California costs too much. At the very root of our affordability crisis is the high cost of housing. High rents and expensive homes are driving families and high-wage jobs out of California. Our housing crisis makes it harder to hire teachers, child care workers and law enforcement officers; and it is closely linked to our crisis of street homelessness.
My parents, a letter carrier and a teacher, would be unable to afford today the modest house in which my sisters and I were raised.
The generations of their children and grandchildren are being denied the same opportunities they enjoyed. And this is the original sin of California politics — taking away the dream of home ownership. It’s time to fix this: Because if we get the most basic need for affordable housing right, we will get California back on track.
Over recent decades, we’ve fundamentally broken our housing market by driving up construction costs and limiting the supply of new housing. For a range of well-meaning reasons, we’ve piled on excessive fees, created long bureaucratic approval processes and been hampered by junk lawsuits. We’ve essentially imposed an upfront tax on new housing so high that, when combined with rising land costs, many homes and apartments are simply impossible to build.
The key solution to unlocking the millions of new homes that we need is to drive the costs associated with construction down, starting with the easiest costs to control — that is, the direct costs imposed on new housing in the form of taxes (cities call them fees) and the indirect costs created by long bureaucratic delays.
In San Jose, that’s exactly what we’ve done.
We started by drastically reducing the time it takes to get approvals to build by making the process an administrative, rather than a political one. Then we went a step further. We saw that sky-high city fees were keeping new homes from being built. It was a Catch-22. We wanted fees to fund services, but those fees were so exorbitant — as much as 20% of the total costs of construction — that we were not getting the housing our residents needed. And of course, because we weren’t building, we weren’t collecting the fees anyway.
When we slashed these fees, we saw an immediate impact. Over 2,000 homes that were entitled but not getting built have now broken ground. And 2,000 additional homes will break ground this year that otherwise would not have. We did the math, got out of the way and the result is dramatic.
Now we need to do exactly that statewide. And more.
When it comes to delays, we can do more to reduce lawsuits that can keep vitally needed homes tied up in court rather than under construction. Environmental laws should protect our natural areas and not be misused to stop housing in our city cores.
Slashing permitting times and inspections is now easier than ever because of new technologies and reforms. In San Jose, we let trusted builders and architects “self-certify” their plans using online tools that significantly speed up the process and lower costs. We should do that statewide. One important study found that a 25% reduction in approval time could increase the rate of housing production in California by a full 33%.
But these are just the first steps. A giant leap will be when we address the high cost of housing by fundamentally changing how we build it.
Housing experts at the Terner Center have found that factory-built housing is up to 25% less expensive and constructed up to 50% faster. And I believe that’s just the start of the savings, which will only increase as we scale.
Just as California helped dramatically reduce the cost of solar power by helping the market achieve economies of scale, we can do the same with housing by leveraging state dollars to promote factory-built housing while also creating high-wage factory jobs. We can incentivize construction innovation by linking new state dollars and tax credits to metrics like the cost of construction per square foot. Factory-built approaches already exist, so by incentivizing lower cost per unit, the market will respond quickly.
Building California homes in California factories should be a centerpiece of the state’s industrial policy. The modest home my working-class parents could afford represented economic security, stability and, just as importantly, hope for a better future for our whole family. Working people and even well-off people today simply don’t have a realistic chance of purchasing a home anymore. Today, an entire generation of young Californians are resigned to life-long rental payments, which breed resentment and harm their long-term economic stability.
Solving the housing crisis first and fully by building the homes we need will make it easier to solve many other challenges facing California and give young families new hope for a better future. That’s why it is urgent we unlock the wealth of new innovations and ideas that will turn the corner on housing costs and hold ourselves accountable for implementing them. The solutions are there. Let’s have the political courage to implement them.
Matt Mahan is mayor of San Jose. He is running to be California’s next governor.
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