New Solar Mandate Latest Chapter in ‘California Craziness’ Story

Making housing more affordable in California has been at the top of the agenda in Sacramento for more than a year.

Unfortunately, lawmakers have mishandled the opportunity to pass meaningful reforms and now a new solar energy mandate will soon force homes prices even higher.

The Energy Commission, whose five members are appointed by the governor, unanimously decided Wednesday that all new single-family and multi-family homes up to three stories built Jan. 1, 2020, and beyond must have roof-mounted solar energy panels.

So begins another chapter in a book someone should write about “California Craziness.”

The latest increase in homebuilding costs come after lawmakers held a “Housing Day” last September, passing more than a dozen bills they said would help ease the crisis. The bills that were later signed by Gov. Jerry Brown will, at best, do little to relieve the upward pressure on prices, and, at worst, push them higher.

This year, the Senate had a chance to move along legislation that would have made a real impact by steamrolling NIMBY objections over new homes being built near transportation centers. Unfortunately, the Senate Housing and Transportation Committee killed the bill.

Lawmakers’ failures will soon be compounded by this new bureaucratic rule requiring virtually every new home built in California to have solar panels.

It is no small order. This latest push in the state’s hasty race to move away from fossil-fuel powered energy is likely to add $25,000, and maybe as much as $30,000, to the cost of each new unit, according to Meritage Homes. Keep in mind the median price of a single-family home in the Golden State is $565,000, according to the California Association of Realtors.

It’s also another example of government picking winners and losers in the marketplace. Demand for solar panels on homes has been on the decline. Business interests that bank on non-traditional energy sources, such as Tesla – which now owns Solar City and does well thanks to favorable government policies like these – stand to do even better under this new solar requirement.

The rule is more of what California doesn’t need. What it does need are more homes, and a lot of them, to relieve the housing shortage and deflate the swollen prices that have, according to Beacon Economics, made homes in California the most expensive in the country.

The 14th Annual Demographia International Housing Affordability Survey: 2018 found that five California cities — San Francisco, Los Angeles, San Jose, San Diego, and Santa Cruz — rank in the 10 least-affordable housing markets in the world. The 11th least-affordable is Salinas-Monterey.

Meanwhile, international real estate service Nested ranks San Francisco as the most unaffordable city in the world for renting a home, Los Angeles 10th.

According to the California Budget & Policy Center’s analysis of Census Bureau data, nearly 17 percent of homeowners with mortgages pay at least 50 percent of their household income on housing. Roughly 29 percent of renters dedicate more than half of their household incomes to housing.

Those with the lowest incomes have it the hardest. The nonpartisan Legislative Analyst’s Office says that the “majority of low-income households spend more than half of their income on housing.”

California’s housing stock has strayed so far from equilibrium that the Legislative Analyst’s Office said three years ago that “on top of the 100,000 to 140,000 housing units California is expected to build each year,” developers “probably would have to build as many as 100,000 additional units annually — almost exclusively in its coastal communities — to seriously mitigate its problems with housing affordability.”

The true number is likely higher now than the LAO’s 2015 estimate because the pace of construction keeps falling behind. The California Department of Housing and Community Development said in January of last year that “production averaged less than 80,000 new homes annually over the last 10 years,” far fewer than the 100,000 to 140,000 units a year that had been expected.

California’s housing crisis has reached such a headache that, according to media reports, thousands are giving up and are leaving the state. MarketWatch said last week that “with no letup in home prices, the California exodus surges.” The state’s “‘out-migration’ has not only picked up steam, it’s accelerated.”

But none of this seems to matter in California politics. What does seem to matter is the appearance of taking a bold step even if it does nothing to address a real problem that just keeps getting worse due to legislative negligence.

Read more . . .

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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