Housing & the Free Market

Housing & the Free Market

Economically, everything appears to be getting worse in Northern California. 

The same situation may also exist in Southern California. 

Housing in Northern California is drastically overpriced.  Try finding a decent home for less than $1 million or $2 million (or more). 

Taxes are high.  California leads the nation in the sales tax, the gasoline tax, and the top-bracket of the state’s personal income tax (13.3 percent). 

The freeways are jammed in Northern California.  There is limited parking, assuming one can find a parking space at all.  The public schools in many areas are overcrowded, offer a poor education, or face both conditions. 

Crime appears to be growing.  On March 18, 2018, the San Francisco Chronicle reported that there were 31,000 auto break-ins in San Francisco in 2017.  Arrests, according to the Chronicle, were made “. . . in just 550 cases . . .” 

Higher education at the esteemed 10-campus University of California is, for many students, unaffordable.  Tuition alone costs $12,630.  Fifty years ago, tuition was $180 per year. Costs for books, room, and board make the cost of attending the University even higher. 

The California State Legislature keeps intervening to try to remedy the state’s problems.  In recent years, the state government has told local communities how much cheap housing to build.  A certain portion of new homes has to be set aside for low-income individuals. 

Currently, in the state legislature, are bills giving the state the right to grab a local community’s land.  State Senate Bill 827, for example, would, if enacted, allow the state to seize a local community’s land within one-quarter mile of a frequently used bus route and within one-half mile of a train station.  The seized land would be used to construct high-rise, high-density housing.  And the housing can be as high as 85 feet regardless of local zoning ordinances, including local height limits.  Parking at such housing may be prohibited. 

What is the remedy for California’s problems? 

Some people advocate more state-government intervention to solve California’s problems. 

However, there is another approach.  That approach is to let the market work. 

The economist, Milton Friedman, who died in 2006 and was for many years a professor of economics at the University of Chicago, was a strong advocate of free-market economics and a vigorous opponent of government intervention in the marketplace. 

Dr. Friedman, who had libertarian views, said many of society’s problems were caused, not solved, by government intervention. 

One of Dr. Friedman’s often repeated quotations is:  “If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.”

Perhaps, in Northern California, the free market is already working,  In March  2018, the Wall Street Journal reported that more people moved out of the San Francisco metropolitan area “. . . than moved into it from other parts of California or the U.S., according to U.S. census data.” 

The Journal continued:  “In the year that ended July 1 [2017], the region showed a net loss of nearly 24,000 residents to the rest of the country, roughly double the loss of the previous year and a sharp reversal from net annual gains of about 15,000 as recently as 2013-2014.”

Perhaps the solution to Northern California’s problems is to do nothing at all, letting the current mass exodus continue unabated.   

If enough people leave Northern California, the state’s government won’t have to intervene in the economy, especially in the area of housing.   

If the free-market works, home prices might drop, but at least residents would be able to find a parking space.  ν

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