California needs to shift jobs, housing to the east

POSTED: 4/21/18


Publication: Marin Independent Journal


Sen. Scott Wiener’s mandatory housing densification legislation, SB 827, died on a bipartisan Senate committee vote. Neither Wiener nor the push for radically more housing development is going away anytime soon. Wiener made the strategic error of introducing a widely unpopular concept during an election year. He won’t make that mistake again.

There’s no denying that housing is scarce and prices have skyrocketed. That’s true not just in the locales that Wiener had the poor taste to demonize: Marin and Beverly Hills. There’s incredibly high demand for traditionally priced housing in America’s boomtowns stretching from New York to Seattle.

In his comments, the senator neglected to mention SB 827 was unpopular with almost all San Francisco political factions except for the technology, real estate and construction industries along with their subsidized acolytes in the YIMBY (Yes In My Back Yard) lobbying group.

Of course there are winners and losers accompanying all changes. Homeowners, including many old-time Marin middle- and working-class families fortunate to purchase their homes decades ago, experienced a windfall. In a world where the word “pension” is archaic, they’re able to sell their homes and retire with a decent standard of living.

Others, mostly newcomers, do face a daunting housing challenge. Homes aren’t necessarily scarce. They are just expensive compared with housing costs in places not blessed or cursed to be booming. Many of these new Bay Area residents are employed in the well-paid technology and information sectors and able to afford high six-figure or low seven-figure homes or $3,500 per month in rent.

Left out in the cold are younger residents, including many Bay Area natives, without high-paying private or public sector jobs. They are compelled to live in far out suburbs or relocate to more affordable Central California.

The reality is the Bay Area has too many high-paid jobs. Try telling that to the mayors of Buffalo, Detroit or New Orleans. That’s their dream. Look at the competition for a site outside metro Seattle for Amazon’s second headquarters.

This demonstrates an overlooked factor that may help relieve the Bay Area housing pressure until its current boom bursts, as all booms eventually do. We have a mismatched demand-supply balance. According to housing lobbyists, California needs 3.4 million new units, most of that in coastal communities. Even when proposed new affordable housing is built, that gigantic imbalance isn’t going to evaporate.

The traditional “supply and demand” argument is that by increasing supply, demand will be satisfied and housing prices will decrease. That’s where the 3.4 million of needed new units comes from and what it’ll take to decrease housing prices making them “affordable.” By definition it also will lead to a housing price collapse devastating California homeowners. It’s never going to happen.

A partial remedy may be on the opposite side of the equation: demand.

If San Francisco, Cupertino or San Diego have too many good jobs, we need to create incentives moving those jobs outside of coastal California. Do it by shifting the demand eastward to poverty stricken, job-short eastern California.

The Central Valley and the Inland Empire of San Bernardino and Riverside counties are begging for well-paying jobs. They have reasonably priced housing and land. The Legislature should incentivize the technology and services industries to locate their new jobs in towns that have been bypassed by the Bay Area’s economic boom.

San Francisco transformed rundown mid-Market Street by offering the tech industry attractive tax benefits. Similar strategies will garner attention from bottom-line-minded technology executives. Community leaders and politicos in Redding, Riverside and Turlock will gladly do their part.

If new job centers are constructed with workers paid prevailing wages, politically powerful labor will be in support. Up technology education at eastern California high schools and create big-time innovation hubs at UC Merced and UC Riverside. Forget “high speed” rail. Convert it to modern, efficient electric “fast rail” linking the Central Valley to the Bay Area.

When it comes to housing, altering demand might be a win-win strategy for all Californians.

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