John Gerardi Guest Hosts - Why Is It So Expensive & Take So Long To Build in California?

Episode Transcript

Speaker 1 (00:00):
A topic that I'm sure some of you listening to.
Many of you listening I know are business owners, small
business owners, involved with construction, involved in engineering, all kinds
of trades and work like that. We're gonna break down
for you today. Why does it take so long? Why
is it so expensive to build here in the state

(00:22):
of California. This is not Trevor Carey, as you may
have surmises John Girardi filling in for Trevor Carey today.
Two three zero forty two forty two is the call
in number if you would like to call in and
talk with us. I'm the director over at Right to
Life of Central California RTLCC dot org. I also do

(00:46):
development for the Obria Medical Clinics of Central California Obria
three six five dot org, Obria three six five dot org.
And of course, the host of the John Girardi Show
Monday through Friday six to seven pm, although not today.
I think I'm bumped for Frozen State Baseball today, so
tune in to listen to Paul Leffler and the guys
for that. All right, But what I want to do

(01:08):
today is share with you all an excellent article that
I talked about a couple of days ago on John
Girardi Show. But you know not everyone who's listening to
the John Girardi Show at six is listening to the
Trip Carry Show at three. This fascinating piece about basically
why really is it so hard to build stuff in

(01:32):
the state of California. And this is a piece published
by cal Matters dot org. It's written by this guy
named Jason Ward, who's an economist and a public policy analyst,
and he goes into why exactly is it expensive to
build stuff in California? And one of the things he

(01:54):
does that I think makes a lot of sense. And
by the way, if i'd love any any and all
contributors two three zero forty two forty two five pot
nine two three zero forty two forty two, any of
you who know something about this topic, I love to
hear from you as I read through this.

Speaker 2 (02:12):
The way that he.

Speaker 1 (02:13):
Does it, and this is a piece from Calmatters dot org,
I've got to retweet it from my Twitter account Twitter
dot com slash Fresno Johnny at Fresno Johnny. The way
he does it is by dividing construction costs between how
he phrases them, hard costs versus soft costs, and this
drives up costs of construction, This drives up costs of rents,

(02:36):
this drives up costs of home prices, and it makes
the cost of living in California in general higher. But
he divides it into hard costs versus soft costs.

Speaker 2 (02:44):
Okay, So.

Speaker 1 (02:46):
Hard costs are things you can't change, things that even
if the state legislature waived a magic wand and passed
a law or something, it might not be something that
can change. Property in California are more expensive because the
land is more expensive. All things being equal, people would

(03:07):
rather live in Malibu than in you somewhere on the
plains in Oklahoma. With all due respect to any Oklahomans
who may be listening, Sorry, Malibu is a little bit
more of a desirable locale. So the dirt is more expensive,
the land is more expensive. Okay, that's a hard cost
that makes housing in California more expensive. On the whole,

(03:29):
it's more desirable to live in the Bay Area, more
desirable to live in La more desirable to live in
San Diego, more desirable to live in Monterey. Understood, other
hard costs that you can't really change. In California are
things like making a building earthquake proof. All right, you
live near the San Andreas Fault, there's going to be

(03:52):
some additional construction costs that your building needs to withstand
an earthquake. That again, with all due respect to any
of our ok listeners, Uh, just not the case in Tulsa.
Not a lot of earthquakes out in Tulsa. You have tornadoes,
you don't have earthquakes. So those are certain things that

(04:15):
you can't really change about costs in California. But soft costs,
environmental reviews, government regulation requirements about certain kinds of ways,
and labor has to be utilized, et cetera. That is

(04:36):
where the big difference happens. Okay, So here's this piece
from Jason Ward in cal Matters. He writes, I recently
let a study that compared total apartment development costs in
California to those in Colorado and Texas. The average apartment
in Texas costs roughly one hundred and fifty thousand dollars
to produce. In California, building the same apartment costs four

(05:01):
one hundred thirty thousand dollars two point eight times more.
Colorado occupies a middle ground with an average cost of
about two hundred and forty thousand dollars per unit for
publicly subsidized affordable housing units. And okay, and that's when

(05:23):
we say affordable housing, that's kind of a term of art.
It's a specific kind of category of housing. California, affordable
housing is a certain kind of category of apartments and
housing that you can construct that receives state subsidization. California
has spent billions on publicly subsidized affordable housing units. For those,

