minded entrepreneurs build expensive housing for affluent people. We shouldn’t be surprised if many people, especially liberals, don’t find that persuasive,” he writes.
But he points out, “[T]he fact that something isn’t persuasive doesn’t make it wrong. Counterintuitive or not, California needs a lot more housing, and the fastest, cheapest way to get housing is to let developers build it.”
It is here that Manville attacks the crux of the Davis argument against new housing—it’s too expensive. We saw this debate for weeks. Whenever a new student housing project came up, the “adults” in the community yelled that it was too expensive and the students just wanted the housing because they knew it would increase the supply and ultimately help them.
Sterling, for instance, got built. It is expensive. It is also sold out.
Manville does a brilliant job here of attacking this issue head-on.
“(A)llowing market-rate development does mean producing expensive housing,” he writes. “But so does NOT allowing development.”
The problem is that we see the expensive housing, we don’t see the impact of not allowing development.
He writes: “When we don’t build, the price of existing housing goes up.” Indeed, “Instead of turning empty lots into expensive homes, we turn cheap homes into expensive homes. The consequences are less visible — it’s easier to notice a new building physically than an old building’s price rising — but also more damaging.”
As he points out: “Blocking supply doesn’t blunt demand.”
The bottom line: “Our housing policy can divert these people into gleaming new buildings when they arrive or unleash them onto older buildings where our lower-income residents currently live.”
This is the problem that we have to come to grips with: embracing the option of more housing means that we have to come to terms with deregulation, and he points out that “deregulation needn’t always be conservative.”
The left embraces it on things like immigration, criminal justice, drugs and the like.
He concludes: “We have a housing crisis because we don’t build, and we don’t build because we have a fundamentally conflicted relationship with housing.”
This was a really good piece—it captured a lot of the dissonance on the left to new housing. The real problem can be summarized as this: we attack new housing that looks expensive but lose sight of the fact that not building turns inexpensive housing into expensive housing. It just happens over time and less visibly.
“…here in Davis, we have seen the dividing line, between support for more housing and opposition to it, being age-”
Not always.
About 15 years ago I asked and answered a question:
“What are progressives for?” I pointed out and all the things they opposed then answered with the one positive thing they were for “High housing prices.”
Nothing has changed.
I guess this is why I’m pissed at you for your continued support of Measure J and its successors. You claim its about process but the practical consequence is it restricts supply and restricting supply doesn’t help solve the housing shortage.
In my mind if you support a process that makes things worse you are part of the problem.
You are attempting to attack a symptom of the problem – Measure J rather than the problem itself the underlying belief by residents that they need to protect whatever it is that they are protecting – home prices, quality of life, the environment.
To me the beauty of this piece is that it lays out in bold terms that this protection comes at a cost, the cost is that it makes housing more expensive for those who don’t already own their homes which is at odds with your egalitarian liberal tendencies.
The price others pay for your lack of traffic impacts and nice view is that they can’t afford housing, and in some cases, it might be housing insecurity if not homelessness itself.
And that is where you attack this nut.
David
Ron G is correct. Your support of Measures J/R/D has been based on the belief that residents should be able to vote on development within their community. The impediments and consequences of that have been pointed out to you numerous times yet you’ve remained in support of the Measures. We cannot separate the process from the consequences. We’ve pointed out that the process itself is an impediment to development due to the transaction costs and risks of the electoral process.
Measures J/R/D also impede the submission of new development proposals and we don’t see the impact of that directly either. That process is creating expensive housing here.
What, do you find it so odd that people of all political persuasions don’t want their community to end up looking like Natomas or Elk Grove?
Because the cost of that policy is exclusionary housing. That means it is achieved on the backs of the lower income people and people of color.
So in order to be politically correct should this be everyone’s future, hooray!
https://consumerenergyalliance.org/cms/wp-content/uploads/2018/08/iStock-841386490-e1535062684131.jpg
There are outcomes in between the extremes that you portray. We can instead have rational planning and design process that avoids SF or Natomas or Elk Grove. A community trying to stay in stasis will instead die. We need to be dynamic and adapting. Trying to freeze Davis in some mythical past will be a failure.
The “extreme” is the “norm” in most places in the Sacramento region (and beyond).
That photo that Keith posted demonstrates the reason.
The Chronicle is a joke, regarding this issue. David himself portrays it as a “conservative” publication.
Not one word in the Chronicle’s (or David’s) article regarding the vast differences in income/wealth that the technology industry has exacerbated in the Bay Area.
What’s actually happened is that (some) who claim to be progressive have adopted conservative, “trickle-down” arguments.
Check out new housing prices in any of these sprawling communities, if you want a shock.
The Chronicle didn’t write the article
This is true. Planning for more housing doesn’t equate to getting more housing built. Builders only build new housing if it’s profitable enough for them. Building is capital intensive and financially risky. So builders only go into markets that are growing and will not build enough to increase supply to negatively effect housing prices. It’s in their interests for housing prices to continue to go up. So simply planning and zoning for housing isn’t going to solve the housing needs in the state.
