WHY IS RENT SO HIGH IN CALIFORNIA?

The chart below explains it all. It tells the whole sad story. We need to build 180,000 new housing units in California every year to keep up with population growth, but we are only building 80,000, and this has been going on for 20 years. All of the housing problems we have in California, all of them, can be traced back to this one simple fact. Every year, our housing shortage gets worse, and this ever-worsening housing shortage explains why rents keep rising faster than inflation, why the vacancy rate is so low, why people are doubling up in apartments and houses, why people are paying a higher and higher percentage of their income on housing, why college graduates in California move back home with their parents after they graduate, and why thousands of people in the Bay Area are living in RVs, tents, cars, and trucks. Unless we build enough housing to keep up with population, all of these problems will just get worse.

California’s Population Explosion. In 1945, the population of California was 8 million. Today it is 40 million. That means that for every 1 person who was living in California at the end of World War 2, there are now 5 people living here. I live in a house that was built in 1902. In 1902, the population of California was 1.5 million. That means that for every 1 person who lived in California when my house was built, there are now 26 people living in this state. Like most people in the Bay Area, I am not happy about this tremendous population growth. I too wish that fewer people were moving to California, but they are coming here whether we like it or not. And its easy to see why they are coming. This truly is the Golden State! Suppose you were living in a city in a Rust Belt state full of closed factories, where the unemployment rate was 20% and the minimum wage was still $7.25 an hour. Wouldn’t you want to pack your bags and move to California? The unemployment rate in California is 4%, and the minimum wage in California will soon be $15.00 an hour.

America’s Black Hole. My sister Judy once called California ‘America’s Black Hole.’ I never forgot that because it’s true. What she meant was that moving to California is like entering a Black Hole. Nothing that enters a Black Hole comes back out. Once people move to California, they never go back to where they came from.

Adios Baltimore! I grew up in Baltimore, a Rust Belt city. The population of Baltimore peaked in 1950 and has been declining ever since. The heavy industries that once supported Baltimore’s prosperous working class are gone. Baltimore’s shipyards that once employed 50,000 people are gone. The Glen L. Martin aircraft factory that once employed another 50,000 people is also long-gone. The Bethlehem steel mill that once produced 10,000 tons of steel a day is gone. As the jobs dried up, so did Baltimore’s population. Thousands of row houses in Baltimore with their famous white marble stoops are just rotting away. All of Baltimore’s once-fashionable downtown department stores are now abandoned. There are dozens of cities just like Baltimore all over this country, once bustling industrial centers that have been in decline for generations. Without the jobs, what is to keep people in Baltimore? Baltimore is hot and muggy in summer and can be bitterly cold in winter. There are no interesting geographical features in Baltimore like mountains or waterfalls or palm tree lined beaches. We can’t stop people from leaving places like Baltimore and moving to California, and it is a fantasy to imagine that people won’t come here from places like Baltimore if we just don’t build housing for them.

Not In My Back Yard. We need more housing, a lot more housing in California, housing that ordinary working people can afford, but we’re not building it. Most of the city councils around the Bay Area are dominated by NIMBYs. (Not In My Back Yard). These politicians and the voters who elected them support laws that discourage new housing from being built, like downzoning, height limits, and and inclusionary housing laws. They also support laws that encourage landlords to remove existing rental units from the market, like rent and eviction control laws. Rent control gives owners of rental properties, particularly small rental properties, a financial incentive to get rid of their tenants and sell their properties to owner-occupants or to use their rentals for other purposes, like turning apartments into AirBNB rentals or offices. We need to accept this one fact – a lot of people are coming to California whether we like it or not. We are only hurting ourselves by discouraging developers from building new housing and by encouraging landlords to go out of business.

New in the Chocolate Room.

California Granola. I am making a new granola mix. It contains almonds, raisins, walnuts, and dates. I call it California Granola because nearly all of all the almonds raisins, walnuts, and daCaliforniaGranolates grown in the United States come in California. I have it in 8 ounce and 16 ounce jars. Most people, even people here in California, don’t realize how much of our nation’s food comes from California. Nearly 100% of the following crops come from California: apricots, artichokes, broccoli, cauliflower, celery, figs, garlic, grapes, kiwifruit, nectarines, olives, clingstone peaches, pistachios, plums, pomegranates, and strawberries.

