Study: Government regulation leading to poverty in California

A new study looking at the staggering poverty rate in California showed that Government regulation has played a significant part in it.

Miles Institute:

One of the biggest problems California is facing right now, though, is that government interventions in the marketplace are making it harder and harder to produce more stuff, thus driving up prices.

The end result is a higher cost of living, and thus more poverty. Kerry Jackson at The LA Times notes: 

Further contributing to the poverty problem is California’s housing crisis. More than four in 10 households spent more than 30% of their income on housing in 2015. A shortage of available units has driven prices ever higher, far above income increases. And that shortage is a direct outgrowth of misguided policies.

“Counties and local governments have imposed restrictive land-use regulations that drove up the price of land and dwellings,” explains analyst Wendell Cox. “Middle-income households have been forced to accept lower standards of living while the less fortunate have been driven into poverty by the high cost of housing.” The California Environmental Quality Act, passed in 1971, is one example; it can add $1 million to the cost of completing a housing development, says Todd Williams, an Oakland attorney who chairs the Wendel Rosen Black & Dean land-use group. CEQA costs have been known to shut down entire homebuilding projects. CEQA reform would help increase housing supply, but there’s no real movement to change the law.

Extensive environmental regulations aimed at reducing carbon dioxide emissions make energy more expensive, also hurting the poor. By some estimates, California energy costs are as much as 50% higher than the national average. Jonathan A. Lesser of Continental Economics, author of a 2015 Manhattan Institute study, “Less Carbon, Higher Prices,” found that “in 2012, nearly 1 million California households faced … energy expenditures exceeding 10% of household income. In certain California counties, the rate of energy poverty was as high as 15% of all households.” A Pacific Research Institute study by Wayne Winegarden found that the rate could exceed 17% of median income in some areas.

It is increasingly becoming common knowledge that California is notoriously bad in terms of the cost of housing.

Every time a new “top ten” list of least-affordable housing markets is published, California cities often dominate the top of the list. In this list, for example, San Francisco, Los Angeles, San Jose, and San Diego are all in the top ten.

Housing is perhaps the poster child for the impossibility of getting ahead in California. Much of this is due to locally-based NIMBYism in which local governments actively intervene to reduce new housing construction for the sake of “preserving the character” of the neighborhoods. This is just another way of sawing: “rich people like things the way they are, so you poor people can just get lost. We’re not building any more housing.”

These same rich people then later pat themselves on the back for voting Democratic and “doing something” about poverty.

But it’s not all just local regulations. As Jackson notes, environmental regulations are especially burdensome on businesses, thus driving up the cost of everything. This is especially true of housing which requires land, water resources, and visibly impacts the local environment.

These regulations, mind you, are all imposed on top of already existing federal regulations, and in addition to the environmental regulations that already function with a lower burden to business in other states. Coloradans, for example, aren’t exactly living in rivers of toxic sludge, in spite of having fewer environmental regulations — and cheaper housing.

Nor is housing the only industry impacted by these regulations. Mountains of anti-business regulations in the state also make it harder to start new businesses, hire people, and cover the basic costs of expanding worker productivity. Fewer workers get hired. Less capital is deployed to workers. The end result is that worker productivity growth can’t keep  up with increases in the cost of living. Poverty results.

Recognizing this vise in which the poor are caught in California, the response is always the same: more rent control, more regulations, more more costly hoops for employers to jump through.

“We’re taming capitalism!” the politicians tell themselves. Unfortunately, they’ve driven a fifth of the population into poverty in the process.

But don’t expect things to improve for the poor in California any time soon. California is perhaps the single biggest example in the US of how stylish locales become playgrounds for the rich, and a treadmill to nowhere for everyone else.

In recent years, news outlets have carried a number of articles on how workers in silicon valley are living in their cars. Sometimes, the homeless even have jobs at the big tech firms like Facebook. Nearly all of these homeless people have jobs of some sort, though. Thanks to the ruling classes of California, though, a basic apartment is $3,000 per month, while food and gasoline aren’t exactly cheap.

The well-to-do tell themselves that the high cost of living is simply “the cost of doing business” for living in such a wonderful place with so many enlightened, intelligent, and beautiful people. People can go to the beach whenever they want, and life is wonderful.

Of course, anyone who has actually lived in California as a non-wealthy person knows that one most certainly can’t go to the beach “whenever you want.” If one is working two jobs to pay the rent, a day at the beach — after sitting in traffic and paying for parking — isn’t exactly a regular event. Moreover, the communities with non-sky-high rents are generally found well inland, and aren’t exactly next to Malibu.

This may help explain why, as the Sacramento Bee reported last year, California is exporting its poor to Texas. The beaches aren’t as nice in Texas, but many of these migrants are trading in the beaches — which they never see anyway — for an affordable apartment.

This was a great and very in-depth study that explains one of the major causes of the poverty we see in California. It is truly sad that the leaders and wealthy in California care little about this ever growing problem. Rather than working on getting those in poverty back on their feet, we see them worrying about illegal aliens and social justice causes. California has become one of the biggest opponents of Donald Trump agenda sadly its citizens are feeling the brunt of this.

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