California Dreaming, With Nightmarish Consequences

Mike Shellenberger

Mike Shellenberger is a maverick environmentalist and activist who ran for the Democratic nomination for governor of California. He stirred up some good conversation by his willingness to address the myths coastal Californians cling to to avoid recognizing their votes have gradually strangled the rest of the state and led to a crisis of high cost and low availability of housing for younger and poorer people.

His website has policy statements like this one on housing, but let’s start with his epic Twitter thread on the subject:

This is the story about a real-world “Elysium” — a state which has the highest levels of poverty & inequality in the country but whose residents have convinced themselves that they are behaving ethically, protecting the environment, and fighting racism. California seems to be a progressive paradise, but it is number one in poverty and inequality in America. How can this be? And how does California maintain its reputation as a progressive leader…

Everyone believes California is our most progressive state. And why not? It imposes the highest tax on the richest one percent. It is aggressively implementing Obamacare. And it is standing up to President Donald Trump on everything from immigration to the environment. And yet the Golden State is also number one in poverty & inequality. How can this be? Around the world, progressive nations like Sweden and France, which redistribute wealth through high taxes and generous social welfare policies, boast of less inequality than other nations.

What gives? And how does California maintain its reputation as a progressive leader given the reality on the ground? To answer those questions, let’s take a closer look at what might be considered a present-day Elysium. In the 2013 science fiction film “Elysium,” the rich have fled to a luxury satellite orbiting Earth while the poor toil in dangerous conditions below. Life in California today differs in degree, not in kind, from that dystopian vision.

Homeless encampments with hundreds of people have cropped up in the last two years. Occasionally, they are ravaged by hepatitis A, which in 2017 killed 20 people. In Silicon Valley, 132 people died — up from 85. In San Diego, 117 people died, up from 56. Last year, San Diego city workers nearly killed a homeless person after accidentally throwing her and the tent she was sleeping in into the back of garbage truck. She escaped just seconds before being crushed by the trash compactor.

Meanwhile, inside comfortable homes perched atop Berkeley and Beverly Hills, affluent progressives condemn the cruelty of the Trump administration toward the poor. It’s true that workers in California earn 11 percent more than their counterparts nationally. But that amount is not enough to make up for mortgage payments and rents that are 44 percent and 37 percent higher (respectively) than the national average. Where 56 percent of Californians could afford a middle-class home in 2012, in the third quarter of 2017, just 28 percent could.

This matters. Homeownership has been the traditional route for the working class to join the middle-class, notes Chapman University demographer Joel Kotkin, who has been ringing the alarm about the crisis for years. One fact says it all: homeowners have a net worth that is whopping 36 to 45 times higher than that of renters.

California’s elected officials make serious-sounding pronouncements about the problem but back them up with only symbolic actions. Last September, Gov. Jerry Brown signed housing legislation that will raise $250 million per year to subsidize housing. But that’s just enough to subsidize 1,824 units annually at a time when 100,000 to 200,000 new units are needed.

Is the problem too few progressive policies — or too many?

A political machine based on an alliance between the ultra-rich and the powerless must be fueled by hypocrisy. By feigning great concern for the poor and homeless while quietly strangling new housing and industrial development via downzoning and environmental lawfare, the neo-feudal lords of California have preserved their comfortable life in the wealthy coastal cities and gated communities while driving out the middle class. The black population of San Francisco has fallen from 13.4% in the 1970 census to less than 6% in 2010. Wealthy communities make the construction of modest homes and apartments for poor people illegal but rely on service workers who pack rented homes two to a bedroom or commute long distances from poor towns.

Starting in the 1970s, housing prices began to rise dramatically as new housing was restricted by anti-growth policies, couched in terms of preserving the environment but really designed to pull up the drawbridge to preserve a privileged lifestyle for those who had already bought houses. Because motivations had to be disguised as environmental concerns to appear less selfish, communities contrived to keep water supplies limited and opposed new roads and transit. The propaganda took hold and is now so entrenched that “all right-thinking people” accept that no new supplies of fresh water should be built, new highways only allow more sprawl, and even local roads should have European “traffic calming” design applied, removing traffic lanes and parking. Meanwhile, the state government is wasting billions on a boondoggle high-speed rail project, aka “train to nowhere.” The fantasy of renewable energy and mass transit for everyone is coming into conflict with the development of driverless car services, which may strand those expensive transit investments in the next few decades. The political machine continues to promote higher energy costs for suburban and interior populations and has demonstrated it cannot build new infrastructure at a reasonable cost or on time, but its control over the state is unchallenged.