(05:50):
the gap is even bigger. The cost is over four
times as much between California and Colorado or Texas. Now
he talks about again the hard versus soft cost differences.
Hard costs in California are two point two times as
much as in Texas. Soft costs though, soft costs financing

(06:15):
architectural and engineering fees, development fees charged by development fees
charged by local governments are three point eight times the
Texas average. Construction wage differences. This is another higher costs
of living. You need to pay construction more. There's a

(06:36):
lot more stuff with labor unions being involved, especially with
affordable housing. Stuff trying to leverage sort of union wage
for construction that makes costs more. Construction wage differences explain
six to ten percent of hard cost differences for market
rate apartments. However, for publicly subsidized apartment projects, which are

(06:58):
often mandated to play to pay union level wages, labor
expenses explain as much as twenty to thirty five percent
of the total difference in costs between California and Texas
California property developer. Now it goes more into soft costs.
California property developers pay remarkably high fees for architectural and

(07:20):
engineering services, triple the average cost in Texas. It's five
times as much or more. If you're building publicly funded
affordable apartments. In Los Angeles and San Francisco areas, development
fees to local governments make up the largest soft cost
difference in California. Such fees, which were the subject of
a twenty twenty four US Supreme Court case, average around

(07:43):
thirty thousand dollars per unit. In Texas, the average is
eight hundred dollars Colorado, it's about twelve thousand dollars. In
San Diego, for example, These fees on average eat up
fourteen percent of total development costs per ap apartment, but
it then goes into the single biggest thing that drives

(08:04):
up costs in California. The biggest thing that drives up
cost in California is time time. A privately financed apartment
building that takes just over two years to produce from
start to finish in Texas would take over four years
in California. It takes twice as long to gain project approvals,

(08:28):
and the construction timeline is one point five times longer.
So you understand what that means. Any of you who
own a business, rent a visiness. Okay, you invest, you
buy a plot of land. You're going to develop it,
so presumably you pay some kind of like a mortgage,

(08:49):
you pay down payment financing the rest of it. If
you want to build a big old apartment complex, instead
of waiting too years before that plot of dirt starts
generating some revenue.

Speaker 2 (09:03):
For you, you got to wait four years.

Speaker 1 (09:08):
Instead of paying construction workers for two years of work,
you're paying them four years of work. Instead of the
cost of maintaining and keeping construction equipment, bulldozers, back homes,
et cetera. For two years, you got to pay for
them for four years. Time time is amss No, it

(09:33):
is not it's not on your side. When it comes
to construction. Time is bad, time is money. Land costs
must be carried longer, equipment and labor are on job sites, longer,
loans must be taken out for a longer term, and
so on. Most of the differences most of the differences
that this guy Jason Ward again economist researcher his study

(09:54):
comparing California, Texas, and Colorado. Most of the differences that
the study uncovered stem from policy choices made by state
and local governments. Many are legacies of the so called
slow growth movement in California, which has shaped housing production
since the nineteen eighties. Those efforts worked. Population growth in

(10:17):
the state went negative for a few years after twenty twenty,
due primarily to the high cost of housing. Even more recently,
California's growth was half the numbers seen in Texas and Florida,
with younger and higher earners disproportionately leaving the state. These
departures have dire implications for the state's fiscal future and
political influence Nationally. California lost a congressional seat for the

(10:39):
first time in history after the twenty twenty census. If
current national population trends hold, it could lose four or
five seats in twenty thirty. Now there finally begin beginning
to have some Democrats finally coming around to thinking about

(11:01):
maybe doing some stuff to fix this. Buffy Wicks, who's
sort of a rising star among California Democrats, who's an
Assembly member from Oakland. She has actually introduced a bill
to reform SEQUA, the California Environmental Quality Act basically not
mandate some of the sequel requirements for urban infill housing development. So,

(11:29):
got an empty plot of land within an existing urban area,
you can build an apartment complex on and not have
all the burdens that requires requirements of SEQUE And basically
this is what's gonna happen. Democrats all know what the
problems are. They understand all these problems that this guy

