The Real Resource Question: What Modern Monetary Theory Demands of Mahan, Swalwell, Porter, and Steyer on California Housing

by Larry Henry

An Editorial Submitted to the Davis Vanguard

California’s housing crisis is not, at its foundation, a mystery. The state does not lack land. It does not lack population willing to build or to occupy housing. What it lacks, systemically, is the political will to deploy public fiscal capacity at a scale commensurate with the structural failure of private housing markets to produce shelter that working Californians can afford. The four leading Democratic candidates for governor who have engaged most seriously with housing, Matt Mahan, Eric Swalwell, Katie Porter, and Tom Steyer, all agree on this point to a degree that would have seemed remarkable a decade ago: California’s housing shortage is primarily a product of regulatory barriers to construction. But agreement on the diagnosis is not agreement on the cure; and the cure is where Modern Monetary Theory (MMT), applied carefully to the constraints a state government actually faces, has something important to say.

The theoretical stakes are worth stating plainly at the outset. MMT’s core insight is that the operative question in any economic policy debate is not ‘how do we pay for it?’ but ‘do we have the real resources to do it?’ At the federal level, a currency-issuing sovereign like the United States faces no intrinsic financial constraint on its spending; it faces only real resource constraints, the availability of labor, materials, land, and productive capacity. California is not a currency issuer. It cannot print dollars. It must tax or borrow before it spends, in the conventional accounting sense. But this does not make MMT irrelevant to California’s housing debate; it relocates the question. The relevant questions become: Is California deploying its existing fiscal capacity to expand the real productive base for housing construction? Is the state allowing private financial power to extract value from the housing system faster than public investment can create it? And are the candidates proposing interventions that treat housing as a public good or as a private commodity with a thin subsidy layer applied at the margins?

With those questions in mind, we turn to each candidate in turn.

Matt Mahan: The Productionist Case

San Jose Mayor Matt Mahan brings to this race something the others largely do not: an operational record. He has not merely proposed policy on housing; he has actually governed a major city through the process of removing regulatory barriers and reducing construction fees, and the results have been substantive. His signature argument, that capping impact fees, industrializing housing production in California factories, and simplifying building codes that ‘increase costs without making us safer’ is the next phase of work after deregulation, reflects an understanding of housing economics that goes deeper than most of his competitors.

From an MMT perspective, the industrialization argument is genuinely important. MMT does not dispute that private markets can, under the right conditions, expand real productive capacity; it disputes the assumption that they will do so automatically, without public intervention in the conditions of production. Mahan’s proposal for factory-built modular housing addresses a real resource constraint that is not primarily financial: the productivity of California’s construction sector, which remains organized around craft-based on-site methods that produce housing slowly, expensively, and with high per-unit labor costs. If factory production can reduce per-unit costs by thirty to fifty percent, as proponents credibly argue, this represents genuine expansion of the real productive base for housing, not merely financial reshuffling.

The limitation in Mahan’s framework is distributional and structural. His campaign is funded substantially by wealthy technology executives, and his broader economic posture, which explicitly resists what he calls ‘populism on the right and the left,’ signals a politics oriented toward enabling private construction markets rather than substituting public provision for market failure. Lower construction costs achieved through industrialization will expand the universe of market-rate housing that pencils financially for private developers. Whether that expansion reaches households at the bottom half of the income distribution depends entirely on market conditions, land costs, and financing constraints that Mahan’s platform does not directly address. An MMT voter must ask: who captures the value created by deregulation and industrialization? If it flows primarily to land owners and developers, the sectoral balance problem that drives housing unaffordability is not solved; it is simply reproduced at a different price point.

Eric Swalwell: Speed Without Structure

Eric Swalwell’s housing theory is, in essence, a theory of velocity. California’s permitting apparatus produces delay and uncertainty that function as a hidden tax on housing production; remove the uncertainty through mandatory deadlines, and more housing will be built faster. His signature proposal, a 90-day shot clock requiring every state agency responsible for housing approvals to render a decision, is procedurally clean and politically appealing. ‘If we put more deadlines in place,’ he has said, ‘we will see fewer reports and more rooftops.’

MMT does not dispute that bureaucratic delay constitutes a real resource waste; any process that consumes labor time without producing output is a drag on the real economy. Mandatory approval timelines are a sensible administrative reform, and Swalwell deserves credit for making them the centerpiece of a concrete governing commitment rather than a vague aspiration. He has also spoken directly about the need to increase state revenue to meet California’s health care and education obligations, which reflects at least an implicit understanding that fiscal capacity matters.