A few green shoots of rebellion, like Shellenberger’s candidacy, are no threat so far — he received a bare 0.5% of the primary vote. Yet discontent is rising, and nearly half the Bay Area residents polled recently said they’d like to move away. For the well-off in booming industries, the wonderful coastal climate and groomed upper-class population of wealthier enclaves continue to make life sweet. Street crime, poverty, and homelessness are creeping into even some of the most favored areas, though, and the election of Donald Trump as president shattered the technocratic fantasy of rule by the “best people” like themselves.

Some good reading on how this fantasy of environmental and social justice grew to enable the wealthiest to keep control of the state and most local governments while actively harming lower and middle classes:

Good book by MIT Prof. B.J. Frieden, who saw the syndrome’s beginnings in 1979 after only a few years of antigrowth “I’ve Got Mine, Jack” policies in the richest suburbs, notably Marin County:

The Environmental Protection Hustle

Abstract: A powerful, ideologically driven crusade to keep the average citizen from homeownership and the good life in the suburbs is exposed as a warning signal to environmentalists, whose concerns may backfire, and to homebuilders and the general public in other parts of the country where projects for urban growth may soon run up against the protectionist’s blockade. Frieden asserts that the connections between housing and serious environmental issues such as pollution, use of toxic substances, nuclear-testing hazards, and the conservation of natural resources are few and minor. The attack on home-building does not follow from the central concerns of the Sierra Club and other environmental groups, he feels, but stretches the environmental agenda to phony issues designed to keep the average citizen from using the land, while preserving the social and fiscal advantages of the influential few. He documents environmental controversies that have already discouraged large, planned-unit developments with community open space, driven up the cost of housing, and promoted a return to the 1950s-style building practices of expensive freestanding single-family homes, each on its own lot in small, exclusive developments at the urban fringe.

A more recent treatment, “The Rise of the Homevoters: How the Growth Machine Was Subverted by OPEC and Earth Day,” by William A. Fischel, 2017:

In the 1970s, unprecedented peacetime inflation, touched off by the oil cartel OPEC, combined with long-standing federal tax privileges to transform owner-occupied homes into growth stocks in the eyes of their owners. The inability to insure their homes’ newfound value converted homeowners into “homevoters,” whose local political behavior focused on preventing development that might hinder the rise in their home values. Homevoters seized on the nascent national environmental movement, epitomized by Earth Day, and modified its agenda to serve local demands. The coalition of homeowners and environmentalists thereby eroded the power of the pro-development coalition called the “growth machine,” which had formerly moderated zoning. As this chapter shows, these changes in the meaning of homeownership and in the political behavior of homeowners explain why local zoning has become so restrictive.

In hindsight, a state government with foresight might have headed off this slow-motion disaster by preventing local governments from acting against the larger interests of the state and the future citizens who might have chosen to live there had a good supply of housing been available. Curbing the use of environmental lawsuits and zoning to stop or delay new housing and continuing investment in infrastructure projects like highways and water supplies would have led to a larger population in more desirable coastal areas with lower housing prices and rents, and a healthier growth economy not deprived of middle-class labor. The only people not better off under that scenario are the already-wealthy whose spacious estates in Atherton and Beverly Hills are in effect subsidized at the expense of lesser citizens.

A watered-down bill to address the problem recently died in the legislature. It would have lifted some height and density limits statewide in areas served by transit. Without a groundswell of voter support, nothing will be done.

Rubin Report interview of Mike Shellenberg:

This is Not My Beautiful House

[Originally published June 5, 2016, at JebKinnison.com.]

When I went to work at BBN Labs (a DARPA research shop, like a B-grade Xerox PARC or Bell Labs) in 1984 as a freshly-minted MIT graduate, my office was small and barren, with a desk, a VT-100 terminal, and a classic Mac. But it was still the age of the private office, and I’m thankful I never had to deal with the cubicle, or worse, the bullpen of today — I would never have been able to program with the noise and distractions.

The engineer next door had a leather couch and an oriental rug in his office, and art and geeky knick-knacks on shelves all around. Sometime during the first week, the headhunter / HR contractor who had recruited me stopped by. “Don’t get too comfortable. I mean, don’t spend a lot of time decorating.”

I didn’t know quite what he was getting at — interpreting it as philosophical advice, or perhaps practical because he had just seen the overdecorated office next door. Everything changes and ends, so best be prepared to move on as soon as you think you’ve arrived at your destination? Always have your bug-out bag packed and ready? But later I realized he meant he knew the Labs were splitting, with the part I was working for to be spun off to commercialize the BBN Butterfly multiprocessor. And in a few months we were in a new building next door, so decorating my office would have been a waste of time.

