Misconceptions about California’s Housing Crisis
The “Yes-In-My-Backyard,” or YIMBY, movement in California has become the most powerful force for better housing in modern American history. Their success in advocating for more housing, through both state and local work, is incomparable.¹
Yet much of the rhetoric of the supposedly pro-housing YIMBY movement attacks single-family housing, suburban development, and the common use of cars.² Since the majority of Californians live in suburbs and own their own homes, and since over 90% of households have at least one car, such attacks will limit YIMBYs’ ability to branch out from their urban base.³ Despite claims by some YIMBYs, most Californians and most Americans are not opposed to single-family homes or cars, but want them to be cheaper, greener, and more convenient.⁴Luckily, we can achieve these goals, while also providing more options for those who want to live in dense urban areas.
This article is a brief attempt to set the record straight about suburbs, homes, and cars, and correct some of the unfortunate errors that have crept into a successful pro-housing movement. Single-family zoning in our densest cities is indeed a problem that the YIMBYs are best-placed to fix, but that doesn’t mean that all types of single-family housing are destructive, and that we don’t need to build more car-accessible houses outside of our dense urban areas as well. In California, there is no hope for our housing crisis unless we build both up and out.⁵
Misconception 1: California is peculiarly resistant to building because of its tradition of single-family, suburban homeownership.
California housing prices are at least twice as high as the rest of the United States, and, in the biggest coastal cities, at least three times at high.⁶ But our high prices are not because our state is more infested with homeowners who refuse to allow development. At least since 1920, California has had below average homeownership rates. By 1960, the national homeownership rate was 62%, but only 58% in California, and since then the state’s homeownership rate has declined. It is now 55%. The gap between the national and California homeownership has been growing, just while California has become ever more resistant to building relative to the rest of the U.S.⁷
California’s existing homeowners also have not prevented dense development. In fact, California cities have always been relatively dense, and are the only major part of the US to densify over the past 50 years. The Los Angeles region had 4,600 people per square mile in 1960, and this has increased to over 7,000 people today. San Francisco had 4,200 people per square mile in 1960, and has over 6,200 today. These areas were less sprawling than places like Atlanta, Austin, and Pittsburgh even in 1960, and are much denser than the average American city today, which has around 3,000 people per square mile. California’s cities have continued to densify, even as California housing prices have more than doubled relative to the national average.⁸
In other words, the reason for high California prices is not excessive homeownership and sprawl.
Misconception 2: The federal government has spent billions bolstering homeownership and expanding suburbs, especially through the Federal Housing Administration.
Much of the rhetoric around housing claims that single-family and suburban homeownership has been the result not of individual choices but of federal subsidies, especially federal subsidies coming from the New Deal and the Federal Housing Administration (FHA), which was created in 1934 to insure home mortgages. In a 2016 article in the Journal of Policy History, I demonstrated that this claim is unsupported by statistics. From the 1930s to the 1960s, the FHA insured 26% of all single-family home loans, but it also insured 40% of all multifamily and rental construction mortgages, so the federal government was biased more towards rental property than single-family homes. At the same time, it insured 23% of home loans in central cities, and 19% of loans in the suburbs, so it was biased towards big cities rather than suburbs.⁹
If one adds the fact that the federal government created millions of public housing units after 1937 that were always rental and tended to be in cities, you get a clear bias away from suburbs and single-family homes. And this federal bias towards cities actually increased after 1960.¹⁰
In sum, federal subsidies to housing have focused on dense and central-city homes, yet this has not prevented a gradual increase in “sprawl” across the United States.
Misconception 3: The Federal government has long subsidized drivers at the expense of non-drivers and transit commuters.
When people don’t blame federal home-subsidies for American sprawl and homeownership, they blame supposed subsidies from non-drivers to drivers through the construction of roads and highways. This is inaccurate.
Congress created the 1956 Interstate Highway Act as a “Pay as You Go” system, which at the time was funded by a 3-cent tax on gasoline. All original federal highway funds thus came from “user fees” paid by drivers. By contrast, the 1964 Mass Transportation Act, and all subsequent federal transit legislation, was a straight grant with no contribution from transit riders. In fact, since 1982, about 20% of the gas tax has been siphoned off to pay transit riders as well, with that percentage increasing over time.
