Affordable Housing

Housing in the Valley has been a complexity that is difficult to comprehend and solve. The housing prices in the last two years have gone up to 50%. They have been high since the late seventies, and the wages have not been adequate to afford a resonable house. Since the early 80’s, when the housing price index in the valey was around 35, it has risen to close to 350 now, a 10x increase. Median price of a single family home in the valley today is around $1.4M today. Despite the low interest rate environment household income has to be over $250K to afford this median house. Unfortunately, the median income in the valley is around $145K today, thus creating the affordability gap.

Income, interest rates, supply and demand, all play in the affordability of homes. Interest rates, fortunately are quite low now, but have been moving up lately. Even then, the affortability index shows that only one third of people in the Valley can afford housing.

California has been short of housing supply consistently since the 70’s. Today, we are short of  about 3-4M more housing units. Many of the reasons are decades old including zoning regualtions, environmental restrictions and targets, high cost of land, construction costs and devloper fees, put a severe damper on the housing unit supplies. In the past, section 8 was introduced by the Federal govt to subsidize renters.  It is limited in its usefulness, and has multiple years of wait period. California recently passed SB 35 (affordable housing) that is supposed to help in construction of  more units in cities that do not meet their assessed housing unit needs. SB-9 is another law that allows lot splits of single family lots. However, afforable housing requirements may complicate it going forward.

Supply of the homes or rental units depends on the local zoning and regulations. As job growth puts pressure on housing, cities are very slow to react to the zoning changes. For example, since 2010, 800K jobs have been added in the bay area, and only around 60K new housing became available, thereby resulting in price and rental increases.

US Cities and the States need to revise their thinking in a way that solutions implemented are not short term band-aid fixes. Long term planned development of cities is completely missing from their thinking. The smart city planning models are where work, live, and play spaces are closer togther and meet most of the needs of the employment growth. Corporations need to be part of the smart city planning process.

In order to create better affordability and quality of life, I will work with the cities and corporations to incentivize large planned developments where living, enjoyment, education, and work are within walk able distances. Such planned developments will reduce traffic, provide safe education environment for kids, and can be very energy and carbon efficient. Cities must change their housing planning guidelines in favor of incentives for people to live, work, educate kids, and enjoy within walk able distances. Now with lessons of Covid-19, we realize that we need to build well-lit ventilated homes and work offices. Open outdoors, sunshine, and protected communities will become more important for the health and well being of the community.

Interest rates, Taxes, and Federal programs that ensure favorable mortgages is where the Congress can play a highly creative role to solve Silicon valley and nationwide housing problems for the long run.

Congress has immense power in terms of setting up of financial instruments via Fannie Mae and other financial institutions. We need to change the rules of mortgage purchases and guarantees. By working closely with mortgage-backed securities industry, risks can be adjusted such that smart city planned developments get favorable terms, therein modifying city level behaviors and regulations. I will propose innovations in the mortgage industry to help the high cost of home purchases as well as rentals.

In Addition, I will support the following:

• Eliminate the SALT deduction limit of $10K to help with the federal taxes.
• Reduce tax rate by 15% for the employees of a new start up for 5 years.
• Modification of Prop 13 to limit property taxes to 0.5% of the market value. The market value re-assessment to be limited to lower of 2% or half of CPI. The property tax does not change if ownership changes. Also, institute 1031 exchange type of federal regulation for home sale and new home purchase – home owners should not have to pay federal tax as long as they buy another house of same or higher value.