(11:52):
laid out. None of this is exactly, you know, rocket
science or a shocking development to people. Not every Democrat
in the state legislature is a moron. Probably most of
them are not morons. They probably fully understand these problems.
It's just that the solutions to fixing them are politically
unpalatable to them. It would make labor unions mad if

(12:16):
they relax some of the use about union prevailing wage
having to be paid for lower income housing units or
blah blah blah blah blah. It would make environmentalists mad
if they really just pitched out the California Environmental Quality Act,
and it's ridiculous in requirements. And basically Democrats in the legislature,

(12:38):
they're not really afraid of the environmental groups. They are
afraid of the billionaire donors who give to the environmental groups,
and they don't want to tick them off. They all
know the problems and the state is in such bad
shape right now that here's what's going to happen. Some

(13:02):
Democrats are finally going to get rid of their stupidest
policies and they will then proceed to tear their rotator cuffs,
patting themselves on the back for doing the most obvious
fix that Republicans have been screaming at them to do
for twenty years but have never had the votes to
ever actually affect.

Speaker 3 (13:22):
This is the Trevor Cherry Show on The Valley's Power.

Speaker 1 (13:26):
Talk why is it so expensive to build in California?
And we talked about how basically there are certain hard
costs that California has that less nice weather places may
not have. Again, the dirt in Malibu is worth a
little more than the dirt in Tulsa, Oklahoma. However, the

(13:47):
soft costs differences, environmental reviews, California state regulations, state regulations
that have nothing to do necessarily with safety or habitability
of homes, particularly lower income housing. All of that stuff
is out of control higher in California and is the
result of public policy choices, public policy choices driven by

(14:09):
I believe two groups, labor unions and environmental groups. Labor
unions negotiating against the government with whom they have no
competing interests, and environmental groups who have billionaire Democrat donors
behind them. And one of these things that helps make

(14:32):
housing more expensive is SEQUA, the California Environmental Quality Act.
And I love talking about SEQUA because it's such an
insane It's such an insane thing, and insane from like
kind of a legal standpoint, insane from just the impact
it has, Insane from how obviously stupid, bad, harmful, problematic

(14:54):
it is. And everyone knows it's stupid and bad and
problematic and harmful and hurts the economy and doesn't necessarily
do all that much even help the environment, and liberals
don't want to touch it because they don't ever want
to be perceived as doing something that could possibly open
them to an accusation from an environmental group of harming

(15:17):
the environment.

Speaker 2 (15:18):
So what does it do?

Speaker 1 (15:19):
All?

Speaker 3 (15:19):
Right?

Speaker 1 (15:22):
Most of the time, if you want to sue somebody,
you have to show standing. And we have these sort
of basic normal rules governing standing, meaning your ability to
sue someone, your right to be in the courtroom suing somebody.
The rules for standing are pretty standard across America and
California law. You need to be able to show some

(15:46):
kind of cognizable harm, some sort of cause of action
that you have. So the best example of this if
a producer Ryan is behind the board there. If so
someone crashed a car into his house, I couldn't sue
the guy who crashed the car by suit him. The

(16:10):
judges said, well, what the heck are you doing here
and say, well, I'm upset for my friend. No, that
doesn't cut it. Producer Ryan has to sue his house
was the one that got crashed into. He is the
one who has suffered some kind of cognizable harm. Now,
when you're talking about environmental harms, usually the environmental harm

(16:32):
caused by a single housing development, for example, is so dispersed,
so difficult to segregate out from the environmental impact of
all the other businesses and other stuff that could be
happening in the environment of a given area, a given region,

(16:54):
that it's very hard for someone to file a law
lawsuit to actually demonstrate that that particular development is harming me.
A woman files the loss that says my child has
asthma because a factory opened up, you know, two blocks

(17:18):
away from our house. Well, how is the court ever
supposed to assess whether that's actually the case. I mean,
there's a lot of things in the environment that could
contribute to your kid having asthma. Maybe it's just bad
look of the genetic draw you know. Maybe it's because
of all the car pollution in the area. Maybe it's
because we had horrible forest fires in California when the

(17:40):
kid was four years old and he was outside too much.
You know, like, it's basically impossible or it's very very
difficult anyway, and most of the time to demonstrate that
the environmental harm gives some individual person a private cause
of action. That's why, for the most part, environmental harms

(18:02):
just get regulated by the government. It's just the government,
the state government, the federal government just saying, hey, you
have these kinds of emission standards, you can't exceed them.
We're not going to vindicate this through private people filing
private lawsuits that it doesn't make sense. It's just not
gonna work. So we're gonna try to still protect people's health.
We're still gonna try to protect the environment whatever. You know,

(18:24):
who will stand up for the fishies and the birds
in the trees. Basically, a more sensible way to do
it is, well, this will be the subject of state
government regulation. But no, California doesn't want to do it sensibly.
California says, actually, what we're gonna do is we're just
gonna take our normal American rules about standing who has

(18:46):
the right to sue, and in the context of environmental harms.

