The High Price of Renting in Generic Terms

Most people in the world would like to live in Santa Barbara. That’s because it’s a nice place to live — the climate, the ambience. It’s also not wall-to-wall with people. Let’s conservatively assume that 2 billion souls want to live here; sounds like a “housing shortage.” Of course, not all 2 billion will be able to live here. There isn’t room. (Actually, there isn’t room in the Western Hemisphere for all the people who want to live in Santa Barbara.)

Thus, if you want to “ease” or “eliminate” the housing shortage in Santa Barbara, you will fail, no matter what you do. There will always be a housing shortage here, just as there will always be gravity.

This simple fact has consequences. Whenever human systems experience perceived scarcity, the scarce commodity is rationed in one or more of exactly three ways:

1) Prices rise, so that only those with the resources can afford the commodity (think scalper and popular concerts);

2) Admission is on a first-come, first-served basis, and a line forms (think slips in Santa Barbara Harbor, admission to certain medical and nursing schools);

3) Admission is limited to preferred groups (think older, hereditary union membership; workforce housing in Santa Barbara).

When all three are used simultaneously, as they are in Santa Barbara, a percentage of the available housing is taken off the commercial market to service the preferred groups (#3), who still often must form a line (#2). This drives up the costs (#1), and, in effect, is an invisible “tax” on Group 1 and a subsidy for groups 2 and 3. The “tax” is paid to former owners of homes, not to any government agency. It appears as the profit owners receive for homes they sell. The subsidy comes in the form of below-market rents, not cash payments.

Housing taken off the market permanently so that it can be subsidized for groups 2 and 3 is not truly “low cost housing” — it’s just low-rent housing. The costs are simply shifted to people other than the residents of that housing. Such cost-shifting is common in most cultures in which a genuine need — food, medical care, or other life-sustaining goods, services, and amenities — is distributed to those who need them; the larger society shares in the cost. In this case, however, the amenity is not the right to housing per se; it’s the right to housing in what is arguably one of the most desirable places to live in the world. There is a difference. It’s a bit like subsidizing someone to drive a Mercedes Benz and calling it low-cost transportation.

Whether you believe this is a good thing or a bad thing, it is disingenuous to pretend that the tax does not exist and that the costs are not shifted. This tax and cost shift, in effect, denies Santa Barbara residency to the group that is midway between #1 and the combination of 2 and 3. One result of removing this segment is the creation (or amplification) of a de facto “Rich versus the Rest of Us” set of facts on the ground. Note that this artificial polarization could satisfy the political objectives of one or more individuals or groups.

At the end of the day, to use the words “solve the housing shortage” is like talking about “solving the gravity problem.” It’s silly talk, and should serve to discredit the rest of what the speaker has to say.

Rents and housing prices in Santa Barbara will always be expensive and always have been. Adding more housing for groups 2 and 3 creates even more expensive housing, not less-expensive housing. Rents are artificially low because the costs are simply shifted. It’s an excellent strategy if the goal is to create a lot more very expensive housing, whose residents do not pay the full price for it, in a premium area not too far away from other very nice places like Ventura County and the Santa Ynez Valley.