Want Affordable Housing? Let Builders Build

California Affordable Housing DevelopersIn vetoing the inclusionary housing bill AB1229, Gov. Jerry Brown drew on his first-hand experience with such proposals: “As mayor of Oakland, I saw how difficult it can be to attract development to low and middle-income communities. Requiring developers to include below-market units in their projects can exacerbate these challenges, even while not meaningfully increasing the amount of affordable housing in a given community.”

Our Oakland-based Independent Institute worked closely with then-Mayor Jerry Brown when it was proposed that Oakland join other Bay Area cities in mandating “inclusionary zoning” quotas. Senior Fellow Benjamin Powell, who served on Mayor Brown’s Blue Ribbon Commission, cited his research, which shows that over a 30-year period cities that adopted inclusionary zoning mandates saw a 20 percent jump in housing prices and a 10 percent decrease in the number of new units built.

In contrast, Willard Garvey, having started his career building affordable houses for the flood of GIs returning from World War II, turned his energies in the 1950s to realizing his dream of “Every Man a Homeowner.” He built houses for low-income families in countries ranging from Mexico, Colombia and Peru, to India, Morocco and Thailand. With local partners, and relying on local labor, Garvey’s World Homes constructed thousands of homes in safe, ordered neighborhoods, and sold them under a previously unknown American-style mortgage scheme, with low, affordable monthly payments. While the new homes were purchased by the nascent middle class, the homes they had vacated became available to those even poorer.

The most basic law of economics holds that a rise in supply results in a decrease in prices—and this is what Garvey’s home buyers experienced.

In the California communities that have adopted inclusionary zoning laws over the past 30 years, the inverse of the law has been demonstrated: where prices are held artificially low, supply decreases, driving prices of all homes higher. Our economists estimated that inclusionary housing laws drove median price of homes in Bay Area communities with such laws up by 8 percent; while in Los Angeles and Orange counties, inclusionary housing mandates increased median home prices by 12 percent. In overlooking the record of such legislation, California politicians promoting “affordable housing” mandates today are perversely feeding housing shortages.

mary_theourx_newFortunately, Brown carried the lessons he learned in Oakland to the state capitol. To further the task of helping the citizens of his state challenged with finding homes they can afford, he would do well to free California builders to add to the supply of housing, regardless of the price they hope to charge. It may not make an appealing political sound bite, but at the end of the day the poor, especially, would be better served.

Mary G. Theroux
The Independent

Tuesday, 22 October 2013

Comments

  1. Tenants Together says

    I was surprised to see this article praising Governor Brown’s veto of AB 1229 on your site.

    This poorly reasoned article somehow concludes that the poor would be better served by eliminating any requirement that developers include affordable rental housing in new construction.

    The author reasons that because housing prices rose in certain areas at a time when inclusionary housing laws were in effect, then it must be the inclusionary law that drove the housing prices up. Gas prices went up too during that time, so by the author’s logic, are we to conclude that inclusionary laws cause higher gas prices too? Just because two things happen simultaneously does not mean one causes the other.

    A broad coalition supported AB 1229. Affordable housing advocates were unanimous in their support of the bill. AB 1229 would have reversed the incorrect Palmer court decision, restored to cities the power they had long held to require affordable rental units in new developments. These inclusionary units provide essential housing for the working poor.

    Governor Brown’s veto was a slap in the face of struggling Californians who need an affordable place to call home.

    For coverage of AB 1229, readers should look to articles posted at http://tinyurl.com/mu4gtq5 or http://blog.cesinaction.org/.

  2. Coal for Eco Surv says

    It is surprising to see this reactionary article on this progressive site. The article puts forth the positions of the real estate and landlord industry in the California.

    Since the 1970s, nearly 170 jurisdictions in California have chosen to
    use inclusionary or mixed-income ordinances to produce 80,000 affordable
    units at no cost to taxpayers.

    A broad coalition of tenant groups, affordable housing advocates and
    non-profit community housing developers, supported AB 1229, as did most
    major newspapers around the state. As could be expected, big
    developers, mega-landlords and realtors went all out to fight the bill
    and leaned heavily on Governor Brown to veto it.

    For the real progressive stand on Gov Brown’s stunning veto of AB 1229 go to: http://wp.me/pWryz-ke

    • Tenants Together says

      CES is exactly right. How this article ended up on LA Progressive is difficult to fathom. Was the site hacked?

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