Addressing the Housing Affordability Crisis and Protecting the Middle Class Dream

We have , first of all , joel Farkas , who is CEO of Fruition Communities , which is a developer that works with housing and infrastructure development in the Western United States and actually is doing work in our area here in Riverside County . Joel , welcome , thank you .

In addition , we have Carla Lopez del Rio , who is the Deputy Director of the Riverside Department of Housing and Workforce Solutions . Carla welcome , thank you .

And Wendell Cox , our esteemed demographer and longtime collaborator , fellow at the Chapman University Center for Demographics and Policy and CEO of Demographia , which is a research firm that tracks housing costs around the world . Wendell , welcome back .

The root cause is two primary things the kinds of approvals and jurisdictional regulations in local and state government . And one other thing that people are not aware of are the enormous fees , particularly in the western United States , a developer or homeowner has to pay to a municipal jurisdiction . The first , easiest one to understand is water , the water fees .

The cost of a water resource component for any home , no matter how little or how big , is beyond what anyone could possibly believe .

There are places in this country where you can buy a house for $200,000 , not a permit . But for me , the real big problem is that much of the world has decided that we must not allow our cities to expand , we must not allow greenfield development , and this is what we're paying for . It is anti-sprawl policies .

Even the OECD , which supports these kinds of things , is beginning to raise questions about whether anti-sprawl policies are doing the right thing , because they're basically in the process of ruining the middle class .

If you look at who has the knowledge about how housing works , all of the things that you're saying about fees , land costs , lead time all of those things are not really spoken about by the middle class or the working families .

They really do not understand how the problem is affecting one , and so it's very difficult to drive public policies when the conversation is not coming from the resident , because they are ultimately the ones that drive how we , in these positions of responsibility and fiduciary duty to the taxpayer dollars , invest the money .

And so if you do not understand how your money works , you'll never be able to own the destiny of that money or how you want it to move .

And money can be manifested in housing that's , rentals or homeownership and I honestly wish that there was more advocacy from the community so that they can show up and speak their desires rather than receive what's available , and that's what I feel is happening right now that it is very complex .

People do not understand the intricacies of how we've made it so convoluted that they really don't understand how to make advocacy for themselves . So that's one thing . On the public policy side , there's a real lack of civic engagement and clarity and transparency about how housing happens . Also understand .

I would add , though , in addition to public education , it's the municipal jurisdictional , the mayors , the town managers , council members , their education planning departments , Because while they may say and they may want to provide reasonably priced housing , housing people can afford , many of the things that they are doing , maybe unknown to them , are causing the inability

to provide housing people can afford . Carl also mentioned another thing .

We spend a lot of time with mayors and council members and city managers and planning staff . To describe , when we ask for a certain thing with a regulation . Here is the reason behind it , not just so we as a developer can get something . We show it to the very end .

When a consumer , the public , their constituents , what it means to them , what it means to them in terms of the quality of home , is it going to be ? You know , we hear a lot about solving affordability issues by having tiny homes , 200 , 300 square foot homes . Well , that's not really good for anyone other than a you know , a young person starting out .

It's not good for a family .

When we describe that if we do certain things , you have a higher quality product , a lower cost product higher quality , lower cost , meaning it's more affordable If you only do a few little things here , there's a reason behind it and that's the education of the jurisdictions who are making these decisions , in addition to the public , as Carla mentioned demanding .

They want a higher quality product . They want to own their home . That's another thing . Carla mentioned home ownership . We at Fruition Communities want people to own a home .

That took away the state problem , but the locals had already adopted a bunch of things . So you know it wasn't nearly as effective as it should have been . But you think about , for example , california , which is the worst housing affordability problem in the United States , no-transcript .

And you can't build housing that's affordable because the land costs are being driven by state policies that need to be changed .

I mean , what I find astounding is you've got all these people representing Latino districts , but they don't do anything to address this issue . Why is that happening ?

The people I know today were people that I met throughout my life , but then you have colleagues of mine that come from several generations of college graduates and they are connected and they were born and raised into these connections of people that I was unaware of , so my background being first at many things , and this is what's happening in California .

You're having a lot of first generation politicians , things , and this is what's happening in California . You're having a lot of first-generation politicians , first-generation college grads . We come with talent and skill sets that are growing , but the mentorship and the understanding of how things work is really not coming from our parents .

