The Rabbit Hole Of Regulation

Alice In Govt Land064As anyone who reads this blog on a regular basis knows, I have long been a critic of the regulatory atmosphere in California. I’ve spent many an hour sitting through public meetings where the subject has been debated, and then shoved down the rabbit hole of lost causes. I’ve brought up the subject with policy movers and shakers like Steve Frisch of the Sierra Business Council and former Democratic congressional candidate Heidi Hall, who told me that no one she talked to on the campaign trail ever complained about over-regulation.

Yeah, well I guess we talk to different audiences, because I get an ear full from people on both sides of the political spectrum. (And I can hear it now: “It’s just a bunch of elderly Jefferson whiners!” No, it isn’t.) I get it from people who have voted Democratic all their lives. I get it from the people who skirt the rules, knowing that they’ll pay for it if and when they decide to sell their home. And for sure, I hear it from conservatives, like the frail little 80 year-old woman I gave my seat to at the recent State O’ Jeff hearing at the Rood Center. She told me how she worked for years cleaning houses to buy her own place in the sun, and how she fears that her children will be denied the same opportunity.

And before you write me off as another libertarian ideologue who doesn’t want to pay taxes, let me say that we do have rules and regulations for a reason. No one wants to live in sub-standard housing, and energy efficient homes are a must, but the vast majority of homes have managed to safely stand for a hundred years without a $20,000 sprinkler system. It may make sense for apartment buildings, but there are other, cheaper ways to protect your life and property. And that’s just the tip of the iceberg. Between the state and counties, permit and inspection fees have finally reached parity with construction costs in many cases, and you’re really screwed if they find an endangered microbe on your land.  Is it any wonder why California can’t build affordable housing for the working class or even simple dwellings for the homeless?

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12 Responses to The Rabbit Hole Of Regulation

  1. rlcrabb says:

    Here’s another brick in the wall from former Union editorial board member George Horrigan. I’m sure he’ll be written off as another crackpot secessionist, but I found him to be thoughtful, even-handed, and hardly an ideologue. (Behind paywall) http://www.theunion.com/opinion/16325569-113/george-horrigan-its-time-for-a-change

  2. steve frisch says:

    First let me say there are many regulatory reforms I not only support but advocate for on a regular basis, including: sun setting regulations to require re-authorization on a periodic basis, benchmarking regulations to measure effectiveness, streamlining regulation for home and commercial construction to create ‘one-stop’ services, capping the cost of permitting for certain types of construction, and sliding scale regulatory fees to match levels of service and time required by local government. Many California local governments have some of these reforms in place already and we could institute them here if we could support innovation in government.

    However, I think that many of the examples you cite have real problems.

    First, there are two states that require residential sprinklers, California and Maryland, and, according to the National Fire Protection Association home fire sprinkler cost assessment conducted in 2013, the median cost of sprinkler installation in new residential construction is $5,000 per unit, not the $20,000 you cite. Sprinklers are only required in new residential construction, but considering the fact that we live in a forest, fire is becoming increasingly problematic, and that homes with fire sprinklers save more than the cost of installation in fire insurance costs, it seems like a wise investment to me.

    You have taken issue with California energy efficiency standards, yet every study done of Title 24 energy efficiency requirements show that they save money for homeowners not just in the long run but also on a monthly basis. On average the cost of implementing the Title 24 energy standards adds $2,300 to the cost of building a new residential unit in California, but saves more than $6,300 in energy costs over the 30-year life of a mortgage (with interest calculations included). In other words, since almost every new home purchase uses a mortgage, it adds $11 to the monthly cost of a mortgage but saves homeowners $26 a month in electricity and heating costs. They start saving immediately.

    You have taken issue with having to install low flow toilets during residential remodels. 27% of the water used in a residential unit is used in toilets, with the average California home with old models (5gpf) using more than 13,000 gallons per year to flush their toilets. A low flow toilet (1.28 gpf) can reduce the usage to 2,500 gallons per year. In almost every jurisdiction in California one can get a low flow toilet for free if they are switching out, so the cost is really installation, which costs about $200. In many jurisdictions if you install at the right time of the year, or if you are below 80% of median income any time of the year, you can get the installation done for free.

