Hardworking families struggling to make ends meet are going to find themselves struggling even more if powerful, self-seeking special interests in Sacramento get their way.
The past few weeks, there has been a major charge in the state Capitol to push for expanding statewide prevailing wage mandates onto new housing construction – a costly requirement that would significantly increase the cost of a home.
Data shows government-mandated prevailing wages will raise new home prices by as much as $79,000 per unit, according to a report by the California Center for Jobs and the Economy, a project of the California Business Roundtable. Such a costly mandate will worsen the already severe housing shortage in California that is responsible for skyrocketing housing costs.
California has the highest poverty level in the nation, and one of the highest costs of living. The state’s median single-family home price is just shy of $500,000. While Stanislaus County’s median home price appears to be a relative bargain at $275,000, our county’s home affordability rate (when average income is considered) is only 48 percent. That means less than half of all potential homebuyers in our county can afford to purchase the local median-priced home.
It is no wonder California’s homeownership rates are at their lowest since World War II.
The biggest driver of costs is the simple rule of supply and demand: we do not have enough supply to meet the demand. The nonpartisan Legislative Analysts’ Office says we need to build an additional 100,000 units annually to start bringing down costs – in addition to the 80,000 already built every year. Today’s supply-demand imbalance drives up prices, and more Californians are priced out of the home market.
The solution seems obvious: Build more units, right? But in California, nothing is ever that simple.
Over the years, we have layered regulation on top of regulation driving up projects costs and make it expensive to build. This results in two outcomes:
▪ Housing projects are delayed or halted because the project is too expensive to move forward;
▪ The housing that is built is too expensive for most consumers.
That is why we can no longer entertain policies that significantly increase costs – especially premium labor cost mandates, which research from Beacon Economics shows could increase housing costs by as much as 46 percent. Construction workers should be able to make a good wage that allows them to support themselves and their families, but a competitive market will take care of that.
An unaffordable housing market destroys a vital link to income growth and a path out of multi-generational cycles of poverty. Homeownership helps households build wealth and equity, provides fiscal stability to families and is often a path toward up the economic ladder.
But a mandated-wage policy would hurt renters, too, increasing monthly rents by as much as $460. Already, the poorest 25 percent of California income earners report spending 67 percent of their income on housing – leaving little room for necessities such as food and medicine, much less saving for a down payment or paying for children’s activities.
High housing costs are forcing people out of our communities and into longer commutes. Many workers, including those who provide essential services such as firefighters, teachers, and police officers, are being forced to live further from the cities where they work in favor of more affordable homes in outlying areas.
This is unacceptable. The Legislature should be focused on policies that make it easier to build housing where it is needed, and reject any proposal that pushes homeownership further out of reach. We can and must do better to make housing more affordable for everyone.
Kristin Olsen is a Stanislaus County Supervisors and vice chair of the California Republican Party. She wrote this for The Modesto Bee.