Speaker 2 (18:50):
We're just gonna throw those out.

Speaker 1 (18:53):
And we'll just create via this law a private cause
of action for anybody any one can sue for the
alleged environmental harms. And the way you do it is
by saying that the environmental impact report that a business,

(19:14):
a real estate developer, whoever, must do in order to
get the state approval to build that. By the way,
that's another one of the things that makes the timeline
for construction so long. One of the main contributors to
cost of construction in California is time.

Speaker 2 (19:30):
It just takes so much longer.

Speaker 1 (19:31):
The environmental impact reviews, the reviews, all that stuff takes
a lot more time in California than it does in say, Texas.
So basically, what you can do with SEQUA is you
can file a lawsuit against some developer and say, oh,
his environmental impact review was insufficient, it didn't satisfy this, this, this, this,

(19:57):
and this requirement. And then with one lawsuit from one
yahoo left wing nonprofit, your ten million dollar apartment complex
investment gets ground to a screeching halt. You can't move,
you can't keep building because you've got this lawsuit that

(20:19):
needs to be reconciled over the environmental impact of what
you're doing.

Speaker 2 (20:24):
That's a cost. That risk.

Speaker 1 (20:28):
Is a cost that adds thousands and thousands of dollars
to the average cost of a home.

Speaker 3 (20:35):
This is the Trevor Carry Show on The Valley's Power Talk.

Speaker 2 (20:40):
John Girardi in for Trevor Carry.

Speaker 1 (20:42):
I am the director at Right to Life of Central
California RTLCC dot org. Also the host of Right to
Life Radio every Saturday morning right here on this very
fine radio station. You can also find that show and
my usual Money Friday Show, the John Girardi Show wherever
you find fine podcast, including the iHeart App. So check

(21:07):
all those out. I want to I want to keep
going with this. Why does it take so long? Why
is it so expensive to build stuff in California? I
want to talk about SEQUA a little more so as
I was explaining the last segment, the California Environmental Quality
Act SEQUA another by the way, real turd legacy of

(21:28):
Governor Ronald Reagan. Governor Ronald Reagan was a lot more
liberal than you realize. There's a lot of like old
there's a lot of like old holdover stuff from both
the Reagan and Nixon governor administrations. That's not so hot.

(21:48):
Wait was Nixon ever governor? I'm trying to think. I
think he signed like the California No no, no, no,
no no. Nixon signed the Federal Endangered Species Act, That's
what it was. But he was not governed or California.
Reagan sign the California Environmental Quality Act. Now, as I
say the California Environmental Quality Act. What it does is,

(22:10):
instead of just saying, okay, let have the government regulate
admissions emissions standards for the adverse environmental impact of new
construction or whatever, we say both that the government will
regulate it, regulate it through the ridiculous cap and trade
system or whatever, and also let private individuals help regulate

(22:33):
it by filing private individual lawsuits where any random Yahoo
can just jump in and say for some development, some
new business, whatever, that the environmental impact study was insufficient
and bring the whole thing to a screeching halt. So

(22:55):
I want to talk about the most insane example of
this ever heard in the fine San Joaquin Valley town
of Pixley, California. Now raise your hand. If not, maybe not,
if you're driving, keep your hands on the wheel, Raise
your hand. If you have ever been to Pixley, California.

(23:19):
I've been there. I don't know that I've stopped there.
I've certainly driven through it. Pixley is not what you
would call a booming metropolis. It's a tiny little stop
on the ninety nine, sort of in between to Larry
and Bakersfield. It is basically just a pit stop on

(23:43):
the ninety nine. With all due respect to the fine
people of Pixley, I'm sure your town is wonderful, a
lovely place to live. I'm sure you have well deserved
civic pride. But the reality is, I don't know that
there's a single place in the entire town of Pixley
that's more than two thousand feet away from the ninety nine. Okay,

(24:04):
this is not a big town, and it's all basically
just straddling the ninety nine. Ninety nine goes right through it.
There was a plan to build a zero emissions, green
energy producing hydrogen power plant in Pixley. Okay, sounds good.

