The rent is too high; Sneddon knows how to fix it. Friedman does not.
Eric Friedman claims that by making permitting easier and faster, developers will build more and thus reduce rents; he’s wrong. Zoning and permitting are not the problem. Ignoring Econ 101 and basic financial theory is the problem.
Housing is a necessity. It is also an asset whose yield is the rent. A building is worth the rent it brings in, divided by the yield that investors demand: the cap rate.
Buyers will only absorb so many new units at the going yield. Past that threshold, price falls on developers’ inventory, so they slow development and eventually stop. The private real estate market is structurally incapable of a permanent increase in supply; the cap rate is a binding constraint. Austin proves the financial theory.
In land- and resource-constrained Santa Barbara County, demand will always far exceed the supply of market-rate and public housing. No real estate developer can pay for the land, the construction, and the interest on the loans, and still sell housing units here at prices normal families can afford.
So the decisions are political. At what population and traffic density is the area at capacity? Is housing the majority can afford something the local population wants?
Public ownership and construction is the only solution to permanently affordable housing for the majority of households. Bonds of well-run municipalities are close to Treasury credit quality; in 2024 S&P rated Santa Barbara County AAA. That opens the way to county and city ownership of a significant share of local housing, and a stable rent-to-income ratio.
Kristen Sneddon and Eric Friedman are good people doing their best. But only Kristen has shown an interest in learning how the economy and the financial system works.