The California Drought

California is now in the fourth year of a record drought. We should all be thinking about what we can do to save water; however, there isn’t much I can do. Years ago, I replaced all the 5 gallon flush toilets in my rentals with 1.6 or 1.2 gallon high efficiency toilets. I replaced all the showerheads with low flow showerheads. Most of the trees and plants at my properties get no irrigation. The ones that are on irrigation are native and dry climate varieties.

I think that eventually this state will have to have to be a showdown with the farm lobby over water use. California farms consume 80% of the state’s surface water, but they account for only 2% of the state’s GDP. Even worse, there has been a huge increase over the past 20 years in the planting of very thirsty crops like almonds and walnuts. Incredible as it may sound, it takes over 1 gallon of water to grow 1 almond, and it takes 5 gallons of water to grow 1 walnut. It seems ridiculous to me for growers to be increasing the planting of walnut and almond trees during a drought, but that is what is happening. California nut growers have a very well financed and powerful lobby in Sacramento.

Will California Become Six States?

If am constantly amazed at the silly things that dot-com billionaires spend their money on. Most of these people are relatively young men who came into a lot of money suddenly, usually as a result of an IPO or a buyout. Once they get all this money, they go on spending sprees, buying toys – very, very expensive toys. For example, one of these guys bought a zeppelin, the world’s biggest zeppelin. You can see it flying around San Francisco Bay. The owner of the zeppelin uses it to fly his friends from Oakland Airport to the Napa Valley for dinner at pricey restaurants like the French Laundry. Other expensive toys purchased by internet billionaires include a Russian submarine, a chocolate factory on a pier near Fisherman’s Wharf, and one of the Hawaiian islands, and a populated island too! Can you imagine anyone having enough money to write out a check for a whole Hawaiian island?


This brings me around to Timothy Draper, a billionaire Silicon Valley venture capitalist. In July, Draper announced that he had collected enough signatures to qualify a state ballot initiative to divide California into six states. Draper paid people to gather 1,300,000 signatures, well over the 800,000 needed to put the measure on the ballot in 2016. Draper says he did it because: “California needs a reboot”, whatever that means.

One of the six states would be called Silicon Valley and would include all the counties around San Francisco Bay including San Francisco itself. Critics say that Draper’s plan is simply designed to cut off the wealthiest part of the state from the rest, leaving poor people in the Central Valley to fend for themselves.

California is not actually going to become six states. This ballot initiative is just another internet billionaire’s toy. It takes an Act of Congress to admit new states into the Union, and there is absolutely no possibility that Congress will allow California to become six states.

Aaron Levie. My nephew Aaron Levie started an internet company 8 years ago in my backyard called Box.com. Box.com now has over 1,000 employees and offices all over the world. I wonder what expensive toys Aaron will buy when his company goes public, which could happen soon.

The Lady and the Tiger. One expensive toy that Aaron might want to buy is the ‘Lady and the Tiger’ trick. When Aaron was growing up, we used to go to magic conventions together every summer. Aaron and I once saw the Lady and the Tiger trick performed at one of these conventions. In this trick, a beautiful young woman is put into a cage. The cage is lifted into the air and covered with a cloth. When the cloth is removed a few seconds later, the woman is gone, and a live 500 pound Bengal tiger is in the cage instead. Although Aaron knows how this trick is done, he has never done it. Aaron doesn’t have a tiger. Now –  Aaron doesn’t like it when I reveal magic secrets, but I am going to reveal a secret about this trick. No magician can actually turn a beautiful woman (or even an ugly one) into a Bengal tiger. No. In order for a magician to do this trick, he has to have a tiger first. I guess that’s not really a secret. You probably already figured that out.

Houdini Magic Shop. There are a number of magicians who do the ‘Lady and the Tiger’ trick, but I have no idea where they get their tigers from. They don’t sell tigers at magic stores. I have a friend who works at the Houdini magic shop at Pier 39 in San Francisco. Although they sell professional magic tricks there, I know they don’t sell Bengal tigers. I wonder where magicians get their Bengal tigers from. I looked up ‘Bengal tiger’ on Google Shopping, but nothing came up.