Addressing California’s Affordable Housing Shortage: Alternatives to Proposition 1C

The severe shortage of affordable housing in California threatens the state’s economic health and has placed the American Dream of homeownership out of reach for hundreds of thousands of families. Declining federal support for housing programs over the last several decades has prompted calls for increased state funding for affordable housing in California. Rather than establishing a fiscally responsible ongoing revenue stream to fund the state’s affordable housing programs, California policymakers have repeatedly asked voters to approve one-time influxes of bond funding, violating a basic principle of public finance: long-term debt should be used to fund long-term investments, not the operating expenditures of state programs…
Alternative policies that do not require significant new spending and have a much greater likelihood of succeeding include: deregulating the land market to allow more market-driven densities and development, eliminating costly and wasteful building codes that do not measurably improve public health and safety, repealing prevailing wage laws that dramatically increase the cost of building new affordable housing, and avoiding new subsidies for high-income housing projects, such as transit-oriented development. Further, policymakers should separate the larger issue of housing affordability from efforts to provide a housing “safety net” for the needy through the construction of new shelters for homeless persons, foster children, domestic violence victims, and others. Safety net programs are best addressed through the regular budgeting process, as bond funding is a fiscally irresponsible method of financing ongoing government programs.

Leonard Gilroy, Adam Summers and Samuel Staley

Reason Foundation

September 1, 2006

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