Advising leadership and management

How much government can we afford?

Ed Sachs, Mayor Mission Viejo, 2018

Democrats have been voted into a single-party run legislature and now we will see how they will govern.

Our new Governor Gavin Newsom has made it clear he wants to build 3.5 million homes in the next seven years.  What priority will the new legislature give this plan?  The super majority is already talking about re-zoning high risk fire areas that would not allow some residents to rebuild their home.  The same is true for coastal areas as the rising sea levels have members concerned.  As an aside, utility companies wish to be washed clean of any liability for any of the fires they spark and have those costs laid off to homeowners. Insurance cost would necessarily increase further increasing the cost of home ownership.

How will this legislature reconcile these opposing positions?  Between global warming and environmentalist opposing proper forestry management, and soon you may add the removal of local control over zoning restrictions, we see it will not take long to find themselves bumping into the Governor’s aspiration of 3.5 million new homes.

Three and a half million homes is an ambitious target in any state, but developers in California continue to be burdened with endless environmental red tape, and higher costs of building permits, will also be faced with finding a labor force that does not currently live in the State.  With the minimum wage increases that Sacramento has imposed on business, it is dubious whether this workforce will be available to purchase or rent these 3.5 million new homes. 

With a government dictating the cost of building, you can forget housing prices being managed by market conditions.  In fact, when government puts its thumb on housing prices, the economic reaction overwhelmingly results in less building.  We already have building costs of a new home approaching $100,000 in fees, permits, and regulations before the first nail is ever driven.  This is all before the promise of single payer healthcare costs from this one-party state are foisted upon contractors to be included in building costs that are passed onto the buyer.

The plain-spoken truth is that more master planning government in California will only produce housing for the wealthy and lower income workers.  Building affordable housing is subsidized by counties and cities and those subsidies are your tax dollars.  If you taxed every wealthy person in the state at 90% you would not come close to covering a sliver of the costs and our middle class is already fleeing the tax-heavy state in droves. How long before the middle class that has remained in the State looks to leave California joining the over 600,000 that have already left over the last 10 years.

As any opposing voice have been reduced in our legislature, it will be interesting to see how much government California citizens will be able to afford.

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