    The author of the column you linked to cites the difference between the average cost of electricity in California compared to the national average, and claimed Cap and Trade was the reason. What they did not explain was that since the 1950’s the cost of electricity in California has historically been higher than the national average; that no revenues raised from utilities for buying Cap and Trade allowances is allowed by law to be used for anything but rebating customers for the costs, which you are seeing on your utility bills now; and that when we began investing in energy efficiency through surcharges in the late 1970’s Californians used just as much electricity per capita as the average American, but today we use 50% of the electricity used by the average American. Due to energy efficiency standards we pay more but use less, which has added up to a net $66 billion in electricity cost savings in the last 20 years.

    Finally, I survey businesses in the Sierra Nevada, and the issue of the cost of regulation is NEVER in the top concerns of businesses surveyed. Top concerns are the need for basic business skills building (most businesses have no business plan), labor skill availability, access to markets, access to high-speed communications, global competition, and access to capital. When regulation does come up the vast majority of the time the issue is not cost, it is fairness (other people getting preferential treatment) a zoning designation issue (requests for rezones) or the time it takes to get a permit. The vast majority of business needs and decisions never even see a CEQA document or process, they are permitting and zoning administrator issues. What a businessperson in our region says is, “Sure I don’t want to pay, but no one wants to pay; I want to know I can just pay and go do business.” So, as I said, the most important thing we could do to help business and reduce the regulatory burden is create speed and certainty. That is an implementation problem not a regulatory problem.

    My critique of your past stated positions is primarily that, with all due respect for your talent as an artist, they are entirely too anecdotal; they depend on something you heard at the store instead of being based on real data. You heard somewhere that a new residential sprinkler system adds $20,000 to the cost of a home (it would if it was a 15,000 sq. ft., home) and you believe it and repeat it. I just can’t let that go because it does nothing but perpetuate a myth. I think we should use our ire on the things that are real and really matter not phantoms.

  3. rlcrabb says:

    First of all, I guess you missed the line in my critique that said “energy efficient homes are a must.” I have no problem with the standards for new homes or retro-fitting older homes, if that works financially for the residents. My complaint with the toilet issues has more to do with having to replace the special senior-friendly toilets I installed for my elderly parents when a fifteen cent brick will accomplish the same result. With the sprinkler question, maybe $20K is over what most homeowners would be forced to pay, but what the heck? Five thousand here, four hundred there, pretty soon we’re talking about real money. That’s the “anecdotal” complaint I hear most of all. Sorry I don’t have the cold hard numbers to go along with actual experiences.

  4. Steve Frisch says:

    I did not miss the “energy efficient homes are a must” statement Bob, I was referencing past comments.

  5. Chris Peterson says:

    Steve,
    Just a few points:
    The 49er fire, back a few years ago that destroyed hundreds of homes, was started by a vagrant buring toilet paper down in the Yuba gorge. I doubt sprinklers in your home would have prevented that, as I equally doubt it would have helped any of the homeowners who lost their abode.
    On your cost efficiency analysis of energy saving Title 24; using less energy is always a plus, but I don’t think you’d have too many people lining up for the program if you guaranteed them a profit of only $4K in 30 years after an initial buy-in of $2300. Not a very sound investment.
    Also, Bob’s right; a brick in the tank does every bit as good as a “new-technology” crapper. It just doesn’t make the manufacturer or county/state coffers any money.

    It is revealing to see that your surveys of local businesses has “not knowing what we’re doing” as their main concern. I only wish that the corporations on the national stage, in the fight against regulation, were so for-coming. That is, after all, the cause of the 2008 crash. Then again; large corporations came out of that kerfuffle smelling like roses, while the rest of us still struggle with paying for rescuing them while we piece our own lives back together.

    And lastly, with all the due respect you gave Bob for having an ear to the people of the community, I would suggest that you, yourself, are to a great degree as insulated from the outside as you say he is from the inside view. Fact is, from the builder to the owner, you won’t find many people who don’t think that building a home has become a logistical nightmare, and the more federal and state monies are drying up from their usual path back to communities; the more the “brain trust” of local bean counters try to justify the increase in local taxes and fees.