Today, there is no doubt that drivers subsidize transit riders, and not the other way around. According to the Bureau of Transportation Statistics, drivers contribute a $2 federal subsidy to other modes of traffic per 1000 passenger miles traveled (PMT), mainly due to the 18.3% federal gas taxes, while transit riders get a $111 federal subsidy per 1000 PMT.¹¹ Considering all subsidies from federal, state, and local governments, transit riders pay only about 25% of the cost of their ride, while drivers pay about 98% of the cost of their driving.¹²
Despite large and increasing subsidies to transit (transit was self-funding as little as four decades ago) the percentage of Americans taking transit to work has continuously declined, from about 20% in 1980 to almost 5% today. The percentage taking transit for non-work trips has declined even faster, and now is about 2% of all passenger miles traveled.¹³
Also, despite claims of monetary savings from concentrating more development and infrastructure spending in dense, transit-dependent areas, most studies show that larger and denser cities have more expensive capital costs of government per capita than more “sprawling” cities, due to the congestion costs and difficulties of building and maintaining services in dense areas.¹⁴
In sum, the reasons most Americans drive and live in suburbs is not due to subsidies to driving. In fact, without significant federal, state, and local transit subsidies, the percent of Americans driving would be much higher.
Misconception 4: Federal government subsidies have made housing a continuously appreciating asset for the last 100 years.
Many people argue that homeowners’ desire to protect a continuously appreciating asset, their homes, explains why they are so resistant to new building. In fact, despite a short-term dip in the World War I to World War II period, housing prices were almost completely flat from 1900 to the mid-1990s. Homeowners saw almost no gain in prices over almost 100 years, and only saw a sudden doubling in prices from 1997 to 2006, when supply constraints on housing became more common in a handful of large, coastal cities. In areas like Atlanta, Austin, and others, there has been just a steady rise of prices with inflation over a 100-year period. Home prices in those areas have stayed around $100 per square foot, the cost of construction.¹⁵
In other words, in most of the U.S., and for most of our history, where and when homeownership has been common, homes have been mainly valued for their ability to provide peace and privacy, and stable savings, with little prospect of gain.
Misconception 5: The US has a particular addiction to cars, sprawl, and single-family homes that have driven up home prices.
The history of past 100-plus years show that as countries get richer, their cities tend to spread out more and people tend to drive more. The U.S. is more sprawling and more car dependent than other nations, but that is largely because we became richer, earlier.¹⁶
A look at the trajectory of other urban areas proves this near universal trend towards “sprawl.” The population density of the Paris region has decreased from almost 100,000 people per square mile in 1850 to 20,000 in 1950, to less than 10,000 today, and this almost exactly mirrors London’s trajectory, and those of most other major European cities. In Western Europe, central cities have declined in population by over 10% in the past 50 years, while their suburbs have more than doubled in population, a rate comparable to the declines and increases in America’s recent history.¹⁷
The U.S. does drive more than most other countries, about 10,000 Vehicle Miles Traveled (VMT) per capita on average, which has increased from about 6,000 in 1970, but other countries are charting the same path. The Netherlands, the U.K., Sweden, and France all drove about 2,000 VMT per capita in 1970, but this has increased to 4,000 today, and continues to rise as these countries get richer.¹⁸
More importantly, America’s more sprawling society has not increased the prices of our homes relative to other countries. In fact, it has been the opposite. Our homes are among the cheapest on Earth. The most common measure of home affordability is the value of the median house in a country to that country’s median family income. In the United States, a home costs about four times a median family’s income, one of the lowest ratios in the world, and even this rate is driven up mainly by housing prices in coastal cities. In most of the US the rate is 3 to 1. In Canada and New Zealand, the cost of the median home compared to the median family income is 8 to 1, while in the Netherlands, Denmark, and the U.K., the rate is closer to 12 to 1. Other European countries’ home costs are even higher. In most of these countries, these much pricier homes are also significantly smaller.¹⁹
Misconception 6: Public transit is quicker and greener than automobile travel.
