California shows how environmental mandates in building codes make housing unaffordable

Recently, I spoke to a local city council about the obstacles to the construction of affordable housing which state and local governments erect in terms of in terms of taxes, fees, and regulations. My remarks were largely based on an op ed I wrote for the Pioneer Press titled ‘Affordable housing is rare because it’s illegal to build‘.

One of the attendees made three points in defense of Minnesota’s high burden of taxes, fees, and regulations on housing. The third of these was that such regulations were necessary to fight global warming. California offers a stark illustration of how that might work and the costs involved.

Oliver McPherson-Smith writes for Real Clear Energy about the state’s new mandate for residential solar panels. While it “represents a step towards diversification, the regulations shift the financial burden onto the state’s poorest residents.”

Beginning January 1st 2020, all new homes in California under four stories will require rooftop PV (photovoltaic) solar panels to off-set their anticipated energy use. According to the state’s Energy Commission, the solar panels are expected to add approximately $9,500 to the cost of construction…

The problem with the new solar mandate is that it imposes a sizeable cost on an already unaffordable property market. The median property price in California is now just shy of $600,000, almost double the national median. Priced out of owning their own home, almost 50% of Californians rent their housing. Moreover, the state has the largest homeless population in the country–the vast majority of which do not have access to any type of temporary housing.

The solar panel mandate adds yet another cost to building more housing for both buyers and renters in California. While a $9,500 increase won’t dampen the dreams of the state’s millionaires, it will price-out the poorest in the state who are struggling to make ends meet. According to calculations by the National Association of Home Builders, each marginal $1,000 price increase cuts almost 10,000 Californians out of the homebuying market. The mandate will bar almost 100,000 Californians from buying a home and will put financial pressure on countless renters.

In April 2017, the Pioneer Press quoted Michael Noble, executive director of Fresh Energy, an energy conservation nonprofit, as saying

The reason we have codes is to protect buildings, protect public health and not unduly waste energy

Policymakers all too often like to tell us we can have all this with no cost. As an economist, it is my sad duty to tell you that there is always a cost. As Californians are finding out, the cost of extensive environmental regulations in building codes is unaffordable housing. Will Minnesotans be willing to pay that cost?

John Phelan is an economist at the Center of the American Experiment.