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\n\t\tMorning view of transmission tower, power lines at Los Angeles, California\t\t<\/p>\n
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\n\t\tMorning view of transmission tower, power lines at Los Angeles, California\t\t<\/p>\n
A new white paper from the Berkeley Economy & Society Initiative argues that California\u2019s affordability crisis cannot be solved through economic growth alone and instead requires a fundamental rethinking of state regulations that, while often designed to advance progressive goals, have also driven up the cost of housing, energy, child care and other necessities.<\/p>\n
The report, To Make California More Affordable, Reform Regressive Regulations, authored by BESI Senior Researcher Samuel Trachtman, contends that California has increasingly relied on what it calls \u201cregressively funded progressivism\u201d\u2014policies intended to promote safety, sustainability and quality that ultimately place disproportionate financial burdens on lower-income residents.<\/p>\n
\u201cCalifornia has an unaffordability problem,\u201d the report begins. \u201cThe first installment in this series on making California more affordable demonstrates how high costs in California drive poverty and out-migration. The second installment makes the case for fostering growth as a key remedy to improve affordability. But growth alone cannot solve California\u2019s unaffordability problem.\u201d<\/p>\n
Instead, the report argues, \u201cThere is another primary driver of high costs in California: a policymaking pattern that we call regressively funded progressivism.\u201d<\/p>\n
According to the authors, these policies are \u201cwell-meaning state and local regulations intended to promote safety, sustainability, or quality that, over the long run, drive up the cost of essentials like energy, housing, and child care.\u201d<\/p>\n
The report stresses that regulations remain an essential tool of government but argues California has too often financed progressive priorities by increasing the costs of basic necessities.<\/p>\n
\u201cUsing state regulation to promote safety, sustainability, and quality is important,\u201d the report states. \u201cBut funding these policies on the backs of the poor is wrongheaded \u2014 doubly so when the policies are too often ineffective in meeting their stated goals.\u201d<\/p>\n
The paper is the latest installment in BESI\u2019s Political Economy of California series examining the structural causes of the state\u2019s affordability challenges.<\/p>\n
In the introduction, the authors acknowledge California\u2019s remarkable economic achievements while arguing that prosperity has become increasingly concentrated.<\/p>\n
\u201cBy many measures California\u2019s economy is an enormous success,\u201d the report notes. \u201cIf it were an independent country, the state\u2019s GDP would make it the world\u2019s fourth-largest economy.\u201d<\/p>\n
Yet the report continues that those successes coexist with growing inequality and rising costs.<\/p>\n
\u201cMost catastrophically, California has failed to build the new housing it needs. This has sharply raised costs for Californians. For far too many, it has simply made housing unaffordable, leading some to seek opportunity elsewhere while staggering numbers fall into homelessness.\u201d<\/p>\n
The authors conclude that \u201conce the cost of living is taken into account, prosperous, innovative California now has the highest poverty rate in the nation.\u201d<\/p>\n
Rather than criticizing California\u2019s progressive policy goals themselves, the report argues that implementation has frequently produced unintended consequences.<\/p>\n
\u201cTime and time again the state has promoted progressive goals through policies that increase the cost of essentials \u2014 and hit California\u2019s low-income residents the hardest.\u201d<\/p>\n
The report devotes significant attention to California\u2019s environmental policies, arguing that several programs intended to reduce greenhouse gas emissions have substantially increased gasoline and electricity prices while delivering uncertain environmental returns.<\/p>\n
Among the programs singled out for reconsideration is the Low Carbon Fuel Standard.<\/p>\n
The report notes that California already has \u201cthe most expensive gasoline in the country,\u201d attributing much of the difference to overlapping state policies, including CARBOB fuel requirements, cap-and-trade and the Low Carbon Fuel Standard.<\/p>\n
Researchers, the report argues, \u201chave also called into question the environmental benefits of the LCFS.\u201d<\/p>\n
The paper recommends that the California Air Resources Board conduct a comprehensive public analysis of the program\u2019s costs and benefits before expanding it further.<\/p>\n
\u201cMoving forward, CARB should produce a rigorous, clear, and comprehensive analysis of the benefits and costs of the LCFS,\u201d the report states. \u201cThe state should not be asking California drivers to pay more for transportation without clearly demonstrating the costs and public benefits.\u201d<\/p>\n
Electricity costs receive similar scrutiny.<\/p>\n
The report argues that California\u2019s rapidly increasing utility rates have been driven largely by rooftop solar subsidies and wildfire mitigation investments financed through utility bills rather than through broader tax revenues.<\/p>\n
\u201cFor a state struggling with affordability, however, the problem with both is the funding structure,\u201d the authors write. \u201cRatepayer-funded subsidies and infrastructure investments are regressive by nature. They hit middle- and lower-income Californians the hardest.\u201d<\/p>\n
