The Economic this week asks the provocative question: why is one of America’s richest states also its poorest? The article attributes some of this to NIMBYISM.
One of the more interesting factoids is that, while California has the largest number of poor people at 7.4 million, it also has one of the largest shares of people in poverty.
The article notes that, while most people would think the poorest state in the nation might be Alabama or Mississippi, or perhaps West Virginia in the heart of Appalachia, California, depending on how you interpret the data, could be there as well.
California ranks about in the middle in terms of the “official poverty line” but “the official poverty line” is the same in every state and takes no account of different living costs or of public assistance. So in 2011 the Census Bureau came up with a Supplemental Poverty Measure (SPM), which most social scientists think is a better way of comparing levels of poverty across the country.
“By this yardstick, 19% of Californians were poor in the three years 2015, 2016 and 2017, the highest rate in the 
country excluding the special case of Washington, DC. The national average was 14.1%.”
While California could be considered the poorest, it “is also among the richest. According to the Census Bureau, its median household income in 2016 was $11,500 above the national average.”
Part of the problem here is that the problem is misunderstood. “Poverty is not a result of economic decline or lack of jobs. California’s GDP rose 78% in real terms in the two decades to 2017, overtaking Britain to become the world’s fifth-largest economy. The number of people with jobs has grown almost without interruption since 2011. In September unemployment stood at just 4.1%.”
But the gains from that growth “have been distributed unequally.”
The Economists opine: “The big problem in California, though, is not the stagnation of low incomes per se. It is stagnation relative to costs—in particular the cost of housing.”
So here’s the problem – the general rule of thumb is that budgets for households become strained when the cost of housing accounts for more than a third of their income.
And, according to data from the California Budget and Policy Center, 56% of those living below the official poverty line are spending over half their income on just housing.
The same group notes, “Whereas the poor would once spend their last dime on food for the children, now they spend it on housing—and depend on charities for food.”
The article argues: “High rents reflect the success of California’s businesses—but also decades of low investment and over-regulation.”
Here they fault CEQA, the California Environmental Quality Act. They call the act in “practice” a “NIMBY’s charter.” They write: “Four-fifths of all suits filed under it have sought to stop infill development in cities (ie, on land already zoned for building) even though this usually has a smaller environmental impact than building on green fields. California’s development and impact fees are about three times higher than the national average. Zoning laws and parking requirements are onerous, too.”
Paul Tepper of the Western Center on Law and Poverty told the Economist that “it is almost impossible to build affordable houses without subsidies. But California scrapped the largest source of state funding for new affordable housing in 2011. Estimates for the number of such houses California needs to build range from 500,000 to 1m units.”
The Economist: “Soaring rents and stagnant wages are the main contributors to poverty, but not the only ones. Though more generous than in some states, California’s safety-net is still ragged.”
Poverty in California “is made worse by mass incarceration.” They write: “The problem is not that the state locks up an unusually large number of people. By American standards, its incarceration rate is below average and falling. But California has been more enthusiastic than most states in passing laws restricting what ex-convicts can do. A staggering 4,800 laws prevent former felons getting public housing, or licenses to work as anything from a car mechanic to a nurse.”
Moreover, they note that California politicians “are not ignoring the problem.” They write: “They are gradually repairing the safety net and rolling back some of the felons’ laws. But these are largely second-order causes of poverty. Politicians are seeking to deal with the primary causes—low, stagnant incomes and housing—by regulation. They have voted to raise the minimum wage to $15 an hour and are asking voters to make it easier to impose rent controls at a referendum next month. These address the symptoms of poverty, not the causes—and rent controls, if imposed, would stymie housing investment.”
I found this an interesting piece in that it really goes across ideological lines. On the one hand it focuses on income inequality. Furthermore, it notes and criticizes things like mass incarceration and the safety net.
On the other hand, it criticizes housing regulations and CEQA.