    In short; you should get out more often, and try changing the company you keep from the “insiders” such as yourself, to the everyday folk. Could be an eye opener.

    • Steve Frisch says:

      Chris,

      You might note that I am not arguing my case based on the efficacy of sprinklers in homes, I am making the case that the cost cited was inaccurate.

      I am also not making the case that a $2300 investment yields a $4K return in 30 years, I am making the case that for an $11 per month investment immediately reduces the cost of operating the home by $26 per month.

      I also never said “not knowing what we are doing”, thus it should not be in quotation marks.

      Nor am I arguing the case for big business making out like bandits in the crash, and bringing it up is irrelevant to the case I made. Anyone who reads my comments or knows me knows that I would be with you on that one. But many very good economists would argue that a good part of the cause of the crash was not too much regulation it was lax regulation.

      Finally, I love that twist of describing me as an “insider”; I merely support my case with actual cited facts that can be checked. If that makes me sound like an “insider” so be it. I never claimed to be an “insider”, and I suspect that I rub elbow with and hear from as many “everyday folks” as you or Bob do, so my observation is just as relevant….except for one thing, my observations are backed up by data.

      • Chris Peterson says:

        Steve,
        My mistake; when I read the part of the post about living in a forest, and fire becoming increasingly problematic, I assumed you had ventured into efficacy, vs efficiency.

        I think what we’re missing is the big picture: in an economy where the bottom 90% struggle to make ends meet on wages that have remained stagnant for over thirty years, and the majority are still teetering on the edge of solvency due to a Wall Street-induced collapse, everything from appliances to autos have come down in price, up in efficiency, and have all the latest safety features to boot. Not so with housing.
        Homes are incredibly more efficient today, and much safer, but there is no domicile equivalent of the PriusC, and the majority of folks, who are above destitute, but below what was middle class, are finding no opportunities for investment. The hand-me-down homes of the past generations are all but gone, and contractors continue to build new homes for the BMW owners, leaving the “‘tweeners” out of the loop.
        Now, is all this the fault of your local and state building codes? Absolutely not. But to continue to add costs to an essential product, without making any effort to ensure that the people can afford them is, I would argue, creating the economic conditions of a Mumbai slum society.
        (And yes, I understand that the underlying cause is that nearly 100% of all newly-generated income goes to the top 1%, unlike historical recoveries where upwards of 80% went to labor. A fact that is, unquestionably, out of your control.)

        Build a better mouse trap, and the world will beat a path to your door; unless it costs way more than they can afford.

        • Steve Frisch says:

          Some very good points in there Chris. I do support regulatory reform to reduce the cost of housing. I agree that it is a huge problem in California; adjustment for housing cost is the thing that takes us from a mid-range state poverty level to number one. There are all kinds of ways we could incentivize more affordable housing, but the problem is we always shy from the ways that really work because we are enthralled by the idea that the market will provide.

          The market will not provide.

          We need local inclusionary zoning ordinances; we need to put teeth in the regional housing needs allocation process to require a mix of housing rather than just providing zoning for it; we need to re-create tax increment financing mechanisms in our rural communities to replace redevelopment funding (enhanced infrastructure finance districts).

          But the big issue is the one you identified; our society is allowing a concentration of wealth in the top 1%-5% of society that is dangerous and un-sustainable. Eventually it will either create dystopia, topple the financial system, or cause revolution.

          • Michael Anderson says:

            Just stumbled on this great conversation. My 3 cents is that disruptive technologies are leaving a lot of people in the dust, hence the anecdotal experiences that everything is going to hell in a hand basket. The exact opposite is true.

  6. rlcrabb says:

    California is still home to a big percentage of the nation’s poor, and housing is a major factor… http://www.utsandiego.com/news/2015/may/16/why-states-anti-poverty-agenda-will-fail/

  7. rlcrabb says:

    The money disease is spreading fast. At some point, you’ll have to be a millionaire to live within 100 miles of the coast. The servants will be bussed in from the valley. http://www.eastbayexpress.com/oakland/jacking-up-rents-in-oakland/Content?oid=4289038

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