This is not completely true (or true at all in most cases). As I said, when market rate builders build, it’s where they expect to make money. Simply believing in supply and demand as the basis for housing solutions does not take into account builder behavior and gentrification forces that counteract and overcome any supply forces that weaken home prices. Let me use a smaller scale example. As a home investor you’re told to try to never own the nicest house in a neighborhood. Why? Because it’s the value of that house that is bringing all the other ones up. If a single small builder goes in and knocks down the worst house in a neighborhood and builds the nicest house; the comps in the area will go up and so will the value of the surrounding houses. This applies at a larger level as well. When new market rate homes are built; they are often near the top of their price range (even if they’re not the highest priced homes; they will be in terms of price per sqft). So as gentrification goes, more affluent people that can afford those homes move in and home prices rise for the entire community. Or to make this locally relevant; when Mace Ranch, El Macero, the Cannery or Grande Village started selling their homes…did prices home prices in Davis go up or down? Sure the added added incremental supply may make home prices go down a smidge. But the increased comps and gentrification are far bigger factors at influencing home prices (remember builders build where they can make money, attract new home buyers that can afford their homes).
IMO the solution is for political push/support by state and local government for affordable housing. But even more than simply planning for affordable housing; there should be plans for public ownership of affordable housing. And to combat the real and perceived socio-political problems of public housing slums/projects/ghettos; I think more workforce housing (housing for those that make 120% of the median income) needs to be built as wells putting specific working groups in these homes like newly hired police officers, fire fighters and teachers.
This kind of reasoning seems kind of weak to me. The premise that homeownership leads many liberals to begin to lean right on local politics….there’s something to it….especially when it comes to new housing. But I think the reason WHY is where the reasoning is weak. While many liberals aren’t above wanting to protect their investments (in their homes) to me it’s readily apparent that most liberals really want to simply protect against sprawl. Is that hypocritical? Maybe. But almost any reasoning a homeowner has against new home development is going to be hypocritical so some degree. I’d say that usually once someone buys a home, they tend to be a little older; so many aren’t so hopped up on blind idealism. Many have become pragmatic about what their community can accommodate and can’t accommodate. The most recent example was the killing of DISC. I’d say the number one concern wasn’t concern for one’s economic investment in their own homes. It was traffic.
Mass planning and new housing will help. But that may lead to sprawl. Or a lot of unrealistic infill plans that are expensive to build which only higher end buyers can afford. But what will happen if mass planning and approvals happen is that there will be a build up of a paper lot inventory. During the Great Recession (2008), the Central Valley had a massive “shadow inventory” of paper lots. Builders didn’t build when people couldn’t afford to buy houses. They didn’t keep building lesser expensive homes for people to buy at the time. It took until 2015/16 to really get through this inventory. You’re not going to see mass construction of Levittown houses anymore that is large enough to be an affordable housing option. It’s too financially risky for builders to build on such a scale.
“This is not completely true (or true at all in most cases). As I said, when market rate builders build, it’s where they expect to make money. ”
Mandville makes this same point.
“Market-rate development is, at least superficially, strange medicine for a housing crisis, in that it carries all the outward hallmarks of the disease it purports to cure. The housing it produces is often expensive, and the developers who build it aren’t trying to cure anything: They’re trying to make a profit. And because the new housing is expensive, the people who move in tend to be well-off.”
“(A)llowing market-rate development does mean producing expensive housing,” he writes. “But so does NOT allowing development.”
Not building turns inexpensive housing and makes it more expensive.
I went to great lengths to explain why this is not true.
Homebuilders build expensive housing. The assumption is that we’re both talking about homebuilders building market rate housing. Building market rate housing that doesn’t overcome simple local real estate price bumps and gentrification doesn’t help make housing more affordable. It makes it less affordable. I pointed out that mass construction of housing where supply would overcome those price increasing effects won’t happen because of builder behavior and financial risk intolerance. So yes, not building turns inexpensive houses into more expensive houses. But building new homes that don’t significantly effect the housing supply (and they never will) will make those inexpensive homes even more expensive.
Mandville went to great lengths to show why it is true. His point is the inverse of yours – he argues that not building housing raises prices. You’re trying to argue that building new homes doesn’t significantly effect the housing supply, but clearly not building homes does effect the housing supply. I think you’re argument is flawed. I think what you are trying to say is that building new housing might not be sufficient to meet demand, which I would agree with, but it most likely is incrementally increasing the supply even if imperceptible in the broader market.
What part of my reasoning is flawed?
1. Builders only build in growing markets and not in markets where home prices will decrease or even stabilize?
2. Homebuilders will not build to the point where their homes will significantly add to the inventory will impact home prices.