We wrote a Nancy recently that talked about understanding Latinos in California and although you have all , like you know , all immigrants that have come to the United States , they come from poverty . Mostly . They do not come as wealthy people . Very few people come with wealth and start businesses here .

Most of the immigrants that have built this country , continue to build this country , come from very poor backgrounds . So 77% of the Hispanics that live in California have a Mexican background , from Mexico . So these 77% of people are coming from rural areas of Mexico , where these concepts are absolutely outside of the scope of any . They don't understand .

Not because they cannot understand , but because it doesn't exist . For example , a 30-year mortgage , that's a very complex financial tool that doesn't exist in a country of origin .

You come to the States , you have very little education , you face language barriers , and so you yourself have to overcome a lot of issues and a lot of barriers in order for you to be able to know how to participate civically , in addition to having two or three jobs that are keeping you from participating in the nine to five schedules that we in government

usually operate . So there's an inability to participate and be educated and be aware . And then there's also a very important piece of the work that I think needs to be recognized , isn't it ? It's the inability of parents to pass down knowledge , both knowledge in understanding how to participate civically , how to lead , but also financially .

They are not children that will inherit assets . They are building them as they grow .

So they're very stretched thin when it comes to being able to serve , being able to take care of their families but , most importantly , have that network , that mentorship and that understanding of how they can actually not just live better , but make changes that will have a repercussion in their community .

So , in order to work on this , we really need to work on that mentorship , that guiding people through the process , making them aware of how things work . It's not just about going to school , it's about understanding how things work and being connected , being able to affect .

I mean , for instance , wendell , you mentioned CEQA and I want to get your thoughts on this , and Joel's as well , and I want to also . I want to get your thoughts on this and Joel's as well .

It strikes me that there is an underlying assumption that if we somehow lighten up on the review of environmental regulations , that we make the amount of times you can challenge a CEQA filing or an environmental review that somehow we're going to be killing the environment and loopholes to be able , or this structure of the SQL laws to be able , to bollocks up

projects . So , joel , how are you finding , in terms of people's policymakers' attitudes and the whole environment around this regulatory situation .

The bias , basically , of policymakers and elected officials is the solution to reasonably priced , high-quality housing for families is an urban environment . All you have to do is look at the top 50 largest cities in the world and realize that's patently , absurdly untrue . The housing in those top 50 worldwide cities are not less expensive .

They're not larger , they're not higher quality . Transportation cost is not better . Transportation problems , traffic problems is not worse , is not better . The food costs are not better . Energy costs are not better . There's nothing that's better for a family in an urban environment . Now , an urban environment has its place .

It's just not for families , and families are a substantial part of this . You're also not going to find anybody that thinks they can have enough money in their 20s and 30s to buy a home in an urban environment . So it's so obviously true that , while urban areas have certain benefits , it has no benefit for the people that we're talking about .

So what you start with , and what I start with , is go to places outside of these environments where we absolutely can provide exactly what Joel and Wendell and Carla are talking about . They exist . There's more than 19,000 jurisdictions in the United States . There's 20 large urban areas . 19,000 jurisdictions in the United States . There's 20 large urban areas .

There's a lot of places to go where we can have this is not a hopeless conversation . We have the vast majority of people in this country who are buying new homes . I mean , joel knows the data , wendell knows the data .

I'm sure they'll speak to it , want what we are talking about and they are willing to go to the places that you can provide what we are talking about and that's how you do it . It is not hopeless . We're doing it right now . It's just not made prominent and they're not aware of they being policymakers who have authority . They're not aware of this .

In fact , at this point , since the last census , which was not that long ago 2020 , the fastest growing parts of Canada and the United States are not even metropolitan . They have become small urban and rural . First time probably . We've seen that ever , certainly in 100 or more years in this country . So that's what's going on at this point .

We don't like suburbs , we want cities to look a particular way , and the price we are paying for it is the destruction of the middle class as well as forcing people into poverty , Because when you've got to go join the public housing wait list because you can no longer afford the housing that your parents could have afforded , you're moving into poverty poverty even

though you may not be counted that way .

Regardless of whether that's a good idea or bad idea in general , it is not going to solve any affordable housing issue whatsoever . It is documented , it's proven , it's insane . Now why are they calling it this legislation ? It's insane . Now why are they calling it this legislation a solution to housing affordability ?

