Economy & Business

Here’s Why Housing Is So Expensive

A housing construction project in San Francisco, Calif., in 2015. (Robert Galbraith/Reuters)
Bureaucratic red tape drives up costs.

Julian, Calif. — Right outside the comfortable and delicious Jeremy’s on the Hill Restaurant in this scenic former gold-mining town northeast of San Diego, Jack Green offers a glimpse of why homes too often are so expensive. The real-estate developer stands near the patio of a Cordon Bleu–trained chef’s mountainside eatery and gets indigestion just thinking about what a mess homebuilding has become.

“I have to spend $80,000 before I can drive one nail into a piece of wood,” Green says. Just preparing to manufacture a house can take four to five months. This includes permits, land-use studies, appealing to various boards, and pleading with politicians. How long did he wait to reach this starting line when he began in this business in the late 1990s? “Three to four weeks.” Thus, he has seen a five- to seven-fold increase in the time needed to launch projects in just two decades.

In fact, “Jack Green” is a pseudonym by which to shield this gentleman’s identity, as he requests, “since I still deal with these people.”

Green once aspired to create 60 homes on land that he purchased. By the time officials finished with him, he actually wound up creating only 13 homes, a 78 percent decrease in planned housing stock. Since he had fewer homes to sell, his asking price per dwelling soared 233 percent — from roughly $300,000 to $700,000. “And you wonder why homes have become unaffordable?” he asks.

Green recollects another project in which he got his paperwork in order, and all systems were go. “At the last minute, an official told me, ‘We need a streetlight at a certain corner,’” Green recalls. “I said, ‘That’s nice. But I don’t see that in any of the approvals, plans, or anything else.’” Basically, the functionary told Green that the city wanted that streetlight installed, and Green had to pay for it. He threatened to sue. “‘No, you won’t,’” Green says the official told him. “‘You want to build this project, and you need our final approval. And you won’t get it until that streetlight gets built.’” Green replied: “That’s extortion.” According to the builder, the bureaucrat said: “Yes, it is.”

Green relented. “That cost me $110,000.”

In yet another headache, authorities blessed Green’s application to cultivate a different property. They allowed him to develop 13 lots, combining homes and open space. But first, officials played the green card. He says that they mandated that he “purchase 22 additional acres in a mitigation land bank for non-native grasslands.” Green recaps: “So, I bought land and could not build on it until I bought even more land someplace else.” Those aggravating outlays cost him an extra $60,000.

While Green once assembled homes in double-digit numbers, that experience is in his rear-view mirror. “I will not go back to the way I was operating,” he says. He now handles just one or two ventures at a time — renovations, new homes on spec, and some custom residences. The days of constructing a dozen or more homes at once are almost too painful to remember.

Green remains mystified by how red tape has clogged his circular saws so that they barely spin.

“I talk to a lot of people,” he says. “I don’t live in a cave. I don’t know how this is happening or how we got here.” He sounds as baffled as he is frustrated.

Alas, this is not the only sector being contorted by California’s bureaucrats and busybodies.

Green also mentioned a friend who is employed in the upper echelons of a local hospital. It has survived with profits of just 5 percent — a rather thin margin in any industry. This person complained that the medical center’s earnings are dropping to 1.5 percent, thanks to big-government mandates from Democratic governor Gavin Newsom. “It’s going to sink,” Jack Green says. So, his friend is pulling up stakes and soon will work for a major hospital — in Arizona.

Deroy Murdock is a Manhattan-based Fox News contributor and a contributing editor of National Review Online.

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