3. New homes bump up the value of surrounding homes
4. New homes are built to be expensive and attract buyers that are usually closer to the top of the median income or wealth range of a community? And that that increase of higher financially able people don’t continue to affect the local home prices (some of those people attracted to a community start to look at the higher end existing homes on the market which drives people further down the chain of priced homes on the market).
My argument is that gentrification is a more powerful factor on the housing market than tiny incremental increases in housing supply. You disagree with that? Why?
Again, I ask; did El Macero, the Cannery or Grande Village make home prices come down? People keep sticking to supply and demand like it’s some sort of sacred gospel. Sure it’s true and it’s at work here. But it’s not the only force at work and it’s the lesser force at work by far.
Look if you want market rate construction to impact home prices you need the following (I am not a fan of this):
1. Accept sprawl and massively approve new plans for housing (lots of paper lots). Infill is too expensive to make a significant dent in the housing supply.
2. Build out infrastructure to support that housing (roads, water, sewer, electrical..etc…)
3. Reduce the risk building risk for builders. Have federal, local and state guarantees on homes built for builders. Builders fear more than anything, being stuck with homes that sit on the market and decrease in value. Builders capital sources fear it even more.
Let’s walk through this…
1. Builders only build in growing markets…
You haven’t presented evidence that that’s true. I would argue builders build where they believe they can make a profit, Manville agrees with that.
2. Homebuilders will not build to the point where their homes will significantly add to the inventory will impact home prices.
Again, I think that’s a problemtic and unprovable statement. Home prices don’t matter to the individual builder. What matters is project-specific profit. That’s not necessarily contingent on home prices.
Second, and this is the point I made as did Mandville – you are looking at the inverse of this, I’m not saying that prices will fall with development, I am saying they will rise and rise faster without it. There is a difference.
3. Skipping this one for now
4. New homes are built to be expensive…
Point was made and addressed by me and Manville here. We see the expensive new homes going up, it’s hard to notice to the creep of older less expensive housing when housing is constrained.
I did say that the belief in supply and demand being the monotheistic economic factor is starting to sound like gospel. This is starting to feel like talking to an climate change denier or anti-vaxxer. It’s like you want new housing built so badly that you’re willing to believe anything.
So what do you think the greatest factor is in profitable homebuilding? In fact what is examined in financials as indications of success and growth? Top of the line revenue growth. What kind of evidence do you want?
How do you know that? I’ve worked for a builder. I’ve been a builder; a big one and a small one. Have you? “Home prices don’t matter to the individual builder?” Are you insane???? Again, what do you think has the biggest impact on profit? It’s not like the builder can suddenly pay less to workers or less for building materials. Builders can’t control land prices and make it cheaper. Hmmmm….so how can you ensure you’re going to have a profitable housing project?
I didn’t say supply doesn’t effect home prices. But what I’m saying is that you and Mandville fail to understand builder behavior as a factor in whether or not new homes make home prices ultimately less expensive. Simple supply and demand as the sole factor influencing home prices does not factor in new home pricing bumps and gentrification which effects the entire housing market of a community.
I would also argue that the point might not matter much. I think we can agree – or you haven’t argued it anyway – that not building will raise prices. If you’re argument is that developers will stop short of satisfying demand, that’s probably true, but not a reason not to build. Only a reason for state interests to intervene at some point.
My argument is that market rate housing is not a solution, not even a partial solution to the housing needs in CA. My argument is that because builders build for profit they will only build when they know they can get housing prices to go up (through new housing price bumps and gentrification) and because they want to avoid financial risk (so they won’t build to point of add surplus supply).
I’m not denying that simple supply and demand forces aren’t at work. But they are not the only forces. Adding new market rate housing to a community is like taking 1 step forward and 2 steps back in terms helping solve the problem of housing affordability. Adding some homes to the market may get the price per square foot in an area to go down by $5 but the influx of new homes and higher end buyers will likely cause home prices to go up by $15 per square foot.
Yes, which is why I advocate for further support and funding of affordable and workforce housing construction.
And I think Manville’s argument is that if you don’t build, that makes things worse because it increases the cost of housing.
