There are a plethora of reasons why housing is so expensive in California — and San Diego has discovered yet another means of putting an obstacle in the way of producing affordable housing.
Some like to point out that California real estate prices are high because of the state’s pleasant weather, its natural beauty, its beaches, good universities, and recreation and entertainment opportunities. And all that is true — to a point. Indeed, residents have long paid a premium for these amenities. But the gap in housing affordability between California and the rest of the nation has grown substantially since the 1970s — and that is primarily due to government policies.
In 1970, California home prices were only about 30% higher than the U.S. average, the state’s nonpartisan Legislative Analyst’s Office has noted. But by 1980 that gap had widened to 80%, and today single-family homes are more than twice as expensive in California as the national average. Moreover, government regulations add hundreds of thousands of dollars to home costs and significantly increase rents, accounting for more than 26% of single-family home prices and more than 40% of multifamily development costs, according to research from the National Association of Home Builders and the National Multifamily Housing Council.
There are myriad ways in which the state and local governments drive up the cost of housing, particularly in California. Zoning restrictions limit the supply of housing and raise prices on the homes that are allowed to be built on the remaining land. Project labor agreements and prevailing wage laws mandate the use of union labor and union pay scales, which are substantially higher than free-market costs. The California Environmental Quality Act has notoriously been abused to delay or kill housing developments and “greenmail” developers into providing costly concessions for reasons that have nothing to do with the environment. Excessive building standards, development impact fees and other environmental regulations, such as the rooftop solar mandate, also impose significant costs.
And now San Diego has come up with reason No. 467 why housing costs are higher in California. The San Diego Housing Commission imposes a hefty “monitoring” fee on subsidized housing projects to ensure that tenants meet income-eligibility requirements. The commission charges $163 per unit for this service. For a 300-unit project, with rent restrictions lasting a typical 55 years, this translates to millions of dollars over the life of the project. That could make the difference between a developer building an affordable housing project or not, or deciding to build it anywhere else in the state that does not impose such additional costs.
“It’s a tax on affordable housing,” developer Gene Broussard told the Union-Tribune.
Nonetheless, the monitoring fee might be considered a reasonable oversight expense to prevent fraud, except that the state already does income eligibility screening for such subsidized projects. Assemblymember David Alvarez, D-San Diego, wrote a law — Assembly Bill 2430, passed in 2024 — to eliminate such duplicative fees.
But the Housing Commission has continued to impose the fee, claiming that its monitoring is more extensive than the state’s. It has also performed some linguistic gymnastics in a lame attempt to argue that the law does not actually apply to it. The agency contends that it is an independent commission, and not really a part of a city or county government, so the law does not apply. This, despite the fact that the commission was established by the city to administer the city’s housing programs, and thus is clearly subject to the law.
Or you can just ask the law’s author, which the Union-Tribune did. The Housing Commission’s reasoning is nonsensical, said Alvarez, and “would allow any city to insulate its monitoring fee practice simply by routing fee collection through an affiliated public body, a result the Legislature plainly did not intend.”
So it seems that numerous government agencies, each with their own bureaucratic rules, and endless laws and regulations have not improved housing affordability in California (or anywhere else). Who would have guessed? In fact, government restrictions have only further exacerbated the problem, stunting housing production and drastically increasing prices.
Eliminating these unnecessary burdens and freeing up the housing market would reduce housing prices by hundreds of thousands of dollars in California, and similarly reduce rents. The fact that politicians do not simply do this illustrates that they are painfully ignorant of basic economics; beholden to the unions, public employees and affordable housing organizations that benefit from the current system; or really just don’t care all that much about housing affordability after all.
Summers is a columnist, economist, and public policy analyst, and a former editorial writer for the Orange County Register / Southern California News Group.