On August 6th
four historic laws were passed by the San Diego City Council:
1.The rain may never fall till after sundown
2.By 9 P.M. the moonlight must appear
3.Winter is forbidden until December and
4.Builders must sell new homes to poor folk.
These are the legal laws here. The last one is the culmination of the policies
of previous city councils, with the result that in San Diego you have to strike
it rich or go broke to buy a home.
The city council decreed that 10% of new homes must be affordable to people
earning 65% of the median annual income (MAI) in San Diego. Now, if you can just
get your income down to 65% of the MAI you get to leapfrog ahead of all the
other homebuyers who make more money than you. The city council is reviving the
old television show, Queen For A Day, and you too can be a winner! The median
price home in San Diego has surpassed $340,000, affordable to only 20% of the
residents. Not to be laughed at, it's estimated these new laws will help 500
households and perhaps as many as 825 per year, of the 180,000 households
determined by the Housing Commission to be in need of housing assistance.
The devil is in the details, Ross Perot would say, and yet to be worked out is
how to keep destitute college students who qualify on the basis of income from
having their parents pay cash for half price condos. Also, what to do with
college graduates (smart people) where the wife or husband temporarily quits
work in order to lower their joint income and qualify for a half priced home. A
couple of months of lost income might just be worth it to pick up a $75,000 to
$160,000 unearned equity in a brand new home, courtesy of the San Diego City
Council.
Several years ago universities taught classes on how to avoid paying back
student government loans. So why not classes on how to manipulate incomes to
qualify for half price condos. Parents should be happy to buy them for cash
because in effect, the discount will pay the full four-year tuition cost at the
priciest university. There will never be a cheaper way to help your kids get
into a new home in San Diego.
Of course you don't have to be a college graduate to figure out how big a pay
cut you need if you make over $60,100 annually (65% of median) to qualify for
the "Affordable Housing Program." A rule of thumb for most homebuyers is you
can afford a home costing up to 3 times your annual income. An annual income of
$60,100 would indicate you could afford a $180,000 home. Since the median priced
home in San Diego is just over $340,000, a $160,000 discount is required to meet
the city council's August 6th
decree. To get this $160,000 windfall how many couples would be willing to take
a temporary $30,000-$50,000 cut in annual income; perhaps have the wife take a
year's sabbatical?
The city council faced a dilemma on August 6th: create incentives for builders
(by reducing city imposed barriers to affordable housing) or punish them. Taking
their cue from Shakespeare who said, "First we kill all the lawyers," and
Joseph Stalin who said, first we kill all the kulaks (farmers), the San Diego
City Council decided to kill all the builders, financially so to speak.
Apparently, the council hasn't learned from the Soviets that without farmers
people starve and without builders there will be a lot more homeless people,
because government only meets about 5% of the demand for housing each year. But
never mind, August 6th
was declared a victorious day, "Affordable Housing Day!"
Testimony at the public hearing on Affordable Housing is reminiscent of Hans
Christian Andersen's delightful story titled, THE EMPEROR'S NEW CLOTHES. The
story describes how two Master Weavers approached the Emperor promising to weave
a cloth of the finest silk and gold threads. This cloth would be of the richest
texture, the most magnificent of colors, and would possess a magic allure all
its own. Only the most sincere, competent, and just people would be able to see
and appreciate the splendor of this incredibly beautiful fabric. The whole thing
was a fraud of course, and everyone was taken in until the Emperor who was
parading down the street was told by an innocent child that he was naked and shouldn't be streaking in public (in so many words).
The story was recreated August 6th,
only this time it was the city council (except for Mayor Murphy and Councilman
Madaffer) wearing no clothes and the Master Weavers were the Areopagus of
Affordable Housing. Let's look at some of the economic warp (excellent choice
of word) being woven for the council. From Master Weaver Toni Atkins citing
record earnings of development companies we hear, "I'm not opposed to profit; however,
it's not the responsibility of these elected people to make a profit for
(homebuilders) stockholders." Profits, of course, are
economic signals that tell which things consumers are demanding most
urgently and where resources should be directed. Mike Neal, president of the
Building Industry Association replied, inclusionary measures "do not solve the
real problem."
Then in a triumph of hope over experience, Jeremy Kaercher of the faith-based
San Diego Organizing Project representing 47 congregations cries out, "The
action the council took today gives our families hope for a better future." The hope is that 500 inclusionary units will multiply miraculously into 50,000
affordable homes (like 5 loaves feeding 5000 people), if only
ordained by the city council.
Homebuilders argued that such programs only add to the cost of market rate
housing putting the financial burden on buyers of those new homes. The San Diego
Housing Commission scolding the builders retort-ed "It is unfortunate that a
special interest group has chosen to frighten potential home buyers by stating
an inclusionary policy would put new homes out of their range." This from a
organization that uses single entry bookkeeping, that has a record of building
the most expensive rental housing in the City of San Diego, more expensive than
elite, luxury apartments sell for in La Jolla. Unfortunately, in the real world,
private builders must earn more money that it costs to build housing whereas
recovering the full cost of construction from rents or sales is irrelevant to
the Housing Commission. All shortfalls are made up by the federal state, and
local government tax subventions. When it comes to housing homebuilders are not
a "special interest group," they are the "only interest group" providing
over 95% of all new housing.
In anticipation of the public hearing, Planning Commissioner Carolyn Chase
wrote, "The Building Industry Association's direct interest is to
maximize profits on each and every unit." With that as a premise, as long as
you can maximize profit by building "unaffordable housing," why do anything
else? As far as anyone knows Carolyn Chase has never built a single
apartment or house for anyone, or built any thing else of value. She apparently
is not aware that nearly all of San Diego's major builders are constructing
"affordable homes" in other states, and in Temecula, Corona and Elsinore
(Riverside County), areas that she, the San Diego City Council, and planning
commission have turned into long-commute-bedroom-communities of San Diego. The
only reason people can buy affordable homes in these communities is they're not
subject to San Diego's onerous land use policies or held hostage by people
calling themselves "environmentalists" and community planning groups opposed
to any more homes and any more traffic.
Like a cacophony of mad hatters, the Master Weavers are running every which way
in never, never land, all jockeying for favored positions, attempting to get the
best deal for the special interest groups they lead. Confused, you needn't be.
If the council is right and if builders giving away tens of millions of dollars
don't increase the cost of housing, then this will be the year that a rabbit
finally pulls a man out of a hat.
Permission granted to
forward to others and quote with or without credit
Fred Schnaubelt
|
