California digs a deeper hole. Chuck DeVore writes:
The main reason why California’s poverty rate has remained stubbornly high—proportionately 13% higher than Mississippi’s 16.1% and 26% higher than arch-rival Texas’ 14.4%—is that California’s housing costs have remained among the highest in the nation.
The U.S. Bureau of Economic Analysis estimated that California’s rent index (a broad measure of real estate costs that includes owner-occupied housing) was 153.7 of the U.S. average of 100 in 2009, dipping to a low of 147.3 in 2015 and then rising to 150.6 in 2017 as California’s recovery from the Great Recession caused housing demand to outstrip supply.
California’s new housing stock has been severely restricted by the state’s myriad of web of development fees, restrictive zoning rules, environmental laws—including greenhouse gas restrictions—and lawsuits. Now it’s about to get much worse, with statewide rent control further discouraging new investment in the state.
Just as Census was reporting California’s worst in the nation poverty rate, the California Legislature was sending Gov. Gavin Newsom Assembly Bill 1482, a measure which imposes a 5% above the rate of inflation annual cap on rent increases for rental properties 15 years or older—in other words, most of California’s homes and apartments. The California Association of Realtors said that the bill will, “…impose onerous standards upon small property owners and, in turn, exacerbate the state’s housing crisis.”
In addition to rent control, the bill strengthens already-strong tenant protections, now barring property owners from pursuing evictions without a government-approved reason.
Gov. Gavin Newsom is expected to sign the bill into law.
In Texas, the cost of housing is still below the national average, with the federal government estimating the rent index there at 94.5 compared to the national index of 100 in 2017. In 2009, Texas’ rent index stood at 88.2. It has seen an increase in every year of the past eight. This, in turn, has contributed to Texas’ poverty rate creeping above the national average even as its unemployment rate dropped from 8.1% in 2010 to 4.3% in 2017.
In past years, Texas’ housing market has readily kept up with demand. But, as Texas has grappled with growth and its major urban centers have trended blue, restrictions on development have started to slow the availability of supply and increase the cost of housing.
[Chuck DeVore, “Poverty and Affordable Housing—California’s New Rent Control Law Will Make Things Worse,” Forbes, September 13]