Because everyone agrees that housing affordability is pretty important .

I'd love for you to share some of the statistics that you've shared with me about the availability of jobs that come from transit availability . So take it away .

And do you realize that the transit ridership in Los Angeles today not today in 2019 , before the pandemic was down 25% from where it was in 1985 when all we had was buses , buses .

Now I can tell you and I can't speak for anybody else who was on that commission , but I certainly did not support rail when I was on that commission and I was a great supporter of it on the assumption that in 40 years we were going to carry fewer people .

We are spending hideously larger amounts of money than we did before and we are serving fewer people , and you can go across the country and see the same thing .

So , and the other thing that is my favorite thing and Marsha was probably talking about you look at how many jobs you can get to in this country in 30 minutes by transit and that's about the average work trip travel time one way in this country If you look at all the metropolitan the 50 or so metropolitan areas more than a million people .

The highest figure you can get to in terms of the number of jobs you can reach in 30 minutes by transit is about 3% . On average in the United States you can get to 60 times as many jobs by car as by transit in 30 minutes . Now , with that as background , you're absolutely right , joel Farkas , and that is that transit-oriented development .

It may sound good but it's not going to work and it doesn't work anywhere .

One of my great frustrations in being on national transit committees was my colleagues often didn't realize that to have the transit system of Hong Kong you didn't just build it , you actually had to have the land use that justified it in the first place .

And you know , Carla , you're in Riverside , You're one of the few places where families are still moving .

If you were to survey me me , though , of course I use the public transportation . I've used it in San Francisco , in LA , I've had the opportunity to live in those megapolis , but if you were to ask me and survey me , it's not .

It's not always pretty to be on public transportation when you are feeling sick and trying to get home and you can't get off the bus and you need to use the restroom . It is horrible when you are trying to get to and you can't get off the bus and you need to use the restroom .

It is horrible when you are trying to get to an emergency to your family and you can't get to the , or you miss the bus or you miss the train . You can't get to your kids . So the question is not just is it efficient , is it what people want ?

And that's the question that I continue to miss in every single one of these conversations is like this regulation and that thing , and so I . The question that I continue to miss in every single one of these conversations is like this regulation and that thing , and so I admit it , I'm doing the work with you .

This is exactly what I talk about every day , but this is not the conversation that is going to change , and so what I would like to point to is that what we need to do , we need to democratize knowledge , and the reason why you know these universities and I had the privilege of going to one of those pop universities that are leading a lot of this thinking

is that I was sitting there thinking like they're not talking about me . I was a single mother , you know , in college , and I was not in tune with what was being said . So what I think professors have and , believe me , I love academics , so I don't have anything against academia what I have against academia is not their fault .

It's the fact that the conversation should not be their conversation . It should be our conversation , the people's conversation , and so holding on to that power and then making them but their input is going to have these effects on society and having our elected officials .

Sometimes listening to academics more than residents is an issue , and that's why they continue to use the center . You know thinking without anybody criticizing you . You will continue to do the same thing without knowing you're doing it wrong . That's why constructive criticism matters , and it should happen in the open , democratic floor . Yeah , although .

I'm in the business school and I can't tell you the number of situations where my colleagues have no real-world knowledge about what's actually going on in the business world and are training students to think a certain way .

I'm thinking back to your point , joel , about teaching urban planning and how the bias toward density is kind of an underpinning element of what you teach as good urban planning . I mean , I don't even know how do you correct that , how do you create ?

We listen to people , just like Carla's describing . While they may not people may not be able to articulate it the way all of us are saying it now here , instinctively there's a lot of people in this country and in this world that know what they want . Carla alluded to it when she was hearing some of these things . She said they're not speaking to me .

Almost everyone I talk to that is a customer , a potential customer , says the same thing . They know what they want and we listen to them and we're simply providing what we hear that they want . So our job in fruition communities is not to teach either constituents or the regulatory authorities something new .

We go to where we can do it and we provide what people tell us they want , and the best thing , the best way to expand what Carl is saying , is to democratize this idea . The more people that physically own a home , the more people will learn on their own that this is important .

You know , in Colorado we have very expensive ski resorts the Roaring Fork Valley and the Western Slope . What are the two biggest employers ? Are the school districts in the mountains or the hospitals in the mountains ?

