For some time now we have been taking note of the fact — spotlighted several years ago by Dartmouth economics Professor William Fischel — that the high cost of housing in California is to a large extent the product of an onerous land-use regulation regime that disfavors construction of housing where people want to live. Now, along comes Professor Steve Clowney, with a post on the Property Prof blog, of May 18, 2012. Click here. He takes note of a recent article in Forbes.com, reporting that, on the one hand, there is a shortage of engineers and computer geeks in the Silicon Valley area, but on the other hand, local high-tech enterprises willing to pay higher salaries are unable to attract qualified engineers to do the job. Why? It turns out that the technical folks are no dummies, so they won’t leave their present locations (where, ironically, there may be a job shortage) because they see the cost of housing in the Bay Area as a disincentive to moving.
The high cost of housing causes those already in place up there to demand (and get) higher pay for their goods and services, to allowthem to handle the increased cost of housing. So any newcomers may get higher pay from the employee-seeking high-tech Silicon Valley outfits when they move in, but it is consumed, and then some, by the increased cost of living (which includes a higher cost of housing).
Follow up. An article in the June 10th issue of Los Angeles Times (click here) reports that there is a shortage of homes fopr sale in California — at least in places where people want to live, not in the boondocks where overpriced homes were built and sold to suckers during the “bubble.” That explains why home prices in California remain unreasonably high.