SF Bay Area & California’s Housing Conundrum Solution (Part 2)
*This is the 2nd part of a 2 part series on SF Bay Area’s & CA housing climate
In the last article, we talked about the conundrum of housing prices in the Bay Area, and how they’re really expensive; expensive to the point where people here in the Bay Area are finding it hard to find decent places to live, and still not be packed like sardines.
Sigh… so much for the American Dream.
But the good news is that going forward, if the current restrictions on housing are removed and technology/innovation can play a part in helping solve this issues, then yes, the expensive lack of housing problem can be solved.
Let’s begin with the three solutions that can have the potential impact it needs to solve this clusterfuck…
Build more damn homes…
California currently has a shortfall of 2 million homes, with the SF Bay Area contributing its fair share, a McKinsey report found. The population growth through 2025 will add 1.5 million homes to that shortfall.
Speeding up the permitting process can only help. Some reforms adopted by California’s Legislature in 2017 were geared to doing just that by streamlining development reviews. McKinsey’s report maintains shortening the approval process by four months could cut housing costs by at least $12 billion.
Reducing developer fees for new construction can also help, as CA’s fees among the highest in the nation. A UC Berkeley study showed such fees range from $12,000 to $75,000 per unit for multifamily construction in six select cities and from $21,000 to $156,000 per unit for houses. Such fees represent 6 percent to 18 percent of the median home price.
Lastly, more granny flats built can help reduce the exorbitant housing prices. McKinsey’s report estimated California could add up to 790,000 housing units by easing restrictions on adding garage apartments, basement apartments, or backyard cottages to houses. A new state law that took effect last year and pending legislation in Sacramento seek to do just that, resulting in a 63 percent spike in permits for granny flats.
Reform aged Prop. 13
Proposition 13, or the People’s Initiative to Limit Property Taxation, was passed in 1978, stemming from concern over soaring property values and resulting in rising property taxes. Proposition 13 ensures valuations of properties may not grow by more than 2% annually, and market value reassessment may only occur with a change of ownership. Additionally, Proposition 13 created the requirement that all state and local tax increases be approved by a two-thirds vote of the legislature or the voting public.
In a housing conference held at Chapman University last year, two Chapman speakers, Stivers and Joe Cortright, a Portland economist and building consultant — said California’s popular 1970’s tax-control measure reduces local governments’ incentive to approve new housing.
Property taxes used to pay for new infrastructure. Now, local governments are looking for new sources of revenue, like sales tax and impact fees, to offset reduced property taxes. However, Stivers said, “I don’t know if we can unravel that.”
Cortright argued California should scale back Prop. 13, and even consider phasing out its 2 percent tax-hike cap.
With the current crop of majority homeowners in CA and local city bureaucrats set to oppose any changes to Prop 13, this one may be the most problematic of our proposed solutions, as it requires time and bargaining power.
Cut construction costs (Hello technology!)
Innovation could cut the cost and risk of building homes. McKinsey’s report found that while other industries boosted productivity through innovations like robotics, construction productivity fell 7 percent in California from 2007 to 2012. A 20 percent increase in construction productivity would save $11 billion a year in California.
Prefab and/or modular building(s) — in which key components are built in a factory and shipped to the construction site for assembly — also could cut costs and delays.
*Here was our mild rant in Part 1: https://medium.com/@buzzybee.io/sf-bay-areas-california-s-housing-conundrum-e07af1cf744d
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