Close to Home: Decoding the high cost of housing

There are many good questions out there about housing. Why can't we build more? Why is it so expensive? How did this happen? And there are many reasons commonly cited for the ongoing “housing crisis.”

Any explanation is part of larger set of factors. There is no single answer, and an effective response to the housing crisis has eluded us. But it has caused distress and hardships in our community, around our state and nation and even in other countries, and it's likely to get even worse as a result of the coronavirus pandemic.

One consideration is that government land-use regulation has limited the supply of buildable land and maintained a lower density on too much of the urban area, creating a scarcity of land for higher- density development. This was the thrust of the recent state Senate Bill 50, which would have forced local governments to allow for additional multifamily housing. Though it failed in the Legislature, we will probably be revisiting this issue.

A broader view of the housing situation would consider the increased cost of housing development compared to income growth. Between 2000 and 2019, local housing development costs increased by more than 150% while incomes were up only 60%. This is a devastating ratio that illustrates the extent of the housing crisis.

The best way to understand and address the shortage of housing is to look at development costs and craft policies that would reduce them. For low-income affordable housing (households earning less than about $70,000 annually for a family of four), development costs make it difficult to produce rental or for-sale housing without subsidies. While subsidies exist, there aren't enough of them to meet the need.

Most moderate-income families can find a place to live, but it consumes too much of their income, and the housing is discouragingly modest compared to what their parents' generation was able to afford.

A significant driver of housing cost has been public policy choices beyond just the question of land use. Over the past decades, the state has required more expensive building standards, many of them related to energy use. The most recent big-ticket item is the requirement for solar panels on new housing. But these requirements are subject to the principle of diminishing returns, and housing has been paying more for smaller benefits.

In addition to the cost of state-imposed standards, the level of impact fees is often cited as a significant factor in California's high housing development costs.

Most impact fees were instituted after Proposition 13, but we must move some infrastructure responsibility away from new housing, particularly housing available to low- and moderate-income households.

Additionally, a shift to impact fees based on floor area, as is done for commercial fees and school fees, would remove some of the burden from smaller, more modest housing. On the bright side, current legislative proposals may result in fee policies more favorable to housing.

Environmental mitigation can add significant costs to housing, but we still haven't been able to agree on less expensive and more systematic practices for mitigation.

There are other areas of cost inflation where better information is needed. Construction has shown the lowest level of productivity gains of any industry. Part of this is related to public policy choices, but a better understanding of this issue could inform better policy and production practices.

It would be worthwhile to better understand the comparison of development costs in California with other parts of the country. Our costs are higher than almost anywhere, even in rural areas. Are there things we could learn by understanding how things are done in other regions?

Then there are the questions of labor supply and wage levels. The current shortage of skilled constriction workers increases costs and decreases efficiency. At the same time we need to recognize that attracting young people to construction careers will require appropriate training opportunities and incomes that would enable them to live in Sonoma County.

All of these questions involve tradeoffs between competing objectives. But housing must be given a greater policy priority to reverse the trend toward it being always more expensive and less available.

John Lowry, a former executive director of Burbank Housing, is a member of the Sonoma County Planning Commission. He lives in Sebastopol.

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