How Not to Solve the Homeless Crisis

I trust that I am not the only one who has had this thought, so apologies in advance if this makes you feel that you are walking into an echo chamber.

Every time someone bemoans the homeless encampments that are infesting our great cities, especially the leftist cities on the Left Coast, we all think to ourselves that the problem can easily be solved by building more housing.

We are very smart, aren’t we?

Doubtless, we all then ask ourselves the salient question: how much does it cost to build new apartment complexes in these great leftist cities. And there, my friends, is the rub.

As the New York Times reports, to its great credit, building shelter for the homeless in San Francisco costs vastly more than it does in most other parts of the nation.

The average home in the United States costs around $240,000. But in San Francisco, the world’s most expensive place for construction, a two-bedroom apartment of what passes for affordable housing costs around $750,000 just to build.

California’s staggering housing costs have become the most significant driver of inequality in the state. On Wednesday, California’s governor, Gavin Newsom, mentioned the issue 35 times during an impassioned speech, urging lawmakers to solve the state’s homelessness crisis by building more and faster.

But the vertiginous prices of housing in California show how difficult that will be.

Building affordable housing in California costs on average three times as much as Texas or Illinois, according to the federal government.

At this point you are no doubt thinking that there is only one way to bloat housing costs to that extent: government interference and union work rules. If you thought so, you are right:

The reasons for California’s high costs, developers and housing experts say, begin with the price of land and labor in the state. In San Francisco a construction worker earns around $90 an hour on average, according to Turner & Townsend, a real estate consulting company.

But non-construction costs also weigh heavily.

Not taking into account the price of land, around one quarter of the cost of building affordable housing goes to government fees, permits and consulting companies, according to a 2014 study by the California Department of Housing and Community Development.

For a building to be defined as affordable housing it typically obtains tax credits and subsidies. A single affordable housing project requires financing from an average of six different sources — federal, state and local agencies, said Carolina Reid, a researcher at the Terner Center at the University of California, Berkeley, and an author of a forthcoming analysis of affordable housing costs.

She called the process “death by a thousand cuts.”

And let’s not forget those parasitic organisms called attorneys:

Senator Brian Jones, a member of California’s State Senate, remembers laboring over an affordable housing project when he was on the City Council of Santee, Calif., near San Diego.

“It literally took us on the City Council six months to get all of our attorneys, all the developer’s attorneys, all the federal government’s attorneys, to agree on the paperwork. And that was just the financing,” Mr. Jones said.

“I walked away from that process and told the developer I cannot believe this project is going to employ more attorneys than construction workers to get built.”

And then there are environmental regulations, codified in a law that was signed by none other than Ronald Reagan. Hmmm.

Mr. Jones, who is head of the Republican caucus in the Senate, argues that California’s housing market is vastly overregulated, starting with California Environmental Quality Act.

California law permits anyone to object to a project under the act, which when it was signed by then Governor Ronald Reagan in 1970 was seen as a landmark effort to protect the environment from reckless development.

Today the law is often used as a legal battle ax by anyone who wants to slow a project down or scuttle it altogether, Mr. Jones and many developers and experts say.

“At very little cost one individual can take a project and tie it up in years of litigation,” said Douglas Abbey, a lecturer on real estate at the Stanford Graduate School of Business.

Environmental protection is cherished in California but there is also bipartisan agreement that housing prices are too high. Mr. Newsom has pushed through exemptions to the California Environmental Quality Act for homeless shelters, and he says the state should consider more exemptions.

We could go on. The more you look at it the worse it gets. Clearly, we do not see the free market at work. We see big government stifling initiative and producing a homeless crisis. And we see corrupt stakeholders siphoning off money without solving the problem.

While we get mired in this ungodly mess, we console ourselves with the thought that we are a free country. Seriously, free for whom, you might ask.

And then we notice that in big, bad China local authorities and construction workers just built a one thousand bed hospital in ten days. Naturally, we are appalled by the Chinese example. We prefer to vaunt the human right to turn our major cities into open air toilets.

But, consider the question from another angle. Why would China or any other nation want to emulate our wondrous example of dysfunctional and corrupt governance? If you think that China is not exactly a beacon of freedom, what makes you think that our government is even close to living up to its promise.