Money is the problem, not the solution

I noted with some cynicism an article in Rolling Stone titled “Why Can’t California Solve Its Housing Crisis?”  Here’s a brief excerpt.

Google recently pledged $1 billion to help ease the Bay Area’s housing crunch — but that sum is only eye-popping until you hear experts explain it would cost $14 billion to execute the company’s vision of building 20,000 homes. Google’s is a well-intentioned gesture, but one that illustrates how the problem facing the Bay Area, and California at large, is much worse than even its brightest minds can comprehend.

. . .

Four years ago, Liccardo set a goal to create housing for all of San Jose’s 7,400 homeless. The city has just about hit that goal, sheltering 6,937 people this year. The problem, Liccardo explains, is “as quickly as we’re housing residents, we’re seeing three more getting pushed out into the street by the economy.”

It isn’t a failing economy that’s putting residents out on the streets, though. It’s a booming one. By almost every economic measure, the Bay Area is outperforming the rest of the nation. Together, the region’s nine counties boast a GDP of $748 billion — larger than Switzerland’s or Saudi Arabia’s — and an economy that’s growing at double the rate of the United States’ at large. Santa Clara County, home to San Jose, has a job-growth rate that’s twice the national one. But in the past five years, San Jose has built only one unit of housing for every six jobs it’s created — a recipe for rising rents, rabid competition for available units, and, ultimately, economic evictions … It’s a dynamic happening across California, which, despite generating so much wealth, has the highest proportion of residents in poverty when you factor in the cost of living.

. . .

At its heart, California’s housing problem is one of scarcity: According to one analysis, the state has 3.5 million fewer homes than it needs to house all the people who live there. That gap was created over decades — largely as a result of the zoning policies of individual communities, under pressure from local residents. Randy Shaw, a longtime Bay Area housing advocate and author of the book Generation Priced Out, says the best way to describe the dynamics at play is to look at the city of Atherton. Thirty minutes from San Jose, Atherton is the most expensive city in the country: The median price of a home there is $8.1 million.

“You can’t build an apartment building in Atherton,” Shaw says. City code prohibits anything other than a single-unit building with a footprint that cannot exceed 18 percent of the land. In other words, everything but a single, detached home with a yard is verboten. “You have all of these cities in California where you can’t build anything but a luxury home,” Shaw says. “When you have zoning restrictions that prevent you from building the housing you need, you’re pretty much guaranteed to get in the situation we have.”

There’s more at the link.

Some months ago, I wrote about homelessness in California, and pointed out that a major reason for the scale of the problem there is that the state, and its cities, are effectively subsidizing it.  When you’re spending literally billions of dollars every year on the homeless, of course you’re going to get more of them!  You’re effectively making it worthwhile for them to be homeless, because as such they can get subsidies, freebies and other goodies that they couldn’t get under normal circumstances.  I urge you to revisit my earlier article for more information.

The Rolling Stone article highlights another side of the problem.  By emphasizing material prosperity, residents of the state have come to regard it as their inalienable right.  That includes the value of their properties.  Anything that might threaten that value (by, for example, building high-density, affordable housing in a low-density, high-value neighborhood) will be resisted tooth and nail.  The state and municipal governments can throw money at the problem all they like, but the voters who elect the politicians are going to turf them out of office in no time if they go against their wishes in this regard.  Therefore, they talk a good fight, and throw money at any and every aspect of the problem that can be subsidized – except the one that might actually make a difference.

It’s also worth noting that those who are addicted to narcotics, and/or mentally ill or unstable (often the two go hand in hand), will not be able to make the best use of the subsidized services they’re offered.  They’re simply incapable of dealing with modern life.  A few decades ago, many of them would have been institutionalized.  Now, thanks to misguided and ill-informed “compassion”, they’re out on the streets;  and, since they’re not capable of settling down to a more normal existence, that’s where they’re going to stay.

Efforts to house the homeless have often failed, simply because the homeless don’t bother to keep up their newly-acquired homes.  They let them lapse into filth and disorder within a very short time.  (That’s pretty much a worldwide experience, by the way, not limited to the USA;  I’ve seen the same thing in several African countries, France and Italy.)  The average taxpayer is going to be irate when he learns that the hundreds of millions of dollars spent by his city or state on helping the homeless has merely contributed to the creation of a new slum!

In dealing with homelessness, money is the problem, not the solution;  but it’s easier to throw money at the issue than to take concrete, practical, effective steps, so it’ll continue to be the panacea that doesn’t solve the problem.  At the very least, it allows politicians to say that they’re “doing something!” when in fact they’re not.



  1. It’s going to get worse.

    Rent Control is going to devastate the Ca tent market, just as it has done to nyc and sf.

    In Ca there is a huge amount of fees and building code requirements to build anything new. The economics translates as the only thing that makes sense to build is higher end units.

    And environmental lawfare can be used to either kill projects, or force the use of union labor.

  2. Actually, it will cause a tent market bubble. 🙂 It's the *rental* market that's going cock-eyed.

    And $14 billion for 20K homes is 700k per; nice digs if you can get them . . .

  3. I watched a Bollywood movie on netflix the other day that had as its central conceit that 2 people were willing to enter into a sham marriage to take advantage of government subsidized housing. The 2 characters in question were practically falling all over themselves to jump at the opportunity to buy an "incredibly spacious" 550 square foot apartment together, and spent quite some time rhapsodizing about how they'd feel so spread out with so much space for just the 2 of them.

    As you noted — It's all in expectations.

