Proposition 10: The California Killer
A deep dive on the regulatory system
Lack of affordable housing is one of the major problems that California legislators need to work on.
Many renters have been choked off by the high rents that sometimes lead to the homelessness of many.
Proposition 10, also known as “Affordable Housing Act,” was formulated to counteract the lack of affordability when it comes to housing, though the big question is, “would more regulation solve our affordable housing issue?”
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On November 6, 2018, the ballot measure for Proposition 10 will be voted on.
If approved, this would give the local government access to more rent control regulation.
The general public believes that by transferring the power of how rents are regulated from the landlords to the local government they think it will solve our affordability crisis.
This couldn’t be farther from the truth.
While there are many supply-side solutions we could implement, more regulation is not the answer.
The answer is that we need to increase housing production, as soon as possible, and adding additional regulation will only deter investments in net housing produced.
Complexities of Housing Production
There are so many issues that the industry is grappling with from skyrocketing labor costs to global trade ripples affecting material prices, to cumbersome land-use restrictions, and not to mention the uncertainty surrounding pending regulatory risks.
To build ourselves out of this crisis we need construction en masse and it all starts with a variety of macro-leveled concerns.
To address this issue we need to build big, fast, and often.
Ready, Set, Wait.
I feel a lot of the affordability issues stem from Proposition 13 as it constrained the revenues for the local governments, in turn causing the housing permitting process to become a replacement for the lost revenues the state and local governments missed out on.
By missing out on this revenue stream it caused numerous impediments for large-scale developers to secure permits fast enough due to zoning constraints, long project design reviews, and the threat of the California Environmental Quality Act.
Because of all these hurdles, the longer the wait — the higher the carrying costs.
Financing and Rent Prices.
So on the front end, banks and private construction lenders have to forecast, with some degree of certainty, how long this approval will take and the longer the time frame- the more expensive the cost of construction.
As a result, the higher the construction cost, the more expensive rents need to be to justify a given project.
Proposition 10 Won’t Solve Shit.
In sum, voting in favor of Proposition 10 will be devastating for the housing industry as the added regulation does nothing but deter the creation of more housing.
While it may be long before housing supply could catch up with the demand from the growing population, if the government and citizens work hand in hand, we could build ourselves out of this crisis and make California great again.
