How Much More Important Are Homes Than Cars to California’s Elected Officials?

by on March 9, 2022 · 14 comments

in San Diego

By Mat Wahlstrom

Even by the terms of the recent years’ fire sale of our city, this week has been exceptional.

On Monday, March 7, we got the launch of “Bridge to Homes,” a plan to spend over $80 million in public funds to make construction of 662 units of low income housing ‘financially feasible.’

Tomorrow – Thursday at 1pm, the loosening of affordability requirements for accessory dwelling units will be made official by the Land Use and Housing committee of the city council, which if finally passed by the city council, will allow developers to set ADU rents at 80% of the Area Median Income (AMI) for only ten years than 110% AMI for fifteen. (This again is on top of waiving the impact fees these permanent structures will have on infrastructure.) Oh, and, the committee will hear the final proposed changes by Councilmember Joe LaCava to community planning groups.

And Wednesday – this afternoon – is the vote on the Tailgate Park sweetheart deal, the biggest proposed municipal sellout since the Sports Arena redevelopment fiasco.

Although it’s claimed that this transaction doesn’t include a public subsidy, the city is selling land appraised at $76 million for only $35 million.

While we’re being told that 15% of the units will be affordable, it’s actually only 10% that are set at 60% AMI. The remaining 5% will be rented at 150% AMI — an amount that is effectively market rate but also fails to even meet the state’s defined top limit for moderate income of 120% AMI.

And the biggest tell about who this deal will benefit is the bum’s rush to get it finalized before the end of the year, explicitly in order to exempt it from the state’s surplus land law that would require any development from its sale provide no less than 25% of all housing be deeded affordable.

But it does include a requirement to provide 1,060 parking spaces, so there’s that.

Why are we repeatedly told by our public officials that private real estate investment — the one sector of the global economy now more profitable than any stock exchange — requires the sacrifice of both the public commons and public funds to produce even a pittance of public good? In what other line of business would we accept this?

Why are supposedly very serious people asking us to believe them about these things?

There are three necessities for human existence: food, clothing, and shelter. But whereas food and clothing can be brought into economies of scale, we are suffering the folly of treating shelter as a fungible commodity.

It’s not just that we’re being asked to accept that where and how we live is as interim as what we eat or what we wear. It’s that we’re forced to subsidize it.

In 2019, nearly half of all Californians were already “cost burdened,” defined as spending more than a third of their income on rent or mortgages. These numbers have exploded in the wake of COVID despite all our policies to ‘incentivize’ new construction.

No matter how much new housing is built, none of it will be affordable unless it is required to be. The market has never and will never provide something less valuable than what it replaces.

Referring back to the title of this article: an analogy helpful for understanding our situation is to compare homes to cars. Both are easily the highest price tag items on which we spend our money.

But while housing is a necessity, cars are strictly speaking necessary. They’re not required to support life — except of course when they are also shelter — but to live as social and economic circumstances require. (And until transit that is efficient and exceeds the need for personal vehicles exists, they will remain the default.)

Yet consider how successful California has been in making motor vehicle production serve its needs.

Our state has long led a successful fight for safety, cleaner emissions, and greater fuel efficiency, setting standards for the rest of the nation. Even when Trump sued California over its fuel-economy standard agreements with the major automakers they knew that this was a losing proposition; and just over a year ago the last of them finally dropped their opposition.

And why? Because we are the single largest market for personal vehicles in the country. And no matter how onerous manufacturers find our regulations, they go along because they’d rather make a reasonable profit than miss out on selling at all.

Rather than treating homes as we have been, we need to start treating them more like we do cars.

Make affordability a non-negotiable demand the same as other construction standards, period. Institute caps on returns scaled to reward lower-end construction. Ignore the howls of the real estate lobby who claim that it “won’t pencil.” We would never allow a builder to claim he needs to cut costs by not installing fire suppression systems, so treat affordability the same.

Of course this will require we undo the massive upzoning that is artificially inflating the costs of land. As I’ve said before, the primary goal of investors is to make money. If they can do it by not building any housing or only building certain kinds of housing, then that’s what they’ll do. We need to treat upzoning to produce affordable housing as self-defeating as subsidizing the price of gasoline would be to reduce car travel.

The demand to live in California isn’t the problem, it’s the cost to do so — and that is driven by an industry too long used to double-digit profit margins, enabled by the electeds their campaign contributions have captured. And the more of our money thrown at them is only making an intolerable situation unbearable.

As the late Peter Marcuse, a brilliant practical academic and truly progressive urban planner, wrote, “Housing prices are high not because the costs of providing housing to its residential users are necessarily so high, but because we allow the system to act as a source of substantial profit to multiple powerful material interests, who are able to block equity-based changes to the system.”

As California goes, so goes the nation. It’s time for California to lead the way once again — to pry the polished shoes of capital off all of our necks.

{ 14 comments… read them below or add one }

Bearded OBcean March 9, 2022 at 12:44 pm

Not only is Tailgate Park being sold at that discount relative to the appraised value, the appraised value misses the mark by nearly 100%.

Infill sites in Downtown have sold at an average land cost of $30M per acre over the past few years, which would put a value somewhere in the neighborhood of $150 million for the 5-acre Tailgate Park site.

The remediation work, fault line analysis, and demolition work on the site are not materially different than what other developers do when they pay up for Downtown commercial properties to reposition.