The average commute to work by car in the US is about 25 minutes, while the average commute by transit is over 45 minutes. Some people claim that the slowness of transit commutes is only due to America’s sprawling cities. Yet even in New York and San Francisco, the first and third densest areas in the US, commutes by car take about 30 minutes, while commutes by transit take 50 minutes.²⁰ In general, denser cities in America have longer and slower commutes than less dense cities, no matter the mode of travel. And, as density increases, the amount of time spent in road congestion, for both bus riders and car drivers, increases as well, almost doubling with a doubling of density.²¹
Yet, despite increasing congestion, density seems to have little effect on reducing driving. A metasurvey of studies on density and VMT by the California Air Resources Board shows that even a doubling of density, an incredible change achieved in no modern city, tends to reduce VMT by only 10 to 15%, and this mirrors the findings of a National Research Council metasurvey that found reduction of from 5% to 12%.²² The fact that these decreased VMT are also associated with increased congestion, and therefore increased greenhouse gases per mile traveled, means the environmental effects of increased density approach zero.²³
Relying solely on transit also makes access to jobs more difficult, especially for the poor. Even in large and dense cities, the proportion of all jobs in the city that can be reached in 45 minutes by car approaches 100%, while the number of same jobs that can be reached by transit are only about 33%.²⁴ This is why most people, even very poor people, commute to work by car. Almost 80% of families who make under $15,000 a year in income commute by car, about the same ratio as the rest of the population. In fact, very high-income individuals tend to skew more towards transit than the middle class, because they often use commuter rail to travel to high-paying professional jobs in downtown districts.²⁵
Traveling by transit is also not necessarily more environmentally friendly than cars. Today, it takes about 2,900 British Thermal Units (BTU) for a car to move one passenger one mile (Passenger Mile Traveled, PMT), but it takes buses about 4,100 BTU per PMT. While the energy efficiency of cars is improving over 1% per year, buses have actually been getting about 1% dirtier per year. Rail transport has about the same level of BTUs per PMT of cars today, but rail too has been getting dirtier even as cars gets cleaner. With the gradual implementation of California’s electric car mandates and those in other states, there is no reason why cars cannot continue getting greener than transit.²⁶
Misconception 7: America generally, and California specifically, has no more room to grow out, since sprawl will only exacerbate our environmental dilemmas.
Nationally, just 3% of America’s land is urbanized.²⁷ In California, the number is 5%.²⁸ Even in dense regions such as the nine county Bay Area, the large majority of land is undeveloped. About 40% of all land in that region is actually cattle pasture.²⁹
Californians absolutely have to protect their biological treasures, such as the San Bruno Mountains, Yosemite, and the Marin Headlands in the Bay Area, but that doesn’t mean we don’t have hundreds of thousands of acres of cattle land that could be used for houses. And, as we’ve written before, due to California’s genial climate and pro-environmental legislation, almost any housing in California is greener than housing elsewhere, which means that all building here is a win for the climate.³⁰
The United States and California have many problems with our housing markets, but an “excessive” focus on sprawl, cars, and single-family homeownership is not one of them. We desperately need more housing in our dense coastal cities, but we also need to allow more housing on the fringe of our existing cities, which is what most Americans continue to prefer.
On the whole, America and the rest of the world are traversing the same path to a low-density, more car-dependent culture, one where cars are thankfully becoming much cleaner, and cleaner faster, than public transit.
Despite the problems in the U.S. housing market, our homes are much more affordable than most of the world. The handful of very expensive cities in America, largely in California, are in fact the least sprawling and most dense. The federal government, by contrast, has done much to encourage density, transit, and multifamily living, but have had little success in this regard.
People should be allowed to live in whatever sort of neighborhood density or situation they demand, and that means building both up and out, and providing for both transit and automobiles. Yet attacking suburbs, homes, and cars will not solve California’s housing crisis.