Keith Echols,
I believe you are not focusing on the correct market when you talk about gentrification effects and “bumps” in neighboring homes. Even assuming that the neighboring homes to a new development see an increase in price (an assumption I do not think necessarily holds as strongly as you seem to believe), the correct market to analyze from an equilibrium standpoint is not the neighborhood necessarily. It should include all available feasible alternatives as part of the consumer choice set. New construction is expensive and will come in at the top of the market in terms of psf generally as you correctly note. The main effect of building new housing is not to lower the psf sales price of new housing because, as you correctly note, builders will not continue building new housing if they see falling home prices. The main effect of new construction happens down the supply curve. It introduces more competition to older/lower quality housing stock which now faces greater demand elasticity due to higher quality housing serving as a competitor. Therefore, the proper unit of measurement is not new housing sales prices, but what is happening further downstream in the housing supply. It defies economic logic to believe that adding new housing will make older housing more expensive when that same older housing faces greater competition. Maybe, in a few instances, neighboring housing might receive some spillover price premiums (and I am pretty skeptical of their magnitude, but so be it), but when taken at the level of sufficient market size, the effect of adding new housing supply will quite obviously introduce more competition among older/lower quality housing stock. Note, that this competition may take the form or price competition or quality competition. I believe in Davis, the addition of (slightly) more market rate rental housing has lead to far more competition from incumbent firms on the quality dimension versus the price dimension. Higher quality housing, although it will not show up as a decrease in rent, is still progress and welfare improving for consumers.
@Sage
You’ve done an excellent job of detailing very simple supply and demand market forces…..
No one said anything about measuring new home sales. You added that in yourself.
I see you didn’t read my comments about housing bump prices and gentrification effecting the overall local housing market. Or maybe you didn’t understand it. As I said, many people simplistically cling to supply and demand economics as the as a monotheistic economic force at work in the housing market. They cling to that understanding like it’s gospel. I’ve tried to highlight the counter economic forces but I guess I can’t make you understand them….feel free to ask me any questions about them…maybe I can do a better job of explaining them.
@Keith Echols, sorry that we seem to not be understanding each other. I would be game to send you a rough and dirty model to help sharpen the conversation here. I think adding a little mathematical notation might help sort out some of our differences. Feel free to email me at wesleysagewalker@gmail.com to continue this conversation offline.
One has to look at what’s creating the “demand” in the first place, and is pushing-out people who already live in a given area (e.g., the Mission district of San Francisco, Oakland, etc.).
That’s where the Chronicle’s (and your) argument fails.
The greedy pursuit of the technology industry (and the vast differences in wealth it creates) is largely what’s causing this.
San Francisco is no longer a city where anyone with a middle-class income can survive (unless they’re long-term residents, benefit from rent control, etc.). And that will remain true, regardless of any density that’s forced upon it.
Have you seen how they live in places like Hong Kong? Is that the future you’re advocating?
https://www.businessinsider.com/crazy-pictures-of-micro-apartments-around-hong-kong-2018-1
Or, is it more sprawl, as if the Sacramento region doesn’t already pursue that with vigor? (What happened to the photo of Elk Grove that Keith O posted?)
California has stopped growing. Let it do so, and stop pursuing outcomes which increase demand.
Real estate is a local business. CA may have stopped growing (for now). But the Sacramento region hasn’t.
That is a “choice” dictated by policy.
And it is not an environmentally-friendly choice (e.g., as folks move-out of more crowded, expensive Bay Area locales, despite the state’s ironic efforts to force even more density there).
That is a “choice” dictated by policy.
Not sure how exactly it’s their choice. Is the Sac region embracing it? For the most part yes.
You could put up economic policy walls around the cities and tell everyone to go somewhere else. But people will still come; which unplanned growth will erode the quality of life in the region even worse. As with all things democratic, the best you can do is try to mitigate the damage and make the most of it. Try to plan for the best growth possible (which doesn’t mean accepting all growth) and try to mitigate it’s negative effects. There are no perfect solutions just ones that cause less damage.
Just to be clear, we’re referring to a region that has embraced Barry Broome.
Actually, they won’t – unless economic growth is simultaneously pursued. That’s why housing prices have risen so much in the Bay Area.
Prices are significantly rising in Austin, now. Despite their full and complete embrace of sprawl.
There are places in California that aren’t growing at all – and not because of slow-growth policies.
But there’s a couple of unasked questions regarding this issue, as well.
1) Since the housing market is part of our capitalistic system, aren’t higher housing prices one way to control growth? That is, demand drops-off when housing prices become too high? Isn’t that how supply and demand is supposed to work (and in fact – does work)?
Isn’t that the same reason that perhaps half the folks in Davis and the region came from somewhere else (e.g., the Bay Area)?
What exactly is wrong with that, from an individual’s perspective? Who are the fools who are “waiting around” for housing prices to drop in a given, expensive area (rather than moving to a locale that offers a more-realistic housing price/income ratio)? Good luck with that.
2) If the claim is that higher housing prices are preventing people of color (or some colors) from moving to “higher-opportunity” zones, what will happen to those communities that are “left behind”? Detroit comes to mind.
Are places like Davis supposed to absorb the entire population of South Sacramento, Stockton, etc.? Leaving Detroit-like shells, behind?
Wouldn’t it be better to encourage investment in those communities, in the first place?
I’d argue that Davis is proof to the contrary. Davis begrudgingly approved new housing and not very much of it over the past decade yet still grew by over 3,000 people. And its not like it pursued a plan for economic growth either.