Overall. the thrust shows the emerging overlap of the issue of housing that cuts across ideology and cannot simply be pigeonholed as left or right politics – per se.
Thoughts on how this applies to Davis?
—David M. Greenwald reporting
“One of the more interesting factoids is that while California has the largest number of poor people at 7.4 million, it also has one of the largest shares of people in poverty.”
I wonder how much illegal immigration plays into this since California the largest number in the country?
Oooops, are we not supposed to go there?
https: //www.thegatewaypundit.com/2015/08/ 80-of-california-latino-illegal-immigrant-families-live-in-poverty-need-government-assistance/
http://www.latimes.com/opinion/op-ed/la-oe-jackson-california-poverty-20180114-story.html
Notice how Keith has cleverly switched from blaming “illegal immigrants” to citing statistics for “immigrants.”
Eric, illegal immigrants are all self sustaining and none are under the poverty level and the housing they live in has done nothing to drive up California rental and real estate costs.
There, does that make you feel better even though it’s not true?
Now you are justifying and obfuscating your use of inflated statistics.
Keith, native born Americans are all self sustaining and none are under the poverty level and the housing they live in has done nothing to drive up California rental and real estate costs.
There, does that make you feel better even though it’s not true?
Howard, in case you didn’t know native born Americans are legal citizens of this country and if they need Gov’t assistance that is our nation’s responsibility. I don’t believe it should be so with illegal aliens who don’t go through the proper immigration channels to become citizens.
Besides Keith should have linked directly to the United Way study. The referred to article is simply misleading. Take just 5 minutes to read it, the background article to it and then scan the United Way report. The title is purposefully misleading.
We can simply admit that immigrants increase the demand of housing and thus increase the cost. Geesh.
Ha, here’s what Wiki has to say about the Economist.
You realize that the type of liberalism they are talking about is not what you think. For instance, classical liberalism, is market liberalism or laissez faire. They support free trade, which cuts across political lines. And they are culturally liberal. So they are in effect economically conservative, free trade advocates, and culturally liberal.
I noticed how you skipped the “free immigration, globalization and the cultural liberalism” parts.
Then you didn’t read very carefully. Last words I wrote were cultural liberalism. Globalization is covered under free trade and cuts across political lines.
You still didn’t address the “free immigration” part which would lead to them possibly overlooking its repercussions on California’s poverty rates because of their social liberal views.
Jeff M and Ron… care to get your stories straight?
Or, are both happening simultaneously? Am skeptical of the latter…
Howard: You often state that I don’t do research, but it seems like you won’t do even simple Internet searches on your own. (I can’t remember the last time you’ve posted anything, other than your own comments – which are sometimes incorrect.) I’ve posted articles regarding the net outflow, previously. (Mostly lower-income people, leaving the state.) Below is another one.
I am not working “in conjunction” with Jeff, so I don’t know why you’d imply otherwise.
http://www.sandiegouniontribune.com/opinion/the-conversation/sd-california-losing-low-income-people-gaining-wealthy-people-per-report-20180221-htmlstory.html
Regarding immigration from other countries (legal or otherwise), that’s a different topic (and something that Jeff could perhaps address).
David may be reading a different magazine since he started this post with “The Economic this week asks the provocative question”…
The “Economist” magazine is the voice of the DiFi/GHWB “big business” “crony capitalists” that have been fooling people on both the right and left in to thinking that they care about them for decades (anyone that believes in “market liberalism or laissez faire capitalism” would be on the floor laughing if you tried to tell them that the Economist was that kind of publication)…
P.S. NIMBYISM to NOT to “Blame” for California Income Disparities, but it does make things “worse” for the working class (that includes BOTH the hard working people here illegally and those that are not here legally)…
Yes Ken I have to laugh when someone calls out a source as being too conservative when the source they’re using is obviously very liberal biased.
Isn’t too liberal and too conservative an eye of beholder issue?
