The bottom line…
It seems every day now there is a bill being proposed, submitted, or signed into law that has to do with affordable housing. Local and State officials and politicians are constantly bemoaning the fact that there is a housing shortage and an inability by many to afford that which is available. Even historically low interest rates aren’t enough to help many bridge the gap into homeownership and those that remain as tenants are still facing an imbalance in the supply and demand of rental housing. The many organizations that represent the interest of tenants now have achieved the perceived feather-inthe-cap of statewide rent control. Meanwhile property owners, landlords, Realtors and anyone else who deals with investment properties is trying to figure out what comes next.
The ironic thing about all of this is that while the availability of affordable housing takes centerstage, there is an elephant in the room that is not being discussed. The fact that local and state agencies continue to apply upward pressure to development fees, while at the same time increasing regulations and requirements on builders and property owners, means they are deincentivizing the very people who can help solve the problem…
I am not a “growth at all costs” or “rich get richer” kind of a person… On the contrary, I believe very much in the value of the slow and steady and in equal opportunity for all – especially when it comes to the topic of economic policy. However, any 3rd grader with a lemonade stand will tell you that the reason for being in business is to earn a profit. And yet, as the push for more affordable housing is at its highest point ever, the officials in charge of where and how this housing gets built, how much it costs to obtain the permits and what can be charged in the way of rents, are making it harder and harder for a profit to be earned by anyone willing to actually take the risk of providing that housing. This is especially the case when it comes to the entry-level, lower-cost segment of the market. Increasing per-unit costs across the board means that developers are many-times forced to build larger, higher-end homes and apartment units in order to remain profitable. Landlords facing the prospect of rent control and further exposure to litigation because of the new laws look to offset the additional risk by targeting higher-end properties as well… Unfortunately, none of this leads to the solving of the problem that we face – the shortage of available, reasonably priced housing. It only increases the likelihood that whatever is built will be a larger and more expensive product, or that certain projects become unfeasible to build due to
completely costs.
At the end of the day, business people are business people and even that third grader will tell you that if the cost to produce their lemonade increases, they are left with only two choices… Charge the customers more for their product, or just stop producing it altogether.
Dan Bosch is a Realtor Associate with RE/MAX of Chico and the team leader for the Premier Professionals Real Estate Team... Dan specializes in residential and investment properties. He can be reached at (530) 896-9330 or via email at danbosch@sbcglobal.net. You can also follow him at @dan_bosch on Instagram