Their solution and please don't criticize my they argument , I know who they are , I just don't want to name them is to provide $1,500 rents for 200 square foot homes . Well , it sounds good when rents are $3,000 , $4,000 , $5,000 , but it's $6 a foot or more $7 a foot . That is only for someone who's 22 or 23 years old .

It's not for a skilled teacher , it's not for a skilled person working in a hospital . That's the extent of density . Some of the housing authorities have just announced in the Roaring Fork Valley a new affordable housing project . Announced in the Roaring Fork Valley , a new affordable housing project .

The cost not the cost to the county and the city is 1.4 million dollars per home . 1.4 million dollars per home and these are one and two bedroom and that's about it . These are not solutions , but these are extreme examples or maybe not extreme , maybe that's a typical example where people that we're talking about think they know the answer .

The real answer is the people who think they know have failed . They have not provided affordable housing . That's a fact . So why are we listening to them ? I'm going to listen to people Carla says I should listen to that instinctively know , and during this process , when they own a home , they will have a bigger voice , and I want them to .

I want them all the upside of their home . I want them to keep and I want their voice to get louder .

Mechanism for this would normally be elective politics , and it strikes me that most of the people that are in the policymaking role in government are actually appointed rather than elected and , unfortunately , these people are too smart to become elected officials , so they have jobs and , by the way , recognize that the people , in fact , are voting with their feet .

Now why are they doing that One ? They can't afford to live there anymore . I think a lot of people are not happy with the idea of having an apartment and being expected to raise a family there , etc . California has a real problem here and I don't think it's really recognized by a lot of people .

This is still the most affordable place among the most affordable places , where you can still create some type of ownership or affordable housing . However , the relationship between inland California and Sacramento it's noticeable that it's not very strong , and so when you are talking about , you really want to focus on those areas that have the potential .

You would then think that the resources would follow that urgency and that strategy spread , and so you're finding a lot of these communities that are low income or , you know not , had not been given the opportunity to grow because of the lack of relationship .

It's a relationship thing , and so when you're trying to develop housing in Riverside County , you find places that are affordable but are lacking things like infrastructure that are precursors to actual being able to develop , and those investments need to come before there's a reality for you to be able to produce housing .

So the relationship between Sacramento and the regions that are affordable in the inland areas must be stronger , and there are some signs that California is listening because I can tell you that today , in my experience , recent experience the governor's office assigned I'm sorry , the governor's office assigned specific representatives to regions like the Inland Empire , where in

the past those positions did not exist , and they are actively coming to recruit people who are first generation like myself , and inviting us to be part of commissions and boards , which had not happened before , and they are coming to have meetings with us in the neighborhood that can yield those relationships and that leadership .

So I do think that we shouldn't be losing hope . As you know , joe Farkas was saying , this is not a sad conversation . This is just a conversation where we're all frustrated and we all want to find a solution . But we are all still trying very hard to not allow this period of our history where we are still experimenting how this capitalism thing works .

It's still very new and you know we need to expect that in the continuous process of improving our country , we are going to find times where this will be a learning opportunity about the importance of civic engagement and all the things we're talking about . But we are on our way to changing things for the better For the future generations .

This is not the end for them .

We've recommended this in a couple of surveys at this point , that housing affordability in places like Riverside County and Stanislaus County and Fresno County is not good . It's as bad as Portland , but it's a hell of a lot better than Oregon and Washington and the coast . And so if we could come in now and say , okay , you know what ?

Now we're going to allow development to occur in the San Joaquin Valley , the Sacramento Valley and the Inland Empire and we're not going to ask any questions except to make sure you do it well . Inland Empire and we're not going to ask any questions except to make sure you do it well we could maybe turn around California . That's got to happen .

Other than that , if you keep on with these laws , there's no way to go . There isn't any amount of talking that's going to help until someone's prepared to change the laws that have created this mess .

If it does not include that , we will end up with a structure in this country which we're headed to , supported by those who want rental income along with policymakers who want density and government housing supported .

Control of rental income and the individual that Carla has mentioned throughout this time has been the democratization of the individual , which includes primarily homeownership . It is family , intergenerational wealth along with autonomy , along with family formation .

So , joel , carla and Wendell , thank you for being part of the Feudal Future podcast and we look forward to having you back to talk about this in more depth in a later show . Thank you .