>California’s housing crisis isn’t caused because new houses need solar panels, for example.
Not sure where you're getting that, it sure as hell contributes. Several thousand dollars extra to every house is just another cost on the pile. It's death by a thousand regulatory cuts.
I'm in CA, and I know that in my city (Mountain View), the permit costs on new construction, single family home, exceed $100k and in multi-apartment complexes, it's still near $80k per unit. That's permits alone, and a big chunk is the park impact fee.
Solar is mandated on roofs, and you still need a permit for it, neat, eh?
The cost is still dominated by zoning/nimbyism. Yes it's a cut, but when the land alone costs more than any possible house built on it, and and non-single-family-residences are harshly restricted, well, guess what there's more demand than there is supply, and no way to increase the supply, so the prices go up.
But land doesn't cost that much. Approved plots of land with an existing structure cost that much. Land itself is relatively cheap. There's a LOT of empty space in California. When you say land is expensive you're really saying that regulation is expensive.
The regulatory hurdles others have mentioned are why having a zoned and permitted structure is so valuable. Having a home so you can do a single wall teardown is worth hundreds of thousands at least - maybe more because it can clear existential regulatory hurdles that block development.
The nimbyism you mention is possible because of these bad regulations, which in theory exist for the greater good -- but which in practice do not provide for it.
I grew up in the Bay Area, specifically the east bay, back in the 70’s and 80’s when there was actually empty land to be had. I was driving through there a couple weeks ago and it’s all gone, one big metro all the way down past San Jose.
All this land you speak of is far from where the jobs are so there’s no incentive to live there without a three hour commute each way. The Bay Area is restricted by the bay (obviously) and the coastal range which isn’t all that wide. They haven’t really let people develop on the hills (except the rich people building mansions) in my lifetime at the very least which is why they don’t all look like the Oakland hills these days.
It's not. I also grew up here during the same time period. There's been a lot of building, but it's nowhere near full.
Far less than half the available valley areas are developed along the 680 corridor between 580/24. The commute to Oakland is 25 minutes and to SF by BART is one hour.
Even on the bay side there are large empty spaces which aren't being developed, often because development is tied up in decades of litigation -- litigation which is based around these onerous regulatory laws.
I'm sure the change you're seeing during a casual visit is striking. But, have you stopped to look at the empty lots which still remain? Have you researched why they're still empty? I have - and this is why.
There's room for entire new cities to be built along 580, between Castro Valley and Dublin. There are vast tracks of empty land along 24, in the lamorinda areas, just minutes away from Oakland.
Infrastructure is expensive. Unless you want people crapping in a pot and pouring it out their back door or living without water than some method of deciding where and in what density people can live will always be present. This method may be laws and governments of varying qualities. Or it may be fires and plagues turning the cities population to bones. Self regulating systems ain't great either.
It's not, relative to other costs. Septic costs around $10k and trenching sewer to lots in urban areas is relatively cheap. Homes on septic are very common and are already regulated. There are also many plots of relatively cheap land with sewer access. I can think of about 20+ buildable acres in my city, for example. The only thing holding back construction is an onerous and expensive permitting process which mostly focuses on visual aspects of the potential development.
Sewer hookups for dense living isn't the part of the permitting process that's the problem.
"This method may be laws and governments of varying qualities."
We are discussing situations where the aggregate impact of these laws becomes a net negative.
That would increase the costs, but so long as the demand (at that cost) outweighs the supply, there will be an incentive to keep building. If there currently aren't enough homes to satisfy the demand, then the reason why there aren't enough homes isn't that the costs are too high.
Another way to say this is that supply for housing is currently consumed by buyers who can afford the extra cost for solar panels. Until the supply is high enough to where buyers who can't afford the extra $Xk for solar panels are needed to buy the available new housing, the cost of solar isn't a major factor in the housing crisis.
It could eventually be a major factor, but until more housing is built, there are other factors in play that impact the lack of housing more.
If it is death by a thousand cuts, the problem is the thousand cuts, not any single cut in particular.
> Another way to say this is that supply for housing is currently consumed by buyers who can afford the extra cost for solar panels. Until the supply is high enough to where buyers who can't afford the extra $Xk for solar panels are needed to buy the available new housing, the cost of solar isn't a major factor in the housing crisis.
You're presuming there's no elasticity in supply. That even if pricing goes up there's not any additional units built.
> You're presuming there's no elasticity in supply. That even if pricing goes up there's not any additional units built.
Maybe I wasn’t as clear as I could have been. I’m not making any assumptions about elasticity. If supply increases, I’m saying that the extra cost of solar doesn’t matter (yet) so long as the pool of buyers is large enough that the supply can be consumed by buyers who can afford the extra cost for solar.
It isn’t until either the supply gets bigger or the buyer pool gets smaller that the cost of solar would have an impact (when the entire supply couldn’t be bought by people with the means to afford the extra cost of solar). At that point you’ll see more pricing pressure to finally drive prices downwards (if that ever happens).
> Maybe I wasn’t as clear as I could have been. I’m not making any assumptions about elasticity. If supply increases, I’m saying that the extra cost of solar doesn’t matter (yet) so long as the pool of buyers is large enough that the supply can be consumed by buyers who can afford the extra cost for solar.
Simple econ stuff: add a $10k per-unit "tax" to producers; the cost is borne by the suppliers and consumers according to the elasticity of the supply and demand curves, and quantity decreases.
The shaded regions are, of course, slightly different when you're imposing a cost on suppliers that results in some value to the buyer. But the intersection of the supply and demand curves moves left, which means quantity falls.
The only case that quantity doesn't change is if there's no elasticity.
I’m not very well versed in econ, so thanks for the links and help.
Wouldn’t this all assume balanced supply/demand? Which isn’t what we have in CA. I guess you’re saying that demand isn’t elastic? It seems like an odd term to use to describe a situation where demand >>> supply. It’s not like demand is fixed, but it is so far beyond supply on the curve that it acts as a constant?
> It seems like an odd term to use to describe a situation where demand >>> supply. It’s not like demand is fixed, but it is so far beyond supply on the curve that it acts as a constant?
Demand equals supply at the price in a market economy (in the long run). If the demand is high and there's an absolute shortage, sellers are incentivized to raise prices. Then the intersection between the supply curve and demand curve set the price and quantity.
The slopes of the two curves may be shallow, though. There may be a large demand for housing at nearly any price (inelastic demand), and supply may not react too much to price (inelastic supply).
How elastic the curves are sets what happens if you add a fixed cost in: who bears the cost, and how much the quantity changes.
What's the profit margin on a newly built house in California? I can't imagine that construction costs are close to selling price anywhere in commuting distance from a city.
Not sure where you're getting that, it sure as hell contributes. Several thousand dollars extra to every house is just another cost on the pile. It's death by a thousand regulatory cuts.