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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Amy J who wrote (13014)	8/27/2003 1:35:55 AM
From: gpowell	Respond to of 306849

Housing may be California's biggest long-term problem "Yet California has stopped building enough houses. The rule of thumb is that you need one new house for every 1.5 new jobs. In 2002, the rate was only one new house for 3.5 jobs.Why haven't more houses been built— especially given the high prices? Part of the answer is that there are natural barriers to growth. In southern California, houses are going up 50 miles from where your job is, so that you have to commute four or five hours a day. The 100-mile city can go no further. This is “sprawl to the wall”. True in Bay Area as well.* Proposition 13, which halved property taxes and constrained their growth. Regardless of its fiscal merits, this has had perverse effects on land use. Local authorities now have a much bigger incentive to give permits to new shopping malls (from which they derive a share of sales tax) than new houses (where property taxes are constrained). I mentioned this back in march* The wealth generated in California's late-1990s boom produced an outbreak of NIMBYism (not in my back yard), which also found expression in California's initiative process. Between 1986 and 2000, 671 local initiatives concerning growth were put to the vote. Around 60% produced victories for the slow-growth lobby. Environmental pressures also resulted in high fees for developers, an approval process for new construction that is among the most complicated in the country (developers complain it adds about $70,000 to the cost of a single-family home), and an epidemic of lawsuits over construction defects that have made some housing uninsurable. A particular target has been condominiums—jointly owned apartment blocks that are a useful way of putting more people in a limited space. In the mid-1990s, condos accounted for 30% of new houses. By 2000, legal disputes had reduced that to 2%. *Susanne Trimbath of the Milken Institute says that supply has also been cut by a change in the housing business. Rather than just building houses and then trying to find people to buy them, developers increasingly find people to buy houses in advance, getting the householders to pay for construction. This has smoothed out the boom-bust cycle—but it also means that there is not the excess housing on the market you would expect in a recession. For the moment, the benefits to existing NIMBY householders of not building enough new homes outweigh the economic cost to new migrants. Yet the future of California depends on those migrants, who will increase the state's population to almost 50m in 2025 from 33m now." economist.com