But velocity without structure is insufficient as a response to the scale of California’s housing crisis. Swalwell’s deregulatory instinct, his framing of California as a ‘blue state held down by red tape,’ treats the permitting apparatus as the primary binding constraint on housing supply. This is at best a partial diagnosis. Private developers do not build below-market housing because their cost of capital makes it financially irrational to do so; no amount of permitting speed changes this arithmetic. The households most severely damaged by California’s housing crisis, renters spending more than fifty percent of their income on shelter, workers commuting three hours daily because they cannot afford to live near their jobs, are not waiting for faster approvals; they are waiting for housing priced at levels the private market will not produce under any regulatory regime.

The deeper theoretical problem is Swalwell’s treatment of homelessness. He has stated explicitly that he does not see the problem as a resource challenge, preferring to direct existing resources toward nonprofit and faith-based organizations already doing the work rather than creating new state programs. This is, from an MMT standpoint, precisely the wrong frame. Homelessness is not a coordination problem that civil society can solve at the margin; it is the tail consequence of a housing cost distribution that has pushed the lowest quartile of the income distribution entirely outside the private market. Treating it as a resource-adequate situation in need of better coordination reflects the fiscal conservatism that MMT most directly challenges: the assumption that the state’s spending capacity is more constrained than it actually is, and that the appropriate response to market failure is to optimize around it rather than to directly fill it.

Katie Porter: The Consumer Advocate’s Limits

Katie Porter arrives at the governor’s race with the most distinctive intellectual formation of the four candidates considered here. As a consumer protection attorney, a bankruptcy scholar, and a protege of Elizabeth Warren’s who spent years holding financial institutions accountable for predatory practices, she understands, better than any of her competitors, how private financial power extracts wealth from ordinary households. Her record as California’s watchdog on the 2012 national mortgage settlement, during which she secured over eighteen billion dollars in relief for Californians cheated by their banks, demonstrates that she can deploy legal and institutional authority to constrain private financial extraction.

This formation is genuinely relevant to housing policy, and it is where Porter’s platform is at its most MMT-compatible. During her 2024 Senate campaign she argued explicitly that Wall Street speculation is a primary driver of California’s housing crisis, and she has supported increased federal investment in Section 8 vouchers and the low-income housing tax credit. As a gubernatorial candidate she has endorsed Senator Scott Wiener’s Abundant and Affordable Homes Near Transit Act, which would legalize multi-family housing near all transit stops statewide. She has also called for standardized statewide permitting applications, innovative construction techniques, and creative financing programs, while insisting that building at the pace of California’s ‘competitor states’ could reduce housing costs by roughly twenty percent.

The MMT critique of Porter’s platform is not that her instincts are wrong but that her consumer-protection framework, powerful as it is, stops short of the direct public provision logic that the scale of California’s housing failure requires. Porter’s signature move, holding private actors accountable for predatory behavior through legal and regulatory intervention, is a corrective strategy; it constrains extraction without replacing extraction with public production. When private markets structurally fail to produce a public good, the consumer protection response is to regulate the failure; the MMT-compatible response is to treat the state’s fiscal capacity as a direct substitute for market provision. Porter has not gone to that second step on housing. Her platform remains, at its core, a plan to make private housing markets function more equitably, rather than a plan to deploy public fiscal capacity to produce housing directly for the households private markets will not serve.

There is also a tension in Porter’s political economy worth naming. Her elimination of state income tax for Californians earning below one hundred thousand dollars is a genuine progressive redistribution measure, and it reflects the correct MMT intuition that working households are resource-constrained in ways that limit their real economic participation. But a revenue reduction of that scale, absent a corresponding commitment to revenue replacement through corporate and wealth taxation, creates a fiscal gap that would constrain the state’s capacity to fund direct housing investment. Porter has not fully worked through the sectoral balance implications of her tax proposal in relation to her housing ambitions.

Tom Steyer: The Most Complete Framework

Tom Steyer’s housing platform is, among these four candidates, the most structurally complete from an MMT perspective, and it warrants the most extended treatment precisely because its completeness is also accompanied by the deepest political tension.