(24:29):
The avenusom's got a lot of high hopes set on
nitrogen power. You know, he's got this whole idea that
one hundred percent of California's energy is going to be
produced from green sources by you know, a certain time
in the future, and he has to accomplish that somehow
without doing more hydro power, because hydro power is bad.

(24:53):
Unless I'm not sure if you guys are aware of this,
hydro power, which is the only way of producing life
and lots of energy in a green way. Hydro power
is bad because it hurts the fishies. So we can't
do hydro power. We can't do you know, we can't
put dams into rivers that'll that'll harm the fishies. So
we got a wind and solar our way into this

(25:16):
and hydrogen power is away that maybe we can produce
some energy. All right, scaven Newsom wants this. Let's put
it in Pixley. Okay, sounds good in between Fresno and
Bakersfield and vice slia. Maybe it can help pump energy
to all those places.

Speaker 2 (25:35):
Uh, you know, get some.

Speaker 1 (25:38):
Jobs for the good people of Pixley. Again, not trying
to cast dispersions on the fine folks. Pixley doesn't seem
like a town where that would say no to a
new big business getting set up there. Seems like a
good it seems like a good idea.

Speaker 3 (25:57):
Well.

Speaker 1 (25:57):
Last December, a left wing nonprofit group from Fresno, funded
with I Think LA money, the Leadership Council for Justice
and Accountability. They file a sequel lawsuit against this power
plant because of the environmental harm it will bring to

(26:20):
the citizens of Pixley.

Speaker 2 (26:22):
And so this is one of the things they do.

Speaker 1 (26:24):
They gather together a couple of citizens from Pixley and say, oh,
the people of Pixley don't want this. They don't want
the environmental harm that this green energy producing zero emissions
power plant is going to produce. Why by the way,
so they find like maybe like five people from Pixley
to say, hey, would you sign your name on this?

Speaker 2 (26:45):
Uh? Okay, they sign their name.

Speaker 1 (26:48):
And now all of a sudden, oh, the citizenry of
pixel we are standing for the United citizens of Pixley
who don't want horrible environmental damage. But you're like, wait
a minute, but this is a zero emissions, green energy
power plant. That's the point of this is to produce
energy with zero missions. What are we what are we
even talking about the problem being, if you have a

(27:13):
nitrogen power plant, trucks need to go to the power
plant to deliver the liquid raw nitrogen for it to
be converted into power. So there's gonna be more truck
traffic and that's going to cause environmental harms for the

(27:35):
people of Pixley. Pixley is nothing but truck traffic. Do
you know how many trucks drive through Pixley every hour?
It's one hundred billion. Like I said, you go to

(27:56):
Google Maps. I actually did this on Twitter. Tweeted out
a map of Pixley from my Google Maps, and I
included like the little graphics showing like this much area
is two thousand feet. There's not one bit of dirt
in Pixley that's more than about a half mile away

(28:16):
from the ninety nine. The whole thing is just straddling
the ninety nine. That's all Pixley is. Truck traffic in
Pixley is gonna cause pollution. Are you nuts? The whole
thing is trucks. It's just trucks, trucks, truck shruck, struck,
shock struck, struck, struck trucks. Most of the people who
stop in Pixley are probably just truckers going to the bathroom,

(28:41):
but like four or five trucks a day just stopping
there to drop off or however many it is, I
don't know, dropping off some nitrogen. Oh man, that's gonna
make or break the whole environmental set up in Pixley.
You know, the environment was just wonderful in percent and
Pixley before. But this uugh, cats and dogs living together unacceptable.

Speaker 2 (29:09):
And you've got the Fresno b just praising this to
the skies.

Speaker 1 (29:13):
You got Tad Weber's the opinion page editor for the
President b this glowing thing of Oh, the good citizens
of Pixley standing up to pollution.

Speaker 2 (29:21):
Standing up to pollution.

