Publisher’s View: Housing

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1970. I’m 10 years-old, waiting for a haircut at what’d now be called an old-fashioned barber shop in West Covina.  The chairs are filled with men, most likely in their 30s and 40s, but to my adolescent eyes they seemed Biblically ancient. I desperately wanted to grab one of the Playboys strewn around the side tables but was stopped by a forcefield of my own making, consisting of throbbing energy generated by equal parts fear of actually seeing an image of a naked female body and of being busted for underage peeping. Instead, I absently leafed through Highlights for Children.

“Did you see the prices on those new houses being built on the old orange grove down the street,” asked a customer, as the barber snipped his hair.  “Astro-nomical!”

“Yeah,” replied the barber.  “I don’t know how long I’ll be able to afford to live here, if prices keep going up.”

“You need to buy something,” said the customer.  “You’ll never lose money investing in California real estate.”

“Better than gold,” said the barber, as he snapped on an electric razor.

While it’s common wisdom that we’re in the midst of a housing “crises,” California may more aptly be considered in the next phase of an almost 200-year-long, sometimes stampeding, occasionally retreating, land rush.  There’s been periods of deep and scary recessions, but over the past 50 years alone home prices have more than quadrupled in inflation-adjusted terms, escalating twice as fast as the national average.  Eye-popping real estate values have been a top tier topic of conversation my entire life; Californians’ eyeballs are no doubt weary from the number of times they’ve bulged in response to the latest gossip about how much that dump around the corner sold for. 

Intermittently-accelerating real estate prices have been driven by the state’s natural gifts, technological changes and public policies.  Ample taxpayer investments in water supplies, highways, and a world-class educational system created the conditions for the food processing, film, aerospace, defense, electronics,, social media, biotechnology, artificial intelligence and other ever-higher-wage industries to anchor here.  As a result of capturing the lion’s share of each next gen’s jobs, average household income is almost $10,000 higher in California than nationally. 

More importantly, there’s a surplus of people willing and able to shoulder aside those making what might be called a “service job salary” to pay a premium for the lowliest of shacks.  Six-figure incomes are more common in California than anywhere else in America.  Palo Alto and Newport Beach are the nation’s wealthiest cities, with the state’s municipalities occupying more than half the top 20 spots in terms of household wealth.  Skewed prosperity has flattened what used to be a long ladder of housing price points – with rungs that extended from tiny townhouses and manufactured home parks in inland counties to Pacific Heights mansions – into a stepping stool constructed of a few different size mountains of cash.

I remember driving across the Bay Bridge in the early-1980s, Berkeley to San Francisco in reliably less than 25 minutes, and thinking that the state had prepared for a future that’d yet to come.  Freeways were largely uncongested, parks and open space often empty, schools and universities sparkly with promise.  California felt like a land of plenty, able to accommodate whatever growth was on its way. 

That future has arrived.  The food is better, it’s a lot more expensive and crowded, and the land rush that’s been galloping, meandering, retreating, accelerating, and trotting for a couple hundred years is in full, furious, stampede.

Few goods or services are nested within a pure supply meets demand market.  Housing isn’t one of them.  A tangled web of public policies and social pressures determine the quantity, quality, availability, location and cost of homes.  These rules and communal strands emerged to encourage property ownership, enable Californians to stay in their residences even as they escalate in value, maximize individual independence and help with affordability. But as conditions have changed a web that was supposed to capture pests has instead served to tie-up housing supplies.  It’s time for this mesh to be reweaved. 

There’s plenty of residential space in the state, as measuring by square footage.  It’s just not equally distributed, with strong incentives – Proposition 13 limits; mortgage tax deduction; only mildly progressive income tax – for those with means to over-consume.  My 80-something parents continue to occupy the five-bedroom home I grew up in Palo Alto; my own family lives in an oversized flat bigger than our needs.  Many San Francisco property owners leave space that could be rented unoccupied, rather than risk letting to potentially unpleasant tenants protected by stringent rent control laws. 

This underutilized space could be drawn into the market through various tactics.  Already there’s been an uptick in multigenerational families co-inhabiting, soaking up otherwise unused rooms. In 1940, a quarter of the population did so, a percentage that halved by 1980, but has now rebounded almost to mid-century last levels.  In addition to financial reasons, better relationships between age groups may be leading kin to actually want to live together. 

Vastly greater amounts of desirable, but smaller-sized, well-located housing situations need to be developed for empty-nesters of all ages, to induce them out of their oversized homes.  This could include ready access to comfortable autonomous vehicles; ample, accessible, storage for keepsakes and records; onsite work and banking areas; multiple dining opportunities; and a variety of compelling nearby activities.  It’s time to hack real estate, creating captivating mix-and-match living opportunities, such as small residences for adults, who could volunteer as support staff, co-located with churches, museums, zoos, schools, botanical gardens, and aquariums. 

Social change needs to be accompanied by policy alterations.  New zoning designations – “affordable (mixed-use) multi-unit,” “jobs-housing balance,” “communal” – should be adopted and implemented in diverse areas throughout the state, encompassing land that has to be at least partially dedicated to reasonably priced housing, with associated greater densities and amenity-requirement waivers.  Proposition 13 needs to be carefully modified, perhaps by transitioning from property to a mix of more progressive income and capital gains taxes, adjusted to reflect socially beneficial real estate sales, such as downsizing and making way for families.  The mortgage tax deduction should ultimately disappear or shift to being purely income-based.  Owners of rent-controlled property should be allowed to pay into an affordable housing fund to release their assets from pricing limits, with the policy changed from a broad entitlement to one that’s income-tested and accompanied with equivalent value tax credits to remaining and voluntarily-enrolled rent-controlled units.

California needs to continue reimagining and reinvesting in its transportation system, creating a multimode network that’s capable of moving people and goods quickly and efficiently over long distances.  The goal should be to enable 40-mile commutes to reliably take three-quarters of hour or (much) less, with minimal associated pollution, so as to better nurture a regional housing market.  This can be done through a combination of greatly enhanced fixed rail and shuttles, networking of alternative-fueled vehicles and transportation signaling devices to ensure speediest routes, isolating corridors to host the most effective modes possible, such as micro-vehicles and mass transit-only zones, and next generation apps that help to seamless move people from one place to another.

2000. Another barber shop, this one a hipster salon on Valencia Street.  I’m getting a haircut from Brian, the first and only stylist for whom I’d become a steady client.  The very model of San Francisco cool, in addition to cutting hair Brian sang in a rock band – without prior training – and surfed.  He never failed to look as if he’d just woken up, ready for sex; his voice purred like a lounge singer.

“I meant to tell you,” Brian said.  “I’m moving out of San Francisco.  It’s just too expensive here.” 

“That’s too bad,” I replied.  “Where are you going?”

“San Luis Obispo.  You can get a house there for less than $300,000, though it may need some work.  Plus, I can surf.  Don’t worry, though, I’ll still come in a few days a week to cut hair. The drive will be worth it; they don’t have salons like this in SLO. I’ll just sofa-surf.”

Brian did cut my hair several more times after he moved.  On each occasion, in a tone that mixed fear with pride, as if he was conveying a thrilling ghost story, he told me how lucky he was to have bought on the Central Coast; prices were escalating there. 

Soon enough, though, he disappeared from San Francisco. The salon he worked at is now a high-end gift shop.