I’m going to guess (without doing any research) that illegal (and legal) immigration impacts lower-wage Americans (in particular) in two ways: 1) demand for housing and corresponding increase in prices), and 2) direct competition for jobs. With some employers willing to take advantage of the situation.
Even higher-wage workers can be impacted, as witnessed by the actions of some companies in Silicon Valley to import workers for highly skilled jobs. (Or, to ship those jobs directly overseas.)
Jeff M, then we should kick you out since you’re an ancestor of an immigrant? Your logic is either illogical or tribalism.
Keith O, The Economist falls into the category of “libertarian” in the American political spectrum. It has some progressive elements because many libertarians are progressive on social issues relying on libertarian principles. Classical liberalism is considered to be at the heart of the political philosophy motivating the founders of the USA.
This article does not cut across ideological lines as I could have written it and agree with it 100% except for the missing piece that Keith brings up… that immigration from our southern border is part of the cause. Anyone that admits this is simply honest and factual. Anyone that denies this is letting their political bias and/or hypersensitive political correctness virtue signaling get in the way.
The Supplemental Poverty Measure – which is the one that factors housing costs – puts California way above Texas in poverty rankings even though Texas has a similar share of immigrants. So by relative factors clearly California has other causes. However, will all the southern border states poverty is much higher than it would be otherwise because the higher number of poor and uneducated immigrants from south of the border inflate those numbers.
If we want to cut across ideological lines then we should all admit this (while also admitting the net benefits from some number of immigrants). Then we should all agree that we need to slow and stop illegal immigration. Then we should all agree that it is what it is and deporting the people here cannot be a solution (except for criminals).
And next we should get to work on the true root-causes of too high housing costs that this article accurately identifies… and reject those stupid Democrat policy ideas that only serve long-term to make the problem worse.
California is controlled by liberal Democrats in political positions, and liberal Democrats are progressives by nature, and a progressive can never admit progress as criticism is his/her stock and trade. So consider that the other root cause that California has is a higher percentage of policy and law-makers that are actually motivated to perpetuate problems in the state that provide them campaign fodder. These are the looter types that Ayn Rand identifies. They are not really progressives in the honest sense. They are more regressive in their creative methods to perpetuate an environment that keeps up the perception of their need and value. True progressive leadership is one that works itself out of a purpose by solving problems so as to create the progress within its name that it otherwise hijacks. True progressive leadership solves problems to create space for creative steps to the next level of value. However, in California and many other places controlled by liberal Democrats, the problems don’t get solved. They multiply.
Looters take (note that attorneys are largely looters by nature and they dominate California politics). Producers produce. California needs more producers in government positions if it is to truly progress.
Truth be told, rising housing prices are one way to address supply-and-demand. However, Affordable housing can help to ensure that those who work at jobs with insufficient wages (and live in rental housing) aren’t priced out. Rent control can accomplish the same thing, but it seems to be a “third-rail”, on here, and with many politicians.
As prices rise, some folks leave. That’s definitely occurring in the Bay Area, and the state as a whole. There’s a net outflow of people leaving the state. (There’s also a redistribution of population from expensive areas to less-expensive areas, within the state.)
Maybe not such a bad thing, in a semi-desert state with 40 million people.
https://www.msn.com/en-us/money/realestate/priced-out-californians-buying-homes-in-idaho-for-monopoly-money/ar-BBOQn6y?ocid=spartandhp
Perhaps more importantly, rising housing prices can discourage additional population growth and development (from those moving into the state) from other areas.
Those who believe that significantly more housing supply is needed are simply continuing along the same path that resulted in 40 million people (in a span of less than 200 years).
In any case, those who live in market-rate rental housing (in expensive areas) are always going to be at risk for rising housing prices. If the goal is to protect them, there’s two ways to accomplish that (Affordable housing, and rent control). Of course, employers could also choose to pay their employees more, and will do so if conditions demand it.
There have been many articles which show that lower/middle-wage jobs have not kept pace with rising prices, not just limited to housing.
