Quick Take
Economist Richard McGahey, who has held federal, state and local leadership roles and is regarded as a national expert on urban and regional economic development, is against March ballot Measure M. The part-time Santa Cruz resident says Measure M will mean less affordable housing for Santa Cruz and less housing justice for the community. Research, he says, proves his point. It shows that voters who show up for votes outside of regular election cycles are “whiter — and wealthier — than their communities as a whole. And they tend to oppose housing development, perhaps in part to protect their existing house values.”
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Proponents of the upcoming ballot Measure M misunderstand both basic housing economics and how ballot measures increase housing inequality.
Measure M seeks to override city council decisions that allow greater housing density.
Approving it will mean less affordable housing and continuing high housing costs in Santa Cruz.
I am a progressive economist who studies inequities in cities. I’ve held state and national roles in urban and regional economic development. I live part-time in Santa Cruz and have family ties to our community. I care what happens here and can say that recent pro-Measure M pieces in Lookout are anti-housing density.
They come from people who say they care about affordable housing. Yet, all recent research on housing affordability shows that increasing supply lowers overall housing costs. I follow this research closely, and almost every month brings another study showing that more supply is a key to more housing affordability.
People interested in housing justice should oppose Measure M, however well-intentioned its proponents may be. The nonpartisan Urban Institute writes that “increasing the supply of housing — and particularly affordable housing — is vital to advancing housing justice,” especially for “households with low incomes and households of color.”
But isn’t Measure M just, as advocate Frank Barron writes, giving “the public a direct voice” that can override city council decisions? Isn’t that sort of democracy a good thing?
No. Research shows that voters who show up for ballot measures, especially votes that aren’t part of the regular election ballot, and for exhaustive community meetings and input, are whiter — and wealthier — than their communities as a whole. And they tend to oppose housing development, perhaps in part to protect their existing house values.
Measure M proponents point to another provision that will require developers to meet a 25% affordability target. But as former Santa Cruz mayor Don Lane already has explained, we can’t blindly mandate excessively high targets —“if you require too high a percentage of affordable units, the people who build homes simply don’t build.”
Voters don’t have the information or attention span to assess the complex finances of each project as it is developed. Of course, Santa Cruz’s planners and elected council should push every development project as hard as they can to include affordable housing, and they have a strong track record. Legislating an artificially high and arbitrary affordability rate means in fact that less housing — affordable or market — will get built.
The Terner Center at UC Berkeley’s recent report on housing development costs discussed this barrier of excessive affordability percentages. There are many cost pressures on building affordable housing, including increasing materials costs. But the Berkeley researchers note that local requirements, such as arbitrarily setting too high an affordability percentage, make housing harder — and sometimes impossible – to build. And they say policymakers (or voters, I would add) often “are not aware of the tradeoffs” to the negative impact on housing from factors such as “the amount or depth of affordability requirements.” The researchers add that local policies “can make or break the financial feasibility of new housing development.”
And a higher building, which Measure M opposes, helps create more affordable units. Since affordable units are built as a percentage of total units in a building, each additional floor means more total units, and therefore more affordable units. Conversely, shrinking overall building heights means fewer affordable housing units.
Lane, a former Santa Cruz mayor, already has argued how poorly drafted Measure M is, claiming that homeowners seeking simple steps like raising a fence height or modifying an ADU (accessory dwelling unit) could be forced to get approval in a citywide vote. But the problem with Measure M isn’t just poor drafting. It’s the opposition to building more housing. Why are proponents skeptical that increasing housing supply will help affordability?
I’ve written in my blog for Forbes about how so-called “supply skepticism” has been documented by scholars. When asked if more housing supply will bring down housing prices, a recent study found “only about 30%-40%” of survey respondents “believe that additional supply would reduce prices and rents.” In other words, they think (wrongly) that increased housing supply will result in increased housing prices or have no effect on prices, contrary to research.
The survey found respondents understand how supply and demand works for other commodities, such as food or used cars – food shortages mean higher food prices, and more used cars means lower used car prices. The erroneous view that more supply won’t lower prices seems particular to housing. (The same study also noted that homeowners often are a barrier to more housing – “homeowners, who are organized, repeat players in local politics, mobilize against proposed projects nearby.”)
I don’t doubt the sincerity of Measure M proponents. But they are wrong about how housing markets work.
If Measure M is approved, it will mean less — not more — affordable housing in Santa Cruz. It will give homeowners, many of whom already have benefitted from excessive tax breaks under Proposition 13, even more power to block necessary new housing. The city’s existing restrictions on new housing have artificially increased home values. Owners have already done very well – they surely don’t need any more advantages that further drive up home prices.
The result? Santa Cruz is one of the nation’s most unaffordable housing markets. Measure M would make that even worse. So if you really care about housing affordability in Santa Cruz, you should vote against Measure M.