I’m not sure to what degree I agree or disagree with much of your following statements (I find myself in agreement with much of it but with a lot of caveats). But I do believe solutions should try to focus on the source of the issues and not keep trying to fix the outcome to try to make everything better.
UCD (and government employment in Sacramento) have essentially functioned in the same manner as economic development, regarding employment. And really, Sacramento functions that way for all of the surrounding communities.
True – Davis had no choice. Nor has the university shared much of the benefit it receives, with the city itself. For the most part, it just exports (fiscal) costs and impacts.
(Note the differentiation between the city’s finances, vs. individuals who work for UCD or government employers in Sacramento.)
Davis plays second fiddle to UCD, by far.
I know what he’s saying. He’s making a simple supply and demand argument (adding to the supply will soften prices or at least lessen rising prices). What I’m saying is that he isn’t taking into account builder behavior (only building where home prices rise and not building enough to make significant impacts on housing supply and pricing) and not taking into account new home price market price bumps and gentrification.
As I said adding to market rate housing supply is taking one step forward (adding to supply and softening prices) and two steps back (builders building in rising markets….adding “fuel to the fire”, constraining supply, new home price market price bumps and gentrification). gd…dmn it…now I have that Paula Abdul song stuck in my head.
And what I’m saying is the inverse of this – if you fail to build, the costs of housing will rise even if you believe that the costs won’t fall with building.
Yeah, they’re going to rise if you don’t build (supply argument). But home prices are going to rise LESS if you do NOT build more market rate housing (for the reasons I have given).
What you’re saying is essentially; my goal is to walk 100 feet. I’m making a little progress when I take a step forward. But then you’re not acknowledging that you’re also taking two steps backwards.
At this point, with Davis voters blocking the addition of new land for development via Measure J/R/D, the only builders willing to even try in the Davis market are local ones. They know they’re going to have to pay for at least one election to get the land annexed. They know what Davis voters want generally. If a subdivision is approved, it’s going to contain housing at different zoned densities, some affordable housing component (probably by just dedicating the land and letting a nonprofit build it), it’s going to contain parks and amenities and some kind of sop to the people who want all sorts of transportation alternatives.
They’ll provide cheaper housing in part of it, because that’s the price of admission to the housing development market here.
The voters have approved two projects that are on the city periphery: one for students, and one for seniors. The key question is whether the voters would approve a regular subdivision anywhere near major roads and existing neighborhoods. The key issues with any Measure D vote are traffic impacts and near-neighbor concerns. Those who express great concern about truly affordable housing are likely ‘no’ voters anyway, but builders who work here know they have to include some kind of affordable component.
I’m sure they have a spreadsheet going that says how much the single-family homes will have to sell for in order to cover a lower margin on the remainder. I doubt that any of them would go through the process if they weren’t allowed to build any s-f homes. So I’m guessing that within the next 2 – 5 years we’ll see 1 – 2, maybe 3, projects come forward for consideration for Measure D votes, and they’ll manage to check most of the boxes needed to get something built in this town. Some of those homes will be lower cost, and some will be affordable housing, and the rest will be profitable for the builder.
@Don,
We were talking about California in general. But I mostly agree with how you see all this shaking out in the next 2-5 years in Davis….something will be sold to the voters enough to get some housing built. All those things the voters want (including smaller housing units, density, transportation…etc…) will be tacked on to the cost of the market rate homes. And that’s fine. I’ve said in the past that I against new market rate housing unless it has a tangible benefit for the community.
My point being that those market rate homes built will actually make home prices in the Davis market rise. The amount of market rate housing built will not be enough supply to overcome the gentrification effects on the housing market.
I’ve only read to the above sentence, but there is a real dissonance in that sentence. The “not so much” with respect to housing, that I can buy, but I’m going to be very interested to see how the Vanguard makes the case that “not so much” applies to Davis’ attitudes and actions toward civil rights.
Simple: It all goes back to that student comment, ‘everyone should be able to afford to live here’.
.
The problem with that argument is that it is treating the symptom rather than treating the underlying disease. New housing does not by definition have to be expensive. In our current reality, it is expensive, but that is because it is designed to be expensive. Change the design and the expense comes down.
Fewer square feet is the best starting point. We, as a society, have become accustomed to houses with lots of square feet. Many of us have houses where whole rooms are never used for daily activities. That is wasted space … wasted space that is expensive to build. Fewer bathrooms is another design change that would make new houses less expensive. I could go on, but you get the picture.
Matt,
The smaller housing argument ignores the effects of fixed costs which can be quite substantial. As you should know from your economic training, an increase in fixed costs with even quasi-linear marginal costs will tend to lead to higher-end production due to simple optimization calculations. I submit to you that fixed costs in housing are very real drivers of housing size. This comes from everything relating to lot size restrictions, design fees, financing costs, developer opportunity costs, etc.