Steyer’s framing, that ‘there is no silver bullet in housing; it is silver buckshot,’ captures something important that the other candidates miss. Housing unaffordability is not a single-bottleneck problem; it is a multi-variable equilibrium that requires simultaneous intervention at the level of regulatory barriers, construction cost, land value capture, public direct investment, and fiscal capacity. Steyer’s three-part housing platform, lower costs, unlock land, and invest more money in affordable units, is the only one of the four that explicitly includes direct public investment in affordable housing as a structural component rather than a supplementary program.

This matters in MMT terms because direct public investment in affordable housing is categorically different from regulatory reform or permitting speed. Regulatory reform creates conditions for private capital to produce more housing; direct public investment produces housing independent of private capital’s return requirements. The gap that produces California’s housing crisis is precisely the gap between what private capital will produce at market rates and what working households can afford to pay. Steyer’s commitment to close that gap through direct public investment, combined with his proposals to restore commercial property tax equity through Proposition 13 reform and to make corporations pay their fair share, reflects a more complete understanding of the state’s fiscal role than any of his competitors in this analysis.

Steyer’s Proposition 13 commercial property reform is particularly significant for an MMT audience. One of the least-discussed drivers of California’s housing crisis is the fiscal emaciation of local governments that resulted from Proposition 13’s compression of property tax revenue. Local governments starved of property tax income have chronically underinvested in the infrastructure, transit, schools, and public services that make dense urban housing politically and practically viable. Transit-rich neighborhoods that could absorb significant new housing development often lack the local fiscal capacity to serve that density adequately. Restoring commercial property tax revenue at market rates does not merely raise money in the abstract; it rebuilds the public investment capacity that makes the kind of dense, affordable, well-served urban housing that MMT would recognize as a genuine public good actually deliverable.

Steyer’s single-payer health care commitment is also relevant to housing policy, though the connection is less obvious. Housing unaffordability does not exist in isolation from health care cost; California households that spend forty to sixty percent of their income on housing and another twenty percent on health insurance are not merely housing-burdened, they are comprehensively squeezed by two simultaneously failing private markets. A governor who addresses both simultaneously through direct public provision in health care and direct investment in housing is applying the correct MMT logic; the state’s fiscal capacity should substitute directly for private market failure wherever the failure is structural and the public good is essential.

The political tension is biographical and structural. Steyer founded and ran Farallon Capital, a hedge fund that manages private credit assets, for decades before his pivot to progressive activism. A candidate formed at the apex of private credit creation carries intellectual assumptions about economic causation that do not always survive contact with heterodox monetary theory. His instinct to describe his housing platform in terms of ‘silver buckshot’ rather than in terms of the state’s unconditional obligation to produce affordable housing for households that markets fail reflects, at minimum, a lingering commitment to the logic of market supplementation rather than market replacement. But on the policy substance, his platform is the most structurally adequate of the four.

What MMT Actually Demands

An MMT-informed voter evaluating these four candidates on housing should resist the temptation to score them on ideological proximity to heterodox monetary theory and focus instead on the practical question that MMT poses: which candidate’s platform is most likely to expand real productive capacity for housing, constrain private financial extraction from the housing system, and deploy California’s fiscal authority to directly provide housing for the households private markets will not serve?

On those criteria, a ranking is possible but should be held provisionally. Steyer’s platform is the most complete, combining supply expansion, direct investment in affordable units, and structural fiscal reform. Porter brings the strongest analytical framework for understanding how private financial power distorts housing markets, even if her platform stops short of the public provision logic the crisis requires. Mahan’s industrialization argument addresses a genuine real resource constraint that the others largely ignore. Swalwell’s velocity reforms are useful but insufficient as a standalone response to structural market failure.

But the deeper MMT verdict on all four candidates is the same: none of them has yet committed to treating housing as a fully public good, produced by the state at cost for every household that private markets price out of decent shelter. California built public housing before and abandoned it under political pressure from real estate interests. The scale of the current crisis, one hundred fifty thousand Californians unhoused on any given night, eighty percent of families unable to afford a median-priced home, a generation of workers in their thirties still renting because ownership is financially out of reach, demands a recommitment to that principle at a scale commensurate with the failure it is designed to correct.

The candidate who comes closest to that commitment, and who has the broadest structural platform for getting there, is Steyer. But an MMT voter should press all four of these candidates, at every debate and forum, on the question they have not yet fully answered: not how they will reform the private housing market, but how and when California will directly build the housing that market will never build.

Larry Henry is a monetary historian and political economist based in Berkeley, California, working on a history of American monetary sovereignty from Hamilton to Modern Money Theory.

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