Mat Wahlstrom March 9, 2022 at 1:03 pm

Yep, Bearded OBcean, you hit it out of the park. As if the Padres didn’t get enough of a giveaway with the original development.


MICHAEL JACOBS March 9, 2022 at 1:58 pm

I always shake my head at the obvious fallacy, when I hear people say that supply and demand will lower prices for housing all on its own via some imaginary market force. Anyone who has looked into renting or buying a property will tell you that demand is global as in “people from all over the world want to live in San Diego”. Since that means demand is essentially infinite, then the only way to try to ensure affordable places are available is to require them, as the article advocates. I absolutely don’t mind subsidizing 100% affordable projects, but the idea that we are subsidizing (via public land giveaways, tax breaks, etc) profits in the most profitable sector is repulsive. Of course the reason this is going on is because campaigns are expensive, so the politicians are incentivized to represent only their donors. We used to call that corrupton back in the nineteen hundreds.


Mat Wahlstrom March 9, 2022 at 2:15 pm

Agree with everything you said, Michael. But then that common sense understanding of ‘corruption’ was before the Roberts Supreme Court decided that money was speech.


Helen Rowe Allen (Dr/Ms/Esq) March 9, 2022 at 6:19 pm

We know so little about so much that’s going on right now in San Diego in real time. We pay attention but not enough – we may miss the under the carpet tucked away almost out of sight nitty gritty.
But not you Mat Wahlstrom, you’re right there, flashlight in hand.
We Are Grateful


Mat Wahlstrom March 9, 2022 at 6:44 pm

Helen, you’re too kind. If you only knew how I fret over how much slips my attention until it’s too late. But then, the politicians and their staffers are paid to do nothing but push through what their donors want on our dime. Us working stiffs got to find time in between trying to survive.


Paul Webb March 11, 2022 at 12:26 pm

I hope my reading of this is wrong, but my interpretation of what I’ve read is that the City is on the hook to replace the Padres parking that is lost due to the Padres eliminating the parking in order to build this project – to the tune of $40K per space, thereby reducing the purchase price. In other words, the padres get compensated for removing their own parking. Please somebody tell me I’m wrong!


Mat Wahlstrom March 11, 2022 at 4:27 pm

I don’t think you’re reading it wrong at all, Paul. $40K x 1,060 = $42.4M

2/24/22 Staff Report on East Village Quarter (Tailgate Park) Disposition and Development Agreement: “To satisfy the City Lease with the Padres, the Developer is required to provide 1,060 public parking spaces through December 2044, pursuant to a Declaration to be recorded against the Property at acquisition closing.”

3/3/22 U-T article: “Although there is no public subsidy, the city’s appraisal arrived at a fair market value that includes $42 million worth of credits because of site building restraints and a financial obligation associated with the existing long-term lease the Padres have for the site.”

It’s the Charger’s ‘ticket guarantee’ on steroids.


JP April 13, 2022 at 1:01 pm

Matt, interesting piece. You refer to “an industry too long used to double-digit profit margins.” Any good sources for that?


Mat Wahlstrom April 13, 2022 at 5:01 pm

Oh joy — YIMBY has joined the chat. On the off chance you’re not concern trolling, is Moody’s good enough for you?

“Over the last 12-month (LTM) period ended on 30 September 2021, GREP’s [assets under management] grew by approximately 28% year-over-year (YOY) to US$47.5 billion with global units under management also increasing by 5.9% to 755,000 units. Greystar is managing $22.2 billion of development projects with an approved pipeline of $9.3 billion. Driven by a combination of more managed assets as well as higher fees generated from property management and development & construction management fees, total consolidated LTM revenues rose by 24% to approximately $3.1 billion with LTM EBITDA (Moody’s adjusted) growing by approximately 56% to $254 million.”


JP April 13, 2022 at 5:47 pm

nah… Though I have a few friends who are YIMBY, I do not consider myself one. I think its fine if city people want to advocate for more housing in their neighborhoods, but I don’t share their belief that zoning restrictions are the main source of our affordability problem. I personally think (know) that a lot of that narrative is driven by industry through a sophisticated PR, social media and political machine. I mean, for decades they have pushed for deregulation. Difference is now, they’ve honed in on a narrative that seems to have traction. That’s why I asked, because I also share skepticism over the “doesn’t pencil” out narrative. I get that you have unpopular opinions so you are on the defensive, but I’m not “concern trolling” whatever that means. Keep up the good work. It’s important to have different viewpoints out there. Whether I agree or not with your entire article, I appreciate it.


Mat Wahlstrom April 13, 2022 at 5:56 pm

Your point is well-taken, and I appreciate your comment as well.


JP April 13, 2022 at 5:56 pm

Incidentally, I went looking for some data around this topic and this is a quote that appeared in a bunch of articles: “According to the National Association of Home Builders (NAHB), developers average about $3 million in gross profit on $16.23 million in revenue. That’s an 18.9% percent profit.” Couldn’t find the original source at NAHB as it is buried in proprietary studies I couldn’t access. But it seems like a pretty nice profit margin and with rising housing prices, I’m sure its even higher. I’m sure removing pesky regulations would increase profits, not lower prices, but I’m no economist.


Mat Wahlstrom April 13, 2022 at 8:01 pm

Sounds like you’re getting what the YIMBYs mean by “Econ 101.”


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