  4. California – following one bad idea after another chasing the perfect socialist state.

    Oy vey.

    Well, what's that they say about drunks? You can't start going back up until you hit rock bottom. Unfortunately Rock Bottom will come with a very huge monetary bill, which California can't afford right now or, well, ever.

    There was that brief moment, when Prop 13 was passed, where all the stupid could have been stopped, quickly, mostly painlessly and certainly inexpensively. But, nooooooooooo… The legislatorists were already installing work-arounds before the ink was dry on Prop 13. Doomed to fail. A valiant last ditch effort to save the state from itself.

    And, well, right now I say unto California and its residents, fine. You broke it, you bought it.

    Until someone with a lick of sense takes the helm of government out there, you will continue to walk in people poop of all varieties.

    As to rent control, well, it's done so darned much to help NYC, right? Where people sublet closets and individual rooms of apartments because the rents too damn high on non-rent controlled apartments, while at rent-controlled buildings, the management can't afford to maintain them.

    Noooo. Not like anyone could have used any of the hundreds of studies for and against rent-control that all except the most blatantly false show to be one of the biggest knuckle-headed suggestions ever.

    As to building apartments to handle the homeless, well, once again NYC is a perfect example of how not to do it. I'm referring to all the 'Projects' to provide low cost housing that just turned into open warfare places full of drugs and people sleeping on the floor to survive (hopefully) the night that are basically towers of garbage and open sewers…

    Huff, huff, huff, huff… (Beans, it's not your blog, quit ranting.) huff, huff…

    Well, you get the idea. Nothing that CA is thinking of implementing will solve the underlying problem. It will only make it worse.

  5. Yeah…I've seen this before in another state – the "low income housing" that these wonderful, kind, caring, lying, cheating, thieving bastards want to get the public to fund end up costing anywhere from 150% to 200% of what a "normal" 1500 sq ft 3 bedroom 2 bath house would cost. All of which tells me that there's a LOT of money in this game – being ripped right out of the taxpayer's pockets.

  6. Milpitas, a small town on the north border of San Jose, decided to chase out as much of the industrial businesses as they could, and convert the properties to high density housing. Mostly 5-6 story apts.

    I expect them to start condemning single home developments when they run out of commercial areas. Not sure why the home owners didn't object, but the fact that the town has a growing Asian immigrant population might be key, as they have mostly grown up with high density housing in Asia.

    I suspect that they will be unhappy with the resulting home values when the city starts taking them away. I expect the prices to drop as the non-Asians bail first. This used to be a cheap housing area, but now homes can bring $1m.

    When the big earthquake hits, this will become a very bad place to be, as the city will have no resorces to deal with the high numbers of apartment dwellers.

  7. When and how did vagrancy laws and poorhouses cease to be valid social policy? If they were rolled in unction and sprinkled with glitter I'd bet you could sell them to Californians.

  8. California is home to quite literally millions of foreign nationals who have no legal right to be here.
    AND a "housing shortage". Think there might be a connection? a correlation?
    I'm watching this strip-mine development go on every day. You could drop a compass point on my house, draw a 2 mile radius, and find well over ten thousand new "dwellings" ie: high density tenements that weren't here five years ago. And it continues. Every failed strip mall or retail property gets re-zoned, and re-built with hundreds of new units. Every one of those units puts two cars into the local traffic stream, and stretches an already very thin supply of water, and now electricity. Traffic is locked up solid through town every afternoon and morning.
    I'll add another factor that you hear very little about. The media always focuses on border jumpers from Mexico and Central America. In the mean time huge swaths of Orange County are now solidly Korean and Chinese. You see strip malls with no English signage. They don't need it. I see no evidence that any of our new "citizens" are here in America for any other reason than it's an easier life here than at home. They don't come here to be Americans. They come here to establish their own country on our soil.
    It's the same with the homeless.
    Our town is under invasion.
    Other states send their bums to us. The buses out of Downtown LA drop off here.
    This is the result (from our local Next Door site)
    We discovered a new encampment behind Goodwill and Harbor Freight on Whittier Boulevard. The drug-addicted vagrant there is deranged and dangerous. He has been feeding off the carcasses of dead possums, littering the area with human waste and syringes. He’d also set up a portable, medical-type, commode, defecating in the alleyway. When approached, he became aggressive, threating me with a crowbar – But I kept my distance and called WPD. Upon hearing the call, he quickly fled the area, leaving behind over a dozen syringes and several, half-eaten marsupials, piled together by his blanket.

    And we’re in a “very nice” part of town…


  9. 9th circuit ruling allow camping in public, due to shortage of housing.

    Constitutionally dubious ruling.

    Rental unit selling prices historically track housing price changes in Ca.

  10. Ray is right but I've added a critical piece in bold: "…the only thing that makes sense to build is higher end units" or subsidized housing units; there is often a ratio of subsidized units to non-subsidized units mandated for every project larger than a four or so apartments.

    Dave S and Will are right on the money as well.

    Don't forget corruption, either. Given some or all of the following

    • low income housing mandates
    • bans on taking rental units off the market
    • rent control
    • "green" building requirements
    • minority contracting and employment requirements on construction related projects
    • "green" energy boondoggles

    why, you need consultants (often former public officials) to help you navigate the regulatory maze and get your projects approved, all of whom need to get paid for their services. A big chunk of Google's money is going to go into that sector of the economy.

    The homeless industrial complex isn't going to give away its piece of the pie without a fight, either.

  11. $14 billon to build 20,000 thousand houes? That's $700,000 per house. Maybe Alexa can figure it out.

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