Sadly, the issues raised in the article are having a profound impact on our community. The rates for poverty, food insecurity and food-insecure children are all significantly higher in Yolo county than the state average. Worse yet, it has become a chronic condition.
How do I know who is a “looter” and who is a “producer”? In spite of it being from “objectivist” philosophy, the definition seems quite squishy and subjective, as in “looters” and “producers” are who you might personally declare they are.
Implied is that you must be a producer, but how do I know that you actually aren’t a looter?
Producers make something of increased value that they can trade.
Looters subtract from the productive value by taking from it.
Attorneys can be both… working on projects that would produce some new value, but also working on cases that subtract by taking from it. Most non-criminal law attorneys are looters. They extract money from the activities of production. Sort of like mosquitoes feeding on the blood production of the circulatory system.
Most politicians are looters. Politics is their profession and money-making gig. Or else it is their giant charity. There is a great agency conflict with representative democracy that is supposed to be governed by morality. However, market fundamentalism has corroded the concept of public service as charlatans have invaded politics and government positions owning the cover from the pursuit of self-interest. In other words, the CEO is no different than Bill and Hillary Clinton in being justified for enriching themselves from their political positions and influence. But the difference is that the CEO is a producers, and Bill and Hillary Clinton (except for the books they white and sell) are looters. Their wealth is primarily derived from taking from the productive economy.
That difference is key, yet ignored.
How about a slave plantation owner? a producer?
Or a land owner managing share croppers? also a producer?
A “slum lord”?
Jeff M, immigration from other states set up the population baseline that we have now. Are you making the ridiculous claim that somehow current residents own a “property right” in living in California is a static world? That would be a typical reactionary’s response to solving a problem, especially one who is a ghost…
You also apparently missed the fact I posted previously, and has been well reported, that the undocumented immigrant population peaked in the U.S. in 2007 PRIOR to the recent housing price boom. So it is not possible that the explanation for the rise in house prices is tied to illegal immigration–it is net NEGATIVE over the last 11 years.
Thanks for the link to the national chart, but it does not have much to do with CA home prices and rents (a million more undocumented workers in NJ will not change rents in Davis or San Diego). Richard needs to remember that of the about 2.5 million undocumented residents of CA “most” are of child bearing age and since they are here we end up with a LOT more “legal” residents (at least until the president gets rid of birthright citizenship). I speak Spanish and have spent close to a year of my life living in Mexico. I work with a lot of Mexicans and I don’t have a problem with allowing more of them to legally come here, but let’s not try and ignore reality and say that having an extra 2.5 million people living in the state does not put upward pressure on rents and home prices…
Ken – the important point too is that it puts a disproportionate share of pressure on affordable units.
Richard, are posting fake again? National numbers have nothing to do with state data. if you look at national numbers on vacancy rates we do not have a housing shortage.
It is also important to remember that any report with the number of people in the state (or country) illegally has a HUGE margin of error (since when you are out in front of Home Depot and ask the guys looking for work if they are here illegally you won’t always get an honest answer)…
A commendable article. As a long-time subscriber to the Economist, I found this article to be quite interesting as well. I’m glad DG has started to select some better material than that squishy rent control article from some Berkeley urban planners from a few weeks back ;). Kidding, but also not. I was amused that DG found it surprising that this article “cuts across ideology.” Of course it would. Articles submitted to the economist are expected to focus (at least somewhat) on doing semi-rigorous policy analysis. Real analysis is (theoretically) not tied to ex ante ideological claims, therefore, its findings and conclusions should reflect reality rather than a potpourri of subjective beliefs about what policy should be irrespective of evidence for or against.
The issues with CEQA lawsuits, parking and zoning regulations, and growing income inequality bear quite directly on the supply of housing in Davis. I will be very interested to see the evolution of design of better parking policy for new developments and other development and impact fees in Davis. Kudos to DG for highlighting some empirically sound findings and bringing them into the Davis public sphere for debate.