We doubt that we will have much to agree on with newly instated California Gov. Gavin Newsom, but his unveiled state budget has ruffled all the right feathers. That’s thanks to his radical approach to fixing California’s housing crisis.
The Golden State suffers from a homelessness crisis, an emerging luxury housing bubble, and a vast lack of housing for its working and middle class. Although California’s population grew by over 300,000 residents in 2017, just 85,000 new housing units were added. The median home price has surpassed half a million dollars in Los Angeles and more than a million in San Francisco and San Jose. And it’s not just in the cities: The median home value across the state has increased by nearly 80 percent in the past eight years. The state requires a 20 percent increase in housing supply to slash prices by a mere 10 percent. Only one state has a lower ratio of housing units per resident: Utah.
Local zoning and rent control laws, especially those in the state’s urban enclaves, have effectively choked development into stagnation. Some cities have banned high-density apartment buildings outright, while others enact height restrictions.
There are other harmful regulations. Even the liberal Brookings Institution finds that California’s beloved rent control, which inevitably causes economic deadweight losses, “decreases affordability, fuels gentrification, and creates negative spillovers on the surrounding neighborhood” in the long run.
While Newsom lacks the unilateral authority to change city policies, he plans on holding cities’ feet to the fire with a teleological approach to incentivizing more housing development. Newsom will cut state funding to cities that fail to produce new housing fast enough. All of those crippling gas taxes and plastic bag taxes have added up, and now Newsom is using the power of his own big government to subvert local governments’ stranglehold over housing development.
The proposal is both brutally subversive and also entirely necessary. In using the big state government to threaten big local governments to free housing markets, Newsom may prove himself a very different kind of Democratic governor.
Although the approach is unconventional and certainly not conservative in the traditional sense, it provides a tangible partial solution to a devastating and immediate problem. The bluest state in the union is bound to rely on creative approaches to reopening market forces and restoring capitalism. After all, the state senator spearheading zoning reform and multiple hotly contested bills to reignite housing development, such as Senate Bills 827 and 50, is Scott Weiner, a liberal Democrat from San Francisco.
Although increased public spending for homelessness and housing has come to dominate the conversation in California, conservatives should welcome Democrats’ embrace of market forces and economic reality to help residents.