Further, the idea of building fewer bathrooms assumes several things: 1)construction lenders will be comfortable with deviations from established design parameters 2) there exists sufficient market demand for bare bones housing that can still be profitable despite the fixed costs that will be incurred.
Essentially, due to high fixed costs, and with an already constricted supply relative to demand, it is more rational for homebuilders to travel further out the price curve with amenities to optimize their returns. I think the model should be clear, but happy to clear it up.
Wesley, following up on your point above, in your experience, what percentage of a project is typically fixed costs (lot size restrictions, design fees, financing costs, etc.) and what percentage is non-fixed (labor, materials and subcontractor costs, etc)?
I’ll hold off my other questions until I hear your answer to the one I posed herein.
Matt – here is a great article from Brookings – looks like it’s a four part series from last year – https://www.brookings.edu/research/making-apartments-more-affordable-starts-with-understanding-the-costs-of-building-them/
This is a depressing article from Bloomberg from earlier this year – https://www.bloomberg.com/graphics/2021-us-housing-construction-costs/
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California got to be California as a result of development. Los Angeles is one huge development. Silicon Valley is one huge development. Everything south of the Golden Gate Bridge on the Peninsula is a continuous development
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You are trying to cram a universal meaning into the word “liberal.” You are trying to make “liberal” into an ideology. That is, in my opinion, a fool’s errand. Liberals, and their political counterpart, the Democratic Party, are a diverse collection of interest groups held together by moderately compatible policy goals. They are very different from conservatives, and their political counterpart, the while the Republican Party, both of which are built, in a much more united way, atop a common, and relatively narrow, group of relatively abstract, ideological commitments.
The following quote is from the book Why We Are Polarized by Ezra Klein. I believe it applies here.
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That observation about liberalism flies in the face of your desire to make them as homogeneous as conservatives are.
And that doesn’t even begin to deal with the fact that many, many liberals are fiscally conservative while at the same time being societally liberal. You are never going to find that kind of split ticket in a conservative. If they are societally conservative, they will always be fiscally conservative as well.
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The problem with that argument is that it is treating the symptom rather than treating the underlying disease. New housing does not by definition have to be expensive. In our current reality, it is expensive, but that is because it is designed to be expensive. Change the design and the expense comes down.
Fewer square feet is the best starting point. We, as a society, have become accustomed to houses with lots of square feet. Many of us have houses where whole rooms are never used for daily activities. That is wasted space … wasted space that is expensive to build. Fewer bathrooms is another design change that would make new houses less expensive. I could go on, but you get the picture.
That’s a joke, right? April 1st isn’t on top of the page, so no one within earshot is laughing. I guess all those orchards in Mountain View and Sunnyvale (and for that matter Irvine) from my childhood were a figment of my imagination, as was memories of Lincoln and Elk Grove as a small towns surrounded by fields, and for that matter there isn’t a five-story, 700+ student housing complex out my living-room window.
Mass death also works.
Progressive housing laws.
“Bought into the line”? Are you F-ing kidding me? It’s simply a different viewpoint. You speak as if people with different views are mindless sheep.
I like granola. The crunchier the better.
But howzabouts I put it, ” . . . between the environmentally-minded left and the woke, social-justice worrier left” . . . same thing, different jab.
Shame on them for being any of those three things.
No, many of them take advantage or corporate welfare, i.e. subsidies and giveaways.
Progressives, on the other hand, are blinded to developer greed (only the ‘dirty’ ones) by progressive ideology.
Shame on them. They should remain liberal and poor their whole lives.
An old idea also suggests that a liberal is a conservative that’s been mugged . . . but seriously most people become ‘right-er’ when they first have to deal with large sums of money and risk and dealing with bureaucrats and fees.
He says that like that’s a bad thing. But really, unless they are selling their home for the purpose of profit, they are not. They are simply people who put most of their life’s earnings into a single investment and don’t want to have it drop in value, nor see the neighborhood they bought into destroyed by dewy-eyed progressives and their developer ‘partners’ (who are actually just using them like puppets – i.e. their hand is firmly up their rear end.)
Again, depends if you ever plan to sell. And the ‘new development’ would have to be on a mass scale to make a wad of difference. Somehow all that sprawl in Sac didn’t decrease rents or prices.
That’s not true. I know people with businesses who welcome competition as healthy — and some even believe more businesses raise all boats. Of course there is a limit to that – but the blanket statement is simplistic at best.
Many people with houses are what we call ‘house poor’. They have an expensive asset but are living in it and paying mortgage and often end up with less spending money and thus a lower level of living. It’s insulting to insinuate home ownership automatically equals wealth. Some put all they have into it. And yes, any investment is vulnerable – that’s the nature of it.
Measure J. So no, substituting Davis for California doesn’t work. Davis is much worse. Because of that Measure you claim to support (“though it could be modified” – oh, please spare me the ‘modification’ B.S.)
