by Mark Dempsey
I’ve come to believe a sizable percentage of reporters don’t know that their sources are funded by the government, or that they’re repeating government messaging not just occasionally but all the time. – Matt Taibbi
After reading some columns (here and here) advising how to solve California’s problems building affordable housing in the supposedly un-conservative Sacramento News & Review, I was amazed at what these columns omitted.
Then I noticed who was funding the reporting: the Solving Sacramento journalism collaborative, part of a larger organization—”Solutions Journalism“—whose funders include the likes of the Bill & Melinda Gates Foundation. Gates also promotes the “Green Revolution” in Africa so those former colonies will remain indebted to their colonizers for fertilizer, energy, and genetically modified crops.
In other words, the omissions in these “Solutions” have an agenda. They omit what is unpalatable to the powers that be. The “Solutions” people are not getting government funding, but it doesn’t take a political scientist to see the interests of a governing oligarchy and its non-government cronies and think tanks are identical.
Next, they’ll promote “public/private partnerships” like this.
What is missing from the discussion of options to make housing affordable? Perhaps the biggest omission is what keeps real estate prices high. Those who have studied such prices1 say 80 percent of increases stem from land costs.
In Sacramento, land speculators purchase outlying agricultural land for a few thousand dollars an acre, then, after they persuade local governments to permit development, sell it for 50 – 100 times that much to builders.
If the speculators swap for income-producing real estate like apartments or shopping centers, that 5,000% – 10,000% gross profit defers income tax indefinitely too.
That means Sacramento’s public policy favors commute-lengthening outlying development (sprawl) that is roughly twice as expensive to maintain as compact development, increases global warming, and produces a class of plutocratic land speculators called “developers.”
The late Sacramento County Supervisor Grantland Johnson declared that it’s widely acknowledged throughout the state that the region most in the developers’ hip pocket is Sacramento—not a contest we want to win.
Were these facts mentioned in the “Solving Sacramento” articles? Nope. According to them, government regulation makes things expensive. Government is bad! They must be reined in by partnering them with the private sector!
Yet publicly-owned utilities like Sacramento’s Municipal Utility District are cheaper (35 percent for SMUD) than privately-owned utilities like PG&E.
As an added bonus, SMUD executives are not facing charges of negligent homicide because they defunded maintenance and started both fires (power lines) and explosions (gas lines) like PG&E. So…cheaper and better managed by public ownership.
Another omission: Could government build housing? Nixon stopped federally-built affordable housing in the ’70s. Then, while he was cutting taxes for the wealthy roughly in half—and with his successor raising payroll taxes eightfold—Reagan cut HUD’s affordable housing budget by 75 percent. Even New Deal programs for affordable housing were destined to fail.
England built “council housing” to make housing affordable following World War II, but Margaret Thatcher sold that housing to its occupants at discount prices, pleasing British voters for the time being, but setting the scene for rising U.K. home prices for years to come. The U.K. has a similar affordable housing problem now.
Incidentally, did you know that thanks to Proposition 13’s tax limitations, unless California’s local governments collect their infrastructure costs in up-front building fees, they won’t get reimbursed?
That’s in addition to the $12 billion annually the State forfeits because of Prop 13’s commercial property loophole—commercial property is never reassessed if less than 50% changes hands, so many properties remain assessed at 1978 values plus the modest increase Prop 13 permits.
So the “let’s be like Texas and deregulate” pundits are ignoring the fact that Texas has no such Prop 13 tax limitation, and even taxes petroleum at the wellhead while California doesn’t.
Yes, California building fees are large—and vary significantly—making home purchases less affordable, but lower property tax requires a big up-front fee and does not incidentally make holding property off the market affordable, so it also enables land speculation too.
The “Solving Sacramento” pundits who decry California’s (Ronald-Reagan-signed) CEQA law as the source of expensive housing are simply ignoring too much to be credible. That such advice appears in a supposedly left-leaning publication is all the more deplorable.
1Rethinking the Economics of Land and Housing by Josh Ryan-Collins, Toby Lloyd, and Laurie Macfarlane
—
Mark Dempsey is a former member of a Sacramento County Planning Advisory Council.
I agree totally with this article. The private sector costs more. The differences between SMUD and PG&E are startling. Government always does things better in the long run. The sole mission of the private sector is to extract the maximum amount of profits at the expense of ordinary citizens.
This article is full of fantasies and distortions of history. We have to operate within the context of what’s feasible today, not what we wish of how it could be. Our institutions will always have flaws that impede social progress, so we need to focus on what we can change. CEQA abuse is one such feasible alternative.
The one issue that the article correctly highlights is the land swap tax loophole. That creates bizarre incentives with no apparent social benefits. We need to end that.