A Bay Area bond is an expensive way to add affordable housing

A rendering is displayed during the California Forever press conference in Rio Vista, California, on January 17, 2024. Zoning and other land use restrictions make such housing projects difficult to implement.

The November ballot is expected to include $10 billion to $20 billion in affordable housing bonds proposed by the Bay Area Housing Finance Authority. Debt service in the form of $20 billion in new bonds he would add an estimated $240 property tax on any Bay Area home assessed at $1 million.

While it would be great to improve housing affordability in the Bay Area, there are ways to achieve this goal without increasing the cost of maintaining existing homes.

Supporters of the solution rightly point to the shortage of new apartments, but do not take into account its causes. Certainly, private developers are able to build new houses and apartments without the subsidies that a housing bond would finance. RubyHome found that between 2010 and 2022 in Texas added nearly 2.5 million housing units, more than twice as many as California, despite its smaller population. Homes in Texas were built mostly privately, without taxpayer subsidies. For example, thousands of new homes are being built in the Dallas area in the shop for just under $400,000.

Land costs in the Bay Area are higher than in Dallas, in part because of our excellent amenities, but also because much of the land is unavailable for development. More than 800 square miles of land are in area parks, completely off-limits to development, with additional extensive areas zoned for agricultural purposes, with the number of homes limited to approximately one per acre.

Zoning and other land use restrictions, especially those implemented by those opposed to development in their communities, make housing construction in the Bay Area difficult. Thousands of new units could come online quickly if private developers could simply pursue their plans at Concord Naval Weapons Station, Point Molate, Brisbane Baylands, Terraces of Lafayette and elsewhere without political impediment.

And then there it is Project California Forever. With more than 60,000 acres of Solano County property in its possession, the development group could easily create more housing than the bonds would finance, at no cost to taxpayers – if the county government allows it.

In addition to higher land values, construction costs in the Bay Area are elevated by a number of government interventions. These include permit fees and development impact fees may exceed $100,000 per unit in some cities, and restrictions on the use of factory-manufactured housing that would reduce the need for expensive local labor.

Subsidizing housing with bond money could offset the effects of some of these restrictions, but we cannot be sure that bond-financed housing will be built quickly or at a reasonable cost. Los Angeles carries a warning. In 2016, Los Angeles’ Measure HHH program made $1.2 billion in bonds available to finance affordable housing. But it took years produce a significant number of units and the costs are approaching $800,000 per unit. The high costs can be partly attributed to California’s wage laws, which increase construction workers’ wages, and project labor contracts, which control on-site work rules and thus limit management’s ability to deploy workers efficiently.