California Housing Regulators Must Stand Down
On every level, the housing crisis has exploded.
In 1970, responding to Federal laws, California passed the California Environmental Quality Act (CEQA) that requires state and local agencies to adopt all feasible measures to mitigate any identified negative environmental impacts prior to project approvals and permits. CEQA makes environmental protection a mandatory part of every California state and local (public) agency’s decision making process.
Since then, the State of California has required every city and county to:
A) File an Official General Growth Management Plan.
B) Adequately plan to meet the housing needs of every element of their community.
Has half a century of government meddling improved our ability to provide adequate housing for our citizens? The answer is an unequivocal no! The problem is only getting worse, not better. On every level, the housing crisis has exploded.
Prices are the leading indicator of the health of the housing element in any community. When prices are high, it indicates demand is high. If the building industry could simply build more homes to meet the demand, don’t you think they would? Based on prices, you would think that new home construction would be booming, providing thousands of good jobs, which in turn supports service industries like automotive sales, restaurants, theaters and schools.
But that is not happening. All of those important economic segments are in deep trouble. There is more to the story.
I spent the majority of my working years in the new home construction business. During the 80’s San Diego County experienced a monster housing boom. We were building close to 20K homes a year. Prices were attainable. Communities were popping up all over the county. New business opportunities were happening in many different segments: High tech, medical, golf, entertainment, agriculture and education. The suppliers for home construction struggled to keep up with increasing demand and shorter lead times.
Builders are good at studying the marketplace. They can predict the number of homes they will need to build in any given year. They are usually very accurate, because they have to be. In the building business, the fastest way to go broke is to overbuild for the market demand. It is like the fresh food section at the supermarket: If you over-buy and the food spoils, you will lose money. Newly built houses continue to cost money even after they are constructed. Developers must pay property tax, utility set up fees, loan interest payments, maintenance fees and marketing costs. When a builder constructs hundreds of homes in a region, they carry enormous construction loans. If those buildings go unsold for any length of time, the developer risks bankruptcy.
The Democrat run State of California is trying to force the builder community to offer more “affordable” homes. But developers are not going to do anything that doesn’t make economic sense. The legislators need to understand how home development economics work. Just demanding more housing is the last thing they should be doing.
Instead, they should be encouraging more agricultural land development, more manufacturing businesses to set up shop in California. You have to have a strong employment base to bring lower range buyers into the marketplace. Instead, California is suffering an exodus of powerful employers due to excessive taxes and regulations.
If they could make the numbers work, builders would be standing in line for building permits in San Diego County. But they are not.
The reason we are suffering extremely high housing prices is more complex than just high demand. It has more to do with government policy and the jobs market and less to do with construction volume.
Yes, there is a shortage of For Sale homes. But the building industry has been warning about this issue since I was involved with the Building Industry Association (BIA) back in the mid 80’s. The BIA issued annual reports projecting how many homes would be needed in the coming decades just to keep up with population growth. Year after year, the numbers kept getting worse. We were falling behind by thousands of homes while the population grew exponentially.
I remember defending my position in the home building business to my friends who viewed developers as vulchers, moving into mostly rural areas and converting them into densely populated, often walled suburbs. They suggested the builder industry was exploitive and insensitive to those already living in the less populated areas.
I understood their anxiety, but I warned them, “Where are your kids going to live? Are you ok with them having to move out of state? Don’t you think they should have the same opportunities to enjoy San Diego that you have?”
In 2026 my now middle-aged kids are confronted with potentially being forced to relocate because of housing costs.
California Policy Lab reports, “On average, movers relocate to neighborhoods where monthly housing costs are $672 less. After seven years, they are 48% (or 11 percentage-points) more likely to own a home.”
Unfortunately, the Never In My Backyard (NIMBY) attitude has survived and California’s Democrat voters have continually piled more and more economically destructive restrictions on land use, building permits, trucking fees, product safety controls, insurance requirements, lending mandates, and newer, more extensive environmental laws. Now builders are confronted with tariffs and delivery delays, all of which jack up production costs.
As far as the buyers economics? Well, it isn’t a problem if you have already owned a home for more than a decade. But if you are a first time buyer, making less than $180K household income, forget it. You are out of luck, because the lenders can’t risk you going upside down on a million-dollar mortgage.*
So those folks enter the rental market. What does that do? Puts additional pressure on rental supply, meaning rates go up as demand goes up. It is a vicious cycle.
Recently, the California Department of Housing Development demanded the City of Escondido build a minimum of 9,600 new housing units by the year 2029. The State claims the City has been lackadaisical about meeting it’s goals over the past decade.
Dane White, the Mayor of Escondido, reacted to the mandate by simply stating, “We didn’t have the resources”.**
Of course you don’t. Our government is not in the building business. And they shouldn’t be. Leave it to the experts. The only thing government can do is get out of the way! Unfortunately, our semi-socialist California legislators are totally unaware that they are the problem.
We should learn from China’s mistakes.
Around the turn-of-the-century China went on a home building spree, funded by the State, of course. Now they are sitting on an estimated 80 million unoccupied homes/apartments. The Chinese banking and building industry are near collapse because the money they have put up will never be recovered. ***
Central planning, or government overreach, cannot be tolerated in America’s free market economy. Tell California regulators to “Stand Down” or we may end up in the same housing industry ditch as China.
* https://capolicylab.org/priced-out-relocation-amidst-californias-affordability-crisis/
* https://capolicylab.org/priced-out-relocation-amidst-californias-affordability-crisis/