Housing Prices and Growth Management

By: Gary A. Patton

This brief article responds to a letter from Gordon Haskell printed in the April 2002 edition of the Santa Cruz County PDC Newsletter.

I agree with Gordon’s thought that the great challenge for local progressives today is not increasing environmental protection, but rather dealing with "equity" issues, specifically involving housing. This said, however, I want to challenge one of the basic premises of Gordon’s Letter to the Editor.

Gordon suggested that what he called the "anti-growth" movement (which is the title always affixed to the efforts of local progressives by their opponents) has had "unintended consequences," and that these have been negative on the "equity" issues involving housing. This argument, which is exactly the argument that has always been made by the opponents of environmental protection and community efforts to make developers pay their own way, is founded on the erroneous idea that a "consequence" of protecting the environment is to raise housing prices so as to drive out poor people. Some opponents say that the "environmental movement" consciously wants to have this effect. The more charitable say that this is an "unintended consequence."

In fact, building more houses will NOT result in lower housing prices (absent some positive governmental intervention with respect to the price at which that housing is sold). Putting areas like the Santa Cruz County North Coast, or agricultural land, "off limits" to housing construction, which is what the Santa Cruz County "anti-growth" movement did during the 1970's and 1980's, does NOT result in a significant increase in housing prices.

In an unregulated market situation, which is what we essentially have, those who build and sell houses sell them for the highest price they can obtain. Naturally. That's what they're supposed to do. Housing prices are therefore set by demand, and demand is established by how many people out there want to purchase housing, and how much they are willing (or able) to pay.

The high housing prices in places like Santa Cruz County are caused by the fact that the Santa Cruz County housing market includes a VAST number of persons who work outside the community, and have incomes VASTLY higher than the teachers, cops, carpenters, and retired folks whose income comes from within Santa Cruz County. This is simply the geopolitical reality. The Silicon Valley creates seven jobs for each house they permit to be built there. Average incomes in the Silicon Valley are massively higher than the incomes of working families in Santa Cruz County and other neighboring counties. This means that the Silicon Valley's "affordable" housing has been spun to the peripheries of the Silicon Valley, specifically including Santa Cruz County, San Benito County, and Monterey County. In view of this reality (absent some "price control" imposed by local government), almost EVERY house built in Santa Cruz, San Benito, or Monterey County will be sold to someone who can "outbid" a local working family.

We CANNOT counteract this market reality by increasing the supply so much that prices will drop. This is always the unspoken premise of the opponents of local community efforts to protect the environment. They imply that if we would just let the builders rip, they will take care of the ordinary people by building so many houses that the price will go down. Because we're small, and Silicon Valley is big, that strategy won't work. If Santa Cruz County had built out the North Coast, or paved over the Pajaro Valley, the result would be massive economic and environmental loss AND NO SIGNIFICANT REDUCTION IN HOUSING PRICES in Santa Cruz County.

As Santa Cruz County residents probably know, I am now working in Monterey County, which is facing the kind of pressures that smaller (and closer) Santa Cruz County faced thirty years ago. The history of housing development in Monterey County proves what I just said. The City of Salinas has followed the "let 'em rip" philosophy over the last fifteen years, and their housing crisis is, if anything, worse than the housing crisis in Santa Cruz County, since median incomes in Monterey County are significantly below Santa Cruz County incomes. Unconstrained development did NOT lead to lower housing prices. In fact, housing prices have been skyrocketing in Salinas and Monterey County generally, despite the "let 'em rip" philosophy of local government.

LandWatch Monterey County, the nonprofit for which I work, is busy organizing farmworkers and others in East Salinas, to insist that future growth benefit the local folks, not those whose incomes come from outside the community. We're essentially calling for local government to make sure that the housing market addresses lower income persons and local residents FIRST. I think that this is, indeed, "the" challenge to progressives today. That is true in Santa Cruz County as well as in Salinas. But caving into the developers isn't the way to solve the real problems of working families.

Standing up for agricultural land protection and environmental protection doesn't have the "consequence" of raising housing prices, “unintended” or otherwise.

Gary A. Patton, Executive Director
LandWatch Monterey County
Box 1876
Salinas, CA 93902-1876
Email:
Telephone: 831-759-2824, Ext. 10
FAX: 831-759-2825
Website: www.landwatch.org

05/22/02