The Latest Sowellizing: Blaming The Gubmint and Complete Silence About Prop 13
Here is some Sowellizing at the National Review:
But these runaway housing prices in California did not just happen, for no reason.
Prior to 1970, California housing prices were very similar to housing prices in the rest of the country. In more recent times, it has not been uncommon for California homes to cost three times what homes cost nationwide.
What happened in the 1970s was that severe government restrictions on building became common in coastal California. With supply restricted and demand not restricted, it was inevitable that prices would soar beyond many people’s ability to pay.
The main impetus behind severe restrictions on building is environmentalist zealots who demand that vast amounts of land be set aside as “open space” on which nothing can be built.
Behind much of the lofty and pretty talk are some ugly and selfish realities.
People who already own their homes in an upscale community pay no price for making it hard for others to move into their community. On the contrary, the value of the homes they already own shoots up when they restrict the supply of new homes.
In other words, they can keep out the less affluent people — or, as they put it, “preserve the character of the community” — while benefiting themselves economically in the name of green idealism.
“Open space” laws are just one of the weapons in their arsenal. Other legal impediments to building include so-called “smart growth” policies, historical preservation laws, and zoning boards and coastal commissions with arbitrary powers to limit or forbid building.
I did a quick google search and found a paper at the Fed of Cleveland’s site, which produces this graph:
FWIW, it seems that prices took off not just in CA but across the country in the 1970s. That doesn’t mean a disparity didn’t occur between CA prices and the rest of the nation – but it would imply that at least some of what was happening in CA in the 1970s was also happening elsewhere in the country (assuming these indexes (indices?) took into account inflation).
I was hoping to find year by year historical pricing data on CA and the US to see exactly when prices in CA started to take off relative to the US… but after a few minutes I gave up. If anyone has the data, I’ll be happy to go into this a bit more on a later post.
But I would like to point out there’s one thing that has helped push up home prices in CA quite a bit that Sowell doesn’t mention… Proposition 13, which passed in 1978, put a cap on property taxes. Considering the high inflation at the time, it wouldn’t take long to push up the benefits of not selling or moving to many home-owners. As an example, if my mother were to rent out her home… the monthly rent would be at least twice her yearly property tax. If she moves… even to an equivalent home, her property taxes will go up several times. And she will tell you, if you ask – one of the reasons she will not move is because of her property taxes.
Put another way… Proposition 13 serves the same function for home-owners as rent control serves for those who rent apartments. It makes winners of those who are already in, and penalizes those who are out by reducing the incentives of those who are in from moving and raising the prices of existing property. But this is a measure that a) involves tax avoidance and b) benefits the haves at the expense of the have-nots. So of course, a guy like Sowell would never mention this as one of the issues driving up home prices.
As he states as he closes his piece: “Apparently it all depends on whose ox is gored.” And Sowell is not one to gore an ox that belongs to people who have a lot of ’em.
Update… added the words “that Sowell doesn’t mention” to one of the sentences for clarity of meaning.