And this is where dewy-eyed progressives become the shills of greedy developers and push for conservative deregulation of the building and real-estate industry. How’s your utopia coming along?
“The left” doesn’t exist as defined here. There are many who have nuanced views. I know that is verboten here, where you’ve got to be “all in”.
We who?
This ‘left’ spoken of here doesn’t exist. It’s two different factions, the main common bond may be hatred of Trump. There is a back room on campus that belongs to a traditionally ‘left’ student group. But what ‘left’ means has changed. The current ‘left’ students are progressive build-it types. On the wall is a poster from a bygone era (not that long ago) that is for a vote against a local housing development – once a ‘left’ value (not building on fields). The current young progressive ‘build-it’ students probably have no idea what the poster is from or what is stands for.
And so the poster remains.
Using ‘left’ interchangeably as this article does serves no one, except its author.
Some bloggers, though they probably don’t see themselves as such, are capitalists.
There was a movie made that tried this solution. A bunch of super heroes opposed it. There was a follow up TV series that showed how some of the left over people were happier when all the people were gone and unhappy when they were brought back (of course some of those unhappy people ended up being terrorists….because well it’s a super hero movie and the heroes gotta fight somebody).
This is the crux of the matter, but if the goal is to provide large quantities of housing that’s affordable to a range of low-to-middle-income households, why pursue strategies that we know are going to result in only token results? If the public (in the form of the city, or the county, or the state) wants affordable housing, and the private sector has no interest in providing same except as trivial add-ons (and markups) to their profitable products, then the public needs to step up and provide the money to build it.
The alternatives being proposed don’t fix the problem and create major problems of their own, so I don’t understand the push to pursue strategies that are guaranteed to fail.
They are making a simple supply side argument; which is that every little bit of new housing added to the supply helps soften the rise in home prices.
It’s wrong and if you want the reasons you can read my exhaustive comments on the subject above.
I expect you’ll have the opportunity to vote on taxes for that purpose in the next year or so. I wonder whether any small city can raise enough taxes on enough things to generate sufficient revenues to actually build any significant amount of affordable housing. Seems the state might be better positioned to fund that. But there’s a city council subcommittee working on this subject as we speak.
So the cost of housing is high in Davis and many homeowners struggle to make it, so the remedy is to increase the taxes on the already stretched homeowners? I can’t imagine what any subcommittee could actually come up with that won’t infuriate a great amount of residents.
“I can’t imagine what any subcommittee could actually come up with that won’t infuriate a great amount of residents.”
That is the safest bet ever.
The low-hanging fruit is to get the voters to vote to tax other people. Property transfer tax and hotel occupancy taxes come to mind.
It’s an interesting question. I suspect that Davis as it is; is not positioned to fund affordable housing on it’s own. However, I do believe such things like affordable housing can and should be funded through economic expansion. I do believe there may be some things that could help the city towards more affordable housing. For example using city land for affordable housing. If the city is able to acquire and build housing; that it should hold on to the housing and only sell it off (as affordable housing) when it needs to….essentially turning the city into a landlord. For example: I’ve seen in some cities where they have a first right of refusal on foreclosed properties so that cities may turn them into affordable housing.
The City of Davis has a pretty sketchy history with affordable housing. My personal opinion is that municipalities don’t make very good developers or landlords.
City land that is available has been considered for economic development (Fifth Street) as has DJUSD property. When I look at those parcels, I wonder if they’re anywhere near big enough to accommodate both economic development and any significant amount of housing. There is always tension between those two uses.
Bear in mind that the city of Davis actually went through an entire economic development process a decade ago, all the way up to issuing Requests for Proposals after identifying sites for business parks. And also had a full housing element task force that reviewed all sites in town, ranked them, etc. We’re really great at discussing things here. It’s the action phase that gets shot down.
The history of public housing is one of funding that is pulled away year after year as the housing becomes sketchier and sketchier. I have proposed that affordable housing also include worforce housing that includes those making 120% of the household median income as well as targeting specific groups in the city such as first year teachers, fire fighters and police officers. I believe that the workforce housing element added to the affordable housing units as well as continued funding will help to stabilize the “sketchier” elements of public housing.
Even though I wasn’t a resident of Davis 10 years ago, I was around a lot and am aware of what Davis was up to a decade ago. Yes, Davis can talk a lot about stuff amongst it’s own and continue to spin it’s wheels and go nowhere….you’re not wrong about that. Davis wouldn’t know business development if someone came to town and thumped the city council over their heads with a bag of millions in cash and said “I want to open up a big business here and employ lots of people”. Real business development means going out to businesses (in reality people) and making them feel welcome and believe they have a certain chance of being successful in a community….that they have the backing of the people in charge (which sucks in Davis because it’s the inmates in charge of the asylum and not the staff). That means forging relationships and partnerships with big developers who have a history of building facilities for businesses. It means not taking on an antagonistic relationship with UCD (I know that sounds odd coming from me) and working with them for some common goals (though not obligated to work for them). Davis’ current business development model is essentially; here are the conditions and requirements in which we will allow you the privilege to do business in our city; now submit your proposals. The lack of real business development in Davis should be a criminal offense.
