In California, the high cost of housing is hurting the state's economic growth and pushing its citizens deeper into poverty. But there's so much land! Why is it so hard to find somewhere affordable to rent?

The Wall Street Journal's summary of California's new state report on its housing situation is grim: California's average rent is 50% higher than the national average, and its average home price is more than double the national average. Since housing is the first cost that most people pay, that means low-income Californians have less money left over for everything else. The negative impacts of high housing costs tend to cascade down the economic food chain in ways that high prices of less necessary goods do not.

What is California's problem, specifically? "That high cost is largely driven by a slow pace of construction in the state's major coastal markets, where demand for homes is highest and prices are bid up, the report said. Between 1980 and 2010, for instance, new home construction in the state's coastal metro areas increased by 32%, compared with 54% nationally, the report said. In Los Angeles and San Francisco, the supply of new housing grew even more slowly, by about 20%."

The most desirable cities make it the hardest to build new housing. Therefore prices for existing housing skyrocket, and middle and lower class people begin to get priced out of cities altogether. Endless material has been written on how San Francisco, in particular, has erected a wall of local regulations that make it difficult and expensive to build there, which has the effect of protecting the beautiful city inhabited by people who already own, at the expense of everyone else who wants to live there now.

Though figuring out how to make more affordable housing is one of the most complicated public policy tasks in the world, the basic outlines of the problem are not that hard to see:

1. If you remove regulations and make it easier and cheaper to build new housing in desirable cities like LA and SF, prices should eventually fall, at least somewhat. Fortunate people who already have nice places to live in these desirable areas may argue that this could bring down their quality of life. This is true! It may not be important, though.

2. Don't want to deregulate and throw it onto the mercy of the free market? The government can also build affordable housing, especially subsidized housing for low income people. The problems are A) This has to be funded with tax dollars, and everyone will bitch about it, and B) Even if successful, if you still don't allow for more market-rate housing to be built along with it, you can end up with a situation where there is only low-end and high-end housing available, and nowhere for the middle class.

3. Alternately, you can direct public and private investment towards other areas of the state in order to make them more attractive for people to live, in hopes that they will draw off some of the demand that currently goes to LA and SF. Barstow—there's a nice public swingset there, now. Think about it.

4. You can leave the situation just how it is. This will lead inexorably towards a situation in which the most desirable urban areas become more and more expensive, until you reach a point when entire cities are only affordable for the upper class. Whether or not you perceive this to be a problem depends on what your concept of a city is, but suffice it to say that the ongoing housing trends of San Francisco do make it that much easier to construct a fence around a discrete urban area for the purposes of imprisonment when the revolution comes, hypothetically.

In other countries poor people just construct huge unregulated slums in and around cities where they can't afford proper housing. This would certainly be in keeping with San Francisco's fancy-free self image.

[Photo: Flickr]

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