It's the Policies, Stupid

Build two identical houses, one in Dallas, the other in San Jose, Calif. Put in three bedrooms, a two-car garage, nice kitchens and 2,200 square feet of living space. The one in Dallas will sell for under $200,000, the one in San Jose for over $660,000. Why?

The San Jose Mercury News asked that question recently, and it came up with several reasons. Labor is more expensive in San Jose. And the impact fees developers pay are more expensive, about $30,000 in San Jose vs. about $5,000 in Dallas. Profits are higher for San Jose developers (nearly $100,000 or about 15 percent vs. $9,900 or 5 percent in Dallas ) because the approval process is longer and more uncertain, meaning there's greater risk for developers.

But the main reason housing is so much higher is because land costs so much more there ($232,000 for a 2,400-square-foot lot on which to shoehorn the house vs. $29,000 for a spacious 6,000-square-foot lot in Dallas ). And for that, blame 30 years of anti-growth policies, the newspaper says, from urban growth boundaries to California 's disastrous Proposition 13 of the 1970s, which decimated the property tax on homes.

Result: Cities won't approve the building of much new housing. "New housing doesn't bring in as much in taxes and fees for a city as it costs the city to provide police, fire and other services, unlike commercial development, which generates sales tax revenue for the city," the newspaper says. One upshot is that in the late 1990s the Bay Area (including San Francisco and Oakland) built one house for every six new jobs, making the competition for new housing fierce — and propelling the cost of housing into the stratosphere. Posted 8/15/2002