Instead, the report recommends shifting many of those costs into the state General Fund while strengthening cost-benefit review of major regulatory decisions.<\/p>\n
Housing occupies another major section of the report.<\/p>\n
Although California has strengthened housing production laws in recent years, the report argues that state and local building codes continue to unnecessarily increase construction costs.<\/p>\n
One proposal receiving particular attention is allowing single-stair apartment buildings.<\/p>\n
According to the report, \u201cResearch from Pew and the Center for Building in North America indicates that eliminating the second stairway from midsize apartment buildings could cut costs by 10 percent without compromising safety.\u201d<\/p>\n
The report notes that cities including New York, Seattle and Honolulu have long permitted such designs without experiencing higher fire death rates.<\/p>\n
Beyond stairway requirements, the authors criticize what they describe as excessive complexity in California\u2019s building code.<\/p>\n
\u201cThe two-stairwell requirement is just one particularly high-cost standard in a state code that is divided into 12 parts and spans several thousand pages,\u201d the report says. \u201cThis produces a \u2018death by a thousand cuts\u2019 problem.\u201d<\/p>\n
The paper also argues that differing local building codes increase architectural and engineering expenses while limiting competition among contractors.<\/p>\n
Occupational licensing represents another major focus.<\/p>\n
The report contends California has among the nation\u2019s most restrictive licensing systems, limiting opportunities for workers while increasing prices for consumers.<\/p>\n
\u201cCalifornia has some of the most onerous licensing requirements of any state,\u201d the executive summary states. \u201cThis not only increases the cost of services, it makes it more difficult for younger Californians to access higher-paying careers and incomes.\u201d<\/p>\n
The report highlights child care licensing as a particularly important example.<\/p>\n
California\u2019s credential requirements for providers, the authors argue, exceed what existing research suggests is necessary to ensure quality while contributing to severe shortages and high costs.<\/p>\n
\u201cCalifornia suffers from a shortage of child care providers and high costs,\u201d the report states. \u201cCalifornia also imposes some of the strictest credentialing requirements of any state for child care providers, even though the evidence for the benefits of these credentials is limited.\u201d<\/p>\n
Instead, the report recommends adopting a licensing pathway modeled after Washington state, where mentorship and competency-based training play a larger role than classroom requirements.<\/p>\n
Beyond individual policy reforms, the authors devote considerable attention to what they describe as the political obstacles preventing affordability reforms.<\/p>\n
The report argues that many regulations survive because their costs remain largely hidden while their stated goals are politically attractive.<\/p>\n
\u201cThese regulations often have rationales that carry emotional appeal and signal alignment with California\u2019s generally progressive politics,\u201d the report states.<\/p>\n
The authors add that concentrated beneficiaries frequently organize to defend existing regulations while consumers bear relatively diffuse costs.<\/p>\n
\u201cPolitical scientists have long observed that policies with diffuse costs and concentrated benefits tend to be difficult to reform.\u201d<\/p>\n
To address those institutional challenges, the report proposes expanding legislative oversight of regulatory agencies, strengthening cost-benefit analysis, improving budget governance, increasing Legislative Analyst\u2019s Office capacity and reducing barriers to funding programs through progressive taxation rather than utility bills or regulatory fees.<\/p>\n
Ultimately, the report argues that California can preserve its commitment to environmental protection, public safety and consumer protections while reducing unnecessary costs.<\/p>\n
\u201cCalifornia should undertake a broad shift away from regressive regulations that increase the cost of living,\u201d the authors conclude. \u201cThe state can still pursue a progressive agenda that promotes sustainability, safety, and quality, but we must make sure that these policies are not placing such a heavy burden on California\u2019s struggling low-income residents.\u201d<\/p>\n
The report concludes that addressing affordability will require both encouraging economic growth and reforming regulations that unnecessarily increase living costs.<\/p>\n
\u201cZooming out,\u201d the report states, \u201cthe two broad shifts we have proposed in this paper and in the prior installment \u2014 fostering sustainable growth and reforming regressive regulations that increase cost of living \u2014 can substantially improve California\u2019s unaffordability problem by flattening cost increases while incomes continue to rise.\u201d<\/p>\n
The authors say the next installment in the Berkeley Economy & Society Initiative series will examine California\u2019s system of government benefits and explore additional policy reforms aimed at making the state more affordable.<\/p>\n
Follow the Vanguard on Social Media \u2013 X<\/a>, Instagram <\/a>and Facebook<\/a>.\u00a0 Subscribe <\/a>the Vanguard News letters.\u00a0 To make a tax-deductible donation, please visit davisvanguard.org\/donate<\/a> or give directly through ActBlue<\/a>.\u00a0 Your support will ensure that the vital work of the Vanguard continues.<\/p>\n Categories: Breaking News<\/a> Housing<\/a> State of California<\/a> Tags: Berkeley Economy & Society Initiative<\/a> California affordability<\/a> Energy regulation<\/a> housing policy<\/a> Occupational licensing<\/a> Samuel Trachtman<\/a>