Just happened across this video, which I’d highly recommend (in regard to Wall Street investment in single-family houses – for the purpose of renting them out). This is a “new” thing, which arose as a result of the last housing crash.
This is a significant factor in the Sacramento region. And unless you believe that Davis is an island within the region (in regard to the housing market), it also impacts Davis.
https://www.youtube.com/watch?v=gu4tC3px6mc&t=6s
Probably important to note that other UCLA professors do not agree with Manville (the author of the article whom David cites in his article).
(The response to that can be found in the link, below.)
https://www.planningreport.com/2019/05/27/uclas-ananya-roy-housing-inequality-market-driven-displacement
Except that Manville specifically says, simply “allowing more housing cannot by itself solve California’s crisis,” but he points out “it’s also true that California’s crisis has no viable solution that doesn’t involve allowing more housing.”
And to be clear, I am not a believer that the only thing we need is supply. My argument here has been the inverse – not having supply is driving housing costs, but I am not arguing that simply building housing fixes that. But by the same token, not building housing, harms it. So like Manville, housing has to be part of the solution.
The problem though, Ron, is you don’t even believe that there is a housing problem. So in that way, you aren’t really even part of this discussion.
That quote is not in the article I cited, but this is:
It’s really an “affordability” crisis (for some) – not a “supply” crisis.
Scarcity drives affordability.
More quotes from the article (UCLA author), above:
“There are also many flawed arguments to the YIMBY school of thought, which is the reason I did not join my urban planning colleagues at UCLA in supporting SB 827. ”
Earlier you charcterized it as Manville’s colleagues not agreeing with him, the reality is that Manville is the dominant thinking, and you are citing the minority view – hence the quote above.
I guess you’d have to tally the numbers of those who agree with Manville, vs. those who don’t at UCLA or elsewhere. I’m not that familiar with it – I just became aware of the article, that’s all.
And whoever has the majority opinion “wins” and is “right”. Sort of like how it works on the Supreme Court, which seems to be dependent upon who appoints them.
This is what you said: “Probably important to note that other UCLA professors do not agree with Manville” – so you actually started this line of discussion by mischaracterizing the situation.
In any case, the person you are so religiously citing, also doesn’t agree with your position. She believes there is a housing a crisis. That different aspects of society are experiencing it differently. “I see housing justice as a racial justice issue,” she said and I completely agree. Where we might differ is how to solve it, because I don’t believe you can do it without market rate housing as the engine towards housing justice. But I don’t see where her preferred solution is other than to argue that it can’t be a supply-side only solution – which I also agree on.
I take it from this quote that there’s more than one who disagrees with Manville:
But, I’ll look forward to your scorekeeping in a future article, as I’m not that familiar with it.
I find no “religion” in any of this. But I suspect that my views are quite a bit closer to the professor I’m citing.
The professor I cited does provide some other possible solutions in her article – including solutions used in other countries. If I quote much more from it, I might as well copy and paste the entire article.
Uh…guys….
Basically her view and opinion is of a narrower subject of the impoverished compared to the broader views and opinions of her collogues. So her view of solutions isn’t going to include those that discount some at the lower end of lower socio-economic status but help the middle class looking for housing affordability. Basically SB 50 is an attempt at a “one size fit all” but none best solution. Where Roy’s opinion is that policy should focus on the impoverished.
So who’s right or wrong in this argument about YIMBY building policies (in this case upzoning) and if it’s good or bad for the impoverished is a matter of perspective and intention/focus.
Here’s a link to Professor Storper’s article – probably the one that Manville disagreed with (in addition to disagreeing with Professor Roy). I’m not planning to quote from it.
We can title this, “the battle of the professors”, I guess.
https://www.planningreport.com/2019/03/15/blanket-upzoning-blunt-instrument-wont-solve-affordable-housing-crisis
The easiest way for Davis to improve affordability and increase supply is for UCD to build even more student housing. I think the rental market for apartments is already starting to soften as a result of recent construction. I was recently talking with a local multi-property owner and he was starting to worry about filling his rentals.
It will be interesting to see what happens to the vacancy rate as all the new rentals come on line and UCD returns to in person learning. A balanced vacancy rate is supposed to be around 5%. At what vacancy rate markets stop supplying capital for new apartment construction might be lower. At what vacancy rate do builders stop taking risk is another concern. It will be interesting to see where we are at when the dust settles and the market equilibrates after the recent spate of construction.
True story, that.
I suspect what we will see is an attenuation of increases of rental/purchase prices, and a modest decrease in rental prices… too many variables for a clear crystal ball.