Speaker 1 (29:22):
It's a zero emissions power plant if we can't put
it in Pixley, which is as close to the I
don't know if Pixley is the middle.

Speaker 2 (29:29):
Of nowhere, but you can see it from there.

Speaker 1 (29:31):
If you can't put a zero missions power plan in Pixley,
where in God's name are you supposed to put it?

Speaker 2 (29:41):
Because of truck traffic? It's nothing but trucks.

Speaker 1 (29:46):
There are one hundred thousand trucks that drive through Pixley
every stinking day. You're telling me four of them stopping
is gonna just wreck the whole thing. That is what
SEQUA is. That is what SEQUA does. That is why
we can't build anything in this state. And this is

(30:10):
just some stupid left wing nonprofit trying to make a
name for itself, trying to justify itself to its donors.

Speaker 2 (30:18):
That's all this is.

Speaker 1 (30:22):
I mean, if you can't build a nitrogen power plant
in Pixley because of trucks traffic, you can't build it anywhere,
then then forget nitrogen power I guess, I mean, what
are you supposed to do. It just boggles the mind
that we would allow SEQUA to be utilized to stop

(30:49):
development of a green energy resource, Like it's completely insane.
So that is maybe the most absurd example. I mean,
you've also seen SEQUA be used to basically stop like
almost all construction projects in the city of Fresno, because

(31:11):
the City of Fresno, trying to help spur new business,
did like a whole city wide environmental impact review. So
what sequel requires is that you have to do an
environmental impact review before you start some new projects. Those
really long, they're really expensive, they're really difficult to do.
Fresno trying to attract new business, said, okay, we'll do
a citywide environmental impact review. We know that this area

(31:32):
is going to be zoned for this, and that area
is going to be zoned for that. So even if
we don't know the specific business, we can do a
lot of the work in advance, get this place ready,
so that if you want to start a business here
in Fresno, we've done a lot of work for you.
You just piggyback on our environmental impact report and away
you go. Some left wing nonprofits sues. They eventually they
attacked the City of Fresno's environmental impact review. Now the

(31:53):
whole environmental impact review for the City of Fresno on
which all these businesses had depended is in suspense. That's
the kind of crap that SEQUA does.

Speaker 3 (32:06):
This is the Trevor carry Show on the Valley's Power Talk.

Speaker 1 (32:12):
Having started a nonprofit and seen sort of firsthand in
a limited, narrow capacity, much less than probably many of you,
I got to see kind of firsthand the ways in
which California state regulation makes it expensive to build stuff.
Just in my limited window, I was trying to start
our Obria Clinic, which is our nonprofit pro life obgyan

(32:36):
clinic that's helping out a lot of lower income women.
We've been opened for about three years now, wonderful work.
But when we were starting, one of the things I
was encountering was and we were able to get around
it with some basically opening as a satellite clinic of
another clinic. Basically, anyway to start a nonprofit medical clinic

(32:58):
in California to be within and that sort of slot,
that designation slot within California state medical regulation. The kind
of building you have to build for a nonprofit clinic
rather than a for profit clinic has to be extremely elaborate.
You have to build according to this specific building code,

(33:20):
which is called ash Pod three. And it's incredibly expensive.
It's incredibly onerous, and it doesn't actually seem rationally related
to anything having to do with patient health.

Speaker 2 (33:35):
Oh, you're you know, for a like our clinic.

Speaker 1 (33:40):
It's just like an obgyn clinic, like a private practice
obgyn clinic that has normal medical office space. There's plenty
of them around town. No for us, though, because we're
a nonprofit, we have to be built this particular way. Oh,
your hallways are four and a half feet white feet wide.
No good, it's got to be five feet wide. You
have a normal age fact system? Nope, no good. It

(34:02):
has to be this particular kind of HVAC system that
circulates air, you know, x many times per hour? This, this, this, this, this,
And it's really expensive. So I asked Kui bono, who benefits.
It doesn't seem to benefit patience at all. It's not
making this safer. Who actually benefits? And at the end

(34:24):
of the day, the only thing I could get, the
only straight answer I could get, even from Ashabad people,
was well, the labor unions, they negotiated it. And when
you have more elaborate stuff to build, it gives them
more work to do and they get paid.

Speaker 3 (34:38):
This assist that Trevor carry show Mondo Valley's Power Talk