And so it is with houses. Last year we bought a large ten-year-old house for retirement. But this has me thinking of what the headhunter told me — and why I’ve spent so much time moving and fixing up places, hoping this time it would be Just Right….

College Avenue House
College Avenue House

By the time I started work at BBN I had been a landlord for five years, looking after a turn-of-the-century mansion that had been split up into four units during the Depression. It was my first venture into real estate investment — a grand three-story house on College Avenue between Tufts University and Davis Square, Somerville. I knew the Red Line subway extension would be coming to Davis Square, and at $70K the building was a good bet. I imagined doing all sorts of renovation, but while we lived in the ground floor apartment and I did do a lot of small upgrades for energy conservation and the like, I was too young and distracted to do anything major like finish the enormous attic into another glorious apartment as I had intended. And knowing what I know now, I realize I would have been stymied by the NIMBYs nearby anyway….

We had friends gutting and renovating houses in (crime-ridden, cheap) San Francisco (which is no longer cheap.) One time we were staying at their house while they had stripped their own bathroom down to the studs — which meant using a fully-exposed toilet. “Pretend there’s still a wall there.” The things we did when we were young and hungry…

I was getting into microcomputers and compilers and AI, which is how I ended up at BBN doing multiprocessor LISP for the SCI (Strategic Computing Initiative), which was supposed to be a government-funded response to the Japanese AI scare. Neither country cracked the problem, then both pulled the funding plug when no practical results happened — lots of money and effort went down the drain. This drying up of interest and collapse in AI research starting around 1986 is now called The AI Winter… which also crashed my next employer, Symbolics, when the beancounters decided to direct all researchers to buy Sun machines with Lisp compilers instead.

So because I had an absorbing job, I lost interest in the house projects, and it seemed like a good idea to free myself to move around by selling it. We got $350K for it; since we had borrowed all but $14K downpayment, that meant a profit of over $250K on a $15K investment, by the wonders of leverage and good luck. And the rents had largely paid for our own house expenses along the way, as rent controls ended, interest rates dropped, the subway opened, and investment started to flow back into the neighborhood, which today is highly desirable — Zillow thinks the building is worth $1.8 million now, 25x what we paid in 1978. Those conditions are unlikely to ever be repeated.

I entered a PhD program in computer science at Northeastern studying things like denotational semantics with Mitch Wand. A year of that was enough, and I moved to Vancouver to get away from the various unpleasantnesses of that era — escaping to a tiny apartment in a highrise tower in the West End.

First Bowen house framing stage
First Bowen house framing stage – 1992

I bought a big piece of land on Bowen Island and spent the next five years subdividing it, attacked by the Islands Trust and the antidevelopment faction on the island — which as it turned out, is retirement home to many Canadian bureaucrats. You really haven’t lived until people at a public meeting gang up to attack you as “an American developer.” The photo is of the first house being built in my subdivision, not by me — I never built my own house there, since I realized I wasn’t wanted.

Sunnyvale Eichler - 2007
Sunnyvale Eichler – 2007

I fought them to a draw and got out alive, though just barely. I ended up in California, where I picked up a new partner and bought an Eichler in Sunnyvale (photo above). That was my first real success at renovation — we updated the kitchen and baths, much of it “just enough” updating — for example, the 1969 bathrooms just needed new drop-in sinks and faucets to seem fresh, so I could do a lot of the work myself. We paid the dangerously-high sum of $600K for the house in 2000 and sold it for $1.2 million in 2007. Now Zillow claims it’s worth $1.7, showing how inflated values are in Silicon Valley….

View from Upper Market SF House
View from Upper Market SF House

We eventually ended up in the city of San Francisco itself, renting the top floor unit of a new building on upper Market Street. The developer built the largest building he could legally, and what he thought would sell — two condos in a five-story building, with the garage and entries in the middle floor.

The builder/developer made a few mistakes. First mistake: badly judging the market, which collapsed as he was finishing the project in 2008. Second mistake: the steel-framed center of the building didn’t settle, but the back end did, leaving our living room with an inch-high bulge running across the floor. Third mistake: the slate-tiled roof deck, planned hot tub and the garden box, which he never finished installing (but did fill with dirt.) The roof deck leaked. And leaked. And leaked — he rebuilt parts of it several times, while areas inside the house were soaked and had to be replaced. While it would be grand to sit in one’s rooftop hot tub watching the city lights and sipping Chardonnay, the reality never quite justified the trouble.

Market St Kitchen - Green Marble Counters!
Market St Kitchen – Green Marble Counters!

