March 26, 2016

Priced out of housing on a $250k salary

By Larry G. Salzman Senior Attorney

CBS news reported this week that the City of Palo Alto has “voted to study a housing proposal that would essentially subsidize new housing [in that city] for . . . families making from $150,000 to $250,000 a year.”

According to the City’s Vice Mayor, housing there has become “unaffordable for . . . your firefighters, your teachers and, frankly, some of your doctors.” The town’s median home price weighs in at a bulging $2.2 million.

If the study is aimed at finding ways to lower the cost of housing in Palo Alto, the city council could take a simpler approach: look in the mirror.

The way to make housing more affordable is to produce more housing. Palo Alto’s city council has all the power it needs to permit more homes to be built, yet under its policies the city has for decades continuously failed to approve enough building permits to meet the rising demand. Add to that more recent surging needs for housing from employees of growing tech firms, and Palo Alto is patient zero in a government-created plague of overpriced housing.

Moreover, the city’s policies can be flatly punitive toward existing property owners. PLF’s clients, the Jisser family, have been stuck in a years-long process to close their mobile home park in Palo Alto and put their land to another use. For 30 years they have provided some of the lowest-cost housing available there. But when the head of the family, Tim Jisser, retired and sought to close the deteriorating park, the city demanded he pay more than $8 million dollars to his tenants or be forced to forever run the business. Is it any wonder that new investors are wary of investing in low-cost housing in Palo Alto, given their alternatives?

Palo Alto isn’t alone: people of modest and even comfortably middle-class incomes are suffering throughout California’s coastal cities from needlessly restrictive land-use rules. Last year California’s Legislative Analyst’s Office (a non-partisan governmental agency tasked with studying California legislative policies) issued a major study, California’s High Housing Costs, Causes and Consequences. Its conclusion? “Far less housing has been built in California’s coastal areas than people demand.” And a leading cause? Local government’s abuse of “land use authority to slow or stop housing from being built or requir[ing] it to be built at lower densities.”

It is not surprising there is a huge demand for housing in Silicon Valley; more wealth, capital and talent have concentrated there in recent decades than almost any other location in the entire world. What is surprising–and outrageous–is that Palo Alto and so many other cities choose to continue to block development to the point that no one earning less than a millionaire’s wage can move in.

While Palo Alto is studying proposals, I have one: instead of subsidizing, controlling, and penalizing, try respecting property rights and embracing a free market for housing. It’s really the only way out of the mess that decades of bad policy have created.

 

learn more about

Jisser v. City of Palo Alto, California

The Jisser family owns the last mobile home park in super-expensive Palo Alto, California. They wanted to retire, leave the business entirely and close down the park, but the city demanded that the Jissers pay $8 million to the tenants to obtain the required permit. Representing the Jissers, PLF sued on the ground that the city’s demand was nothing more than extortion prohibited by the Fifth Amendment. A federal district court judge dismissed the case because he erroneously believed that the Jissers had to pursue state court remedies first. While the appeal was pending, the city agreed to give up the fight and purchase the mobile home park itself. The appeal is stayed pending resolution of the settlement.

Read more

What to read next