California’s unemployment rate reached 11.9% last week, and if the Golden State stays at that level it will be very difficult for President Obama to do anything but apologize to voters next November for spending trillions and trillions of dollars without making a significant dent in joblessness.
Michigan can have a one-state depression and not greatly impact the nation’s overall economic outlook, but not California. As the West Coast’s recovery goes, so goes –or not– the nation’s.
California’s woes can be traced to the housing industry’s collective heart-attack. When the bubble burst and home prices plummeted, the cost of land already banked by developers and of the materials and labor necessary to build a house didn’t fall. The new home construction starts stalled out as a result, and lost jobs in the sector are a large slice of the 760,000 jobs that have disappeared from the nation’s most populous state in the past year.
Housing is the backbone of the American economy in the new millennium. According to the California Building Industry Association, every new housing start generates 2 to 3 new jobs and $16,000 in tax revenue. The ripple effects from robust housing starts are enormous and visible even to the economically illiterate in new infrastructure, new schools, and of course the new homes into which a growing population must move.
I have proudly represented homebuilders for two decades on land use issues, endangered species and wetlands issues, and on CEQA, NEPA and related issues. From the largest to the smallest, builders are routinely incredible contributors to the communities they construct and committed to full compliance with a dizzying array of complex federal, state and local statutes. The professionals at every level of the industry want only to be able to build products which consumers want and deliver them at a price that homebuyers, especially first time homebuyers, can afford.
Which is why the disinterest among federal and state legislators in stimulating this sector of the economy is so distressing, especially to the rising number of unemployed who have in the past counted on some aspect of the business to keep them productive, from landscapers to interior designers to engineers, from framers to plumbers to asphalt sales teams. If housing is healthy, the economy will be healthy.
But rather than adopt tax incentives and land use reforms to expedite new home starts, we see Congress and the bureaucracy rushing forward new laws to further cripple an already reeling sector. The Clean Water Restoration Act presently pending before the Congress would vastly expand federal control over private property and greatly complicate and increase the cost of bringing new homes to the market.
Lawsuits by environmental groups have triggered a rush by the U.S. Fish and Wildlife Service to consider scores of new species for listing as threatened or endangered under the Endangered Species Act. Most such listings essentially sequester large swaths of private property from all use for years –and does so without a dime of compensation. An AP report last week noted the 29 new species up for listing, a sort of drum roll for disaster in the housing markets.
And now the “new asbestos” –Chinese drywall– is fueling a gold rush among plaintiffs’ lawyers in search of a new and lucrative practice area. With two cases filed in Las Vegas this summer, the number of states home to Chinese drywall controversies made it to 25. Builders and contractors are right to gear up for a new litigation assault, but the costs of doing so drain profits and, again, construction-related jobs.
The employment picture in the United States cannot brighten appreciably until and unless government at every levels stops the continuing assault on homebuilders and even begins to help them with the processing of projects, with the costs and with the tax incentives to buy a new home.
If President Obama returns from vacation committed to a jobs policy that actually creates rather than kills jobs, assistance to the home builders on a number of fronts will be at the heart of any serious plan.
Examiner columnist Hugh Hewitt is a law professor at Chapman University Law School and a nationally syndicated radio talk show host who blogs daily at HughHewitt.com.