Meanwhile, the green marble countertops in the kitchen were probably chosen as a selling point — luxury! Green! Marble! But were horrible, since the slightest hint of acid — a lime, champagne, anything — etched the marble in ugly gray spots and rings. Despite our precautions, parts of it looked terrible in less than a year, and the owner had to bring in a refinisher to redo it and seal it again.

Nighttime View from Market St House
Nighttime View from Market St House

One last view from the Market Street place. The effect of the views eventually wore off, and we were left with the high rent, the leaks, the cold wind and fog that made the roof deck less than pleasant most of the time, and the steep walk up and down the hill to the gym.

Sevilla Great Hall - 2010
Sevilla Great Hall – 2010

Finally, we bought a big place in far south canyon Palm Springs. It came decorated in a sort of post-modern Beetlejuice style, not quite our taste but well-done. At over 6,000 sq. ft. it was a lot more house than we needed, but we were thinking one of our parents (or both?) might end up living with us, and of course we wanted room for guests. Neither of those really happened, so half the house was generally closed off.

The place had three dishwashers, three refrigerators, four water heaters, and six AC units. I replaced most of the ceiling lights with LED units, and since the AC bills were in the hundreds (and could easily have been in the thousands!), I looked into two-stage evaporative cooling.

Craning in Evaporative Coolers
Craning in Evaporative Coolers

Here you see one of the evaporative coolers being craned to the roof, where it was installed near the existing HVAC unit to share ducting. The concept of evaporative cooling takes advantage of the cooling effect of evaporation; the desert air is usually very dry, and under the right conditions evaporation can drive a surface down to near freezing temperature (the dew point is the theoretical limit, and that is often very cold — as I write it is 94 degrees outside, but the dew point is 37 degrees F.)

Normal evaporative coolers just run outside air over wet materials to cool and add moisture before sending it into the house. A two-stage cooler uses that effect to cool water, then expels the first stage air outside. The cold water is then sent to the next stage to chill outside air which is further cooled by running it over moist materials, but since the air is already cooled it gets a bit cooler and does not pick up so much moisture. The result is cool, clean, slightly moist air, perfect for a home in the desert. Running both units, we were able to cool the parts of the house we used most down to comfortable levels using less than 20% of the power used for AC, since all that was needed was a few showers a day worth of water and two big fans.

Control Board
Control Board

Unfortunately this super-advanced cooler was made by a pioneering company, and I soon had arrows in my back. No one knew how to install it, so I had to design the ducts myself. The computer control program would occasionally glitch, requiring a system reboot — cut the power and restart. When it was running, the air was much nicer than what you get from AC, but you had to understand how to open doors and windows just so to balance the system — air was being blown in cool and had to escape, so choice of open windows to distribute the coolth was an art.

It was no great strain for me to run it, but when our plans changed again and I was left alone in the house, it made no sense to keep the house for several more years. We put it up for sale. No one understood the coolers, since unlike solar panels virtually no one has ever seen one — the cheaper one-stage coolers, known as “swamp coolers” locally, have a reputation for being high-maintenance and the choice of people too poor to afford real AC. So that was no help at all in marketing the house, and I doubt the new owner ever used the instructions I left for him.

The Morrison, Phase 2 Construction
The Morrison, Phase 2 Construction – 2012

While waiting for that to sell, I put a deposit down on a unit to be built at The Morrison, a trendy modern development of detached houses on tiny lots, each with a small pool. One of the few developments that kept selling through the recession, and now a model for many copycat developments in Palm Springs. Above is a view of the construction site from our partly-furnished new house.

Finished Pool - 2013
Finished Pool – 2013

So again we had to move and set up a new place — change all the lighting to LED, buy new furniture, decorate. It always seems to be me that has the time and opportunity, so I do it. And years pass, and other things I could be focusing on don’t get done….

“Don’t get too comfortable. Don’t spend a lot of effort decorating,” as my HR guy told me long ago. Unless that’s what you want to do — specialization allows most of us to concentrate on what we’re best at, while farming out other tasks to people who specialize in those. When taxes are very high, there’s a big cost to hiring someone else to do something — you paid taxes on your income, and the people you hire pay taxes on what you pay them, and so on — which is why most of us try to do a lot of the work ourselves to save money. If I pay someone $1,000 to paint, I have to earn $1500-2000 more to make up for that expense. So I do the painting. And I get distracted, and do a worse job.

You can waste a lot of your life buying and selling houses, decorating and moving. I admire people who can stay in one spot for fifty years, happy with what they have — that’s not really me. We’ve moved one more time, and this time is the last! [He said, knowing it’s not true.]