Research proves definitively: CA's ridiculous housing prices due to wild gov't regulatory overreach

Image by Wayne S. Grazio

RAND Corporation does a gigantic study on CA's housing affordability crisis and notes that onerous regulations, as well as built-in labor-friendly contracts, make costs for new housing soar. Take a look at Texas, they recommend, where prices are half of CA's.

We found the following: 

• California is the most expensive state for multifamily housing production in every cost category we considered. Production costs per net rentable square foot for marketrate housing in California are 2.3 times the average cost in Texas. 

• California’s publicly subsidized affordable housing costs are even higher, at 1.5 times the average cost of marketrate housing in California and more than four times the cost of market-rate housing in Texas. 

• Longer production timelines are strongly associated with higher costs. The time to bring a project to completion in California is more than 22 months longer than the average time required in Texas.

Go Deeper:

• Even Housing First works better in Texas, but why?
• Maybe fewer subsidies would actually mean cheaper housing
• Could common sense be the answer to solving California’s housing crisis? (The answer may shock you)

• Municipal impact and development fees are less than $1,000 per unit on average in Texas. They are more in Colorado, averaging $12,000 per unit, and much more in California, averaging $29,000 per unit; in San Diego, where fees are more than $30,000 per unit on average, they make up roughly 13 percent of total per-unit development costs. 

• Key drivers of the remarkably high cost of publicly subsidized affordable housing production in California include requirements for affordable housing developers to pay substantially above-market wages and unusually large architectural and engineering fees (particularly in Los Angeles) likely related to highly prescriptive design requirements. 

• In California, production costs vary substantially across metropolitan regions. San Diego has the lowest average cost for privately financed apartments, at roughly twice the Texas average; costs in Los Angeles are 2.5 times the Texas average; and costs in the San Francisco Bay Area are three times the Texas average. 

• Halving the difference in market-rate production costs between California and Texas could reduce rental prices for new apartments in California by roughly 15 percent. Additionally, if California had Colorado’s production costs for publicly subsidized affordable apartments, the roughly $1.25 billion in recent spending by the state’s four largest funding programs would have produced more than four times as many units. 

Read the whole thing here.

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