There are so many bad policy ideas floating around California that it’s hard to keep track of them. And it’s worth noting how those bad ideas often spawn more bad ideas intended to remedy the problems created by the original bad idea.
Take housing, for example.
For decades, California has been hostile territory to builders and developers. The state and local governments impose a vast array of environmental regulations and other restrictions intended to limit land use. As a result, housing prices in many parts of California are beyond the reach of all but the wealthy.
And now a new study by researchers at Harvard and the National Bureau of Economic Research confirms that jurisdictions which shackle developers with burdensome land-use restrictions not only drive up the cost of housing, but exacerbate inequality by making it more difficult for middle-income and poor Americans to relocate in search of work.
“Many of the cities with the stiffest demand for housing, and thus the highest prices, are on the Atlantic and Pacific coasts,” the Wall Street Journal noted last week. “They also tend to be the cities that impose the strictest rules” on development.
You might think, then, that some local governments in the Golden State — particularly in places such as Silicon Valley, where one real estate agent recently told CNBC that prices are “looney tunes” — might seek to roll back red tape to encourage more housing construction as a means of easing prices.
But you would be wrong. Very wrong.
Instead, voters in five Bay Area cities are being asked next month to pile more restrictions on property owners in the form of rent control.
“It is a standard jest among economists,” Tim Worstall wrote in Forbes recently, “that rent control is the worst thing you can do to an urban housing market short of aerial bombing.”
That’s because rent control will actually quash the incentive for builders to provide more housing stock, the opposite of what is needed in areas with soaring housing costs. The way to control housing prices, Mr. Worstall points out “is to build more housing. And the way to do that is simply kill off the regulations about who may build what or where.”
So to sum it all up: Government policies in many areas of California discourage housing development, driving up the cost of shelter. Now, some municipalities seek to address high housing costs by imposing rent control, which not only ignores the economic realities of supply and demand but will further exacerbate the housing shortage.
Bad idea No. 1 begets bad idea No. 2. One can only imagine what bad idea No. 3 will eventually emerge from the rubble.