The California state legislature just passed statewide rent control. It goes into effect January 1, 2020. If you want to know what’s the problem with rent control, just take Econ. 101 at Cal. Whenever there is a shortage of a commodity, the price of that commodity will go up. (That’s in ‘Microeconomic Theory’,  the Econ. 101 textbook.) When the government fixes the price of a commodity, including rental housing, at a price that is below the market rate, it creates a shortage and make an existing shortage worse. (That’s also in ‘Microeconomic Theory.’) The truth is that it is hard to find a noted economist anywhere who supports rent control, even here in Berkeley.

Why is the rent in California so damn high? We have a huge rental housing shortage in California, and it is getting worse every year. In 1970, the population of California was 20 million. Today, it is 40 million. In 1945, the population of California was only 8 million. That means that for every 1 person who lived in California in 1945, there are now 5 people living here. Up until the 1960s, new apartment construction kept up with population growth, but then a gap started developing, and the resulting shortage has grown with time. This happened for a long list of reasons: the NIMBY movement ‘Not In My Back Yard’ started here. I know people who are perfectly willing to concede that we need to build a lot more housing, but they just don’t want that housing built near them. We also have high permit fees, restrictive zoning regulations, historic landmarking, environmental laws – including greenhouse gas emission restrictions, and lawsuits – lots and lots of lawsuits. And now we have to add to that list statewide rent control.

We need to build 200,000 new housing units in California every year just to keep up with population growth, but we are building less than 100,000 units a year, and this has been going on for over 20 years. Here in the Bay Area, the shortage is even worse. In San Mateo County, the heart of Silicon Valley, for every 4 jobs created over the past 10 years, 1 housing unit was built. It is this gap between supply and demand for housing in California that explains why house prices and rents are so high. We need to build a lot more rental housing in California, but who is going to build that housing and where will the money come from to build it? Rent control is not an incentive to build rental housing. It is a disincentive.

I have been expecting statewide rent control for a long time. It’s the reason why I never bought an apartment house. I prefer to rent houses and condos, which are exempt from rent control. I once owned a 3 unit property in Oakland, but I converted it to condos. Now that we have statewide rent control, I expect that a lot of apartment house owners across the state will convert buildings to condos and then sell them to owner-occupants, but that will just make the rental housing shortage even worse.

What happens to the poor? Statewide rent control in California is especially bad news for the poor. Whenever there is a shortage of a commodity that everybody wants, like housing, who gets it? Do the poor really get an equal shot at it with the rich? Suppose a landlord has an apartment for rent, and he receives 10 or 20 applications for it. Who is he going to rent to? How will he choose among the many people who want it? Will he rent this apartment to a wealthy applicant who can easily afford to pay the rent, or will he rent the apartment to a much poorer applicant, someone who can pay the rent, but only with difficulty? You know the answers to these questions. Whenever there is a shortage of something that everybody wants, it is the rich who get it first, and the poor who get it last, if they get any at all. Throughout the history of the world, this has never changed. You may not like that, but it’s the way things are.

Trump’s Trade War With China Is Making Things Worse. The California Building Industry Association estimates that President Trump’s tariffs on Chinese imports have increased the cost of building a new home in California by $30,000, a figure that they expect will rise. The National Association of Home Builders agrees, pointing out that over 500 types of products commonly used in housing construction are imported from China, including appliances, lighting, countertops, cabinets, tiles, nails, and laminates. The price of some lines of Chinese kitchen and bathroom cabinets has doubled since the trade war began. Needless to say, these costs are ultimately passed along to the people who live in newly constructed houses and apartments.


Disney World is much, much bigger than Disneyland in California, but I think Disneyland beats Disney World hands down. It’s the climate. When Walt Disney bought the land that became Disney World, it was a tropical swamp, which is why Disney got the land cheap and why it wasn’t already developed or being used by others. Walt Disney dramatically reshaped the land, but he couldn’t do a thing about the climate. In summer, the high season at Disney World, it is hot and muggy, and it rains 20 days a month. In July, the humidity often exceeds 90%. In other words, climatically, it is still a tropical swamp. Disney World is also expensive. I know families that visited Disney World in summer and spent $10,000 for a week there, and it rained every day. When it stops raining, it doesn’t dry out. Someone who went to Disney World last summer said to me: “When you leave your hotel, it feels like you are walking into a sauna.” On the other hand, at Disneyland in L.A., it never rains in the summer.

Alligators! Take a look at the photo below. There are alligator warning signs like this all over Disney World. These signs are there because they need them. Disney employees have captured hundreds – literally hundreds – of alligators at Disney World, some weighing several hundred pounds. Guests at Disney World hotels frequently report seeing alligators. You may recall that a couple of years ago a 2-year old child was killed by an alligator at Disney World. After that, Disney put up more warning signs, but there is no way to rid of the alligators. I’m sure that Disney would if they could, but they can’t. That is because it is impossible to get rid of alligators in an ideal alligator habitat like the land inside and around Disney World. The American alligator has been living in Florida for over 100 million years. The asteroid that wiped out the dinosaurs and most other animals 65 million years ago failed to wipe out any of the 20 or so species of alligators and crocodiles that were alive at that time. Most are alive today and virtually unchanged. That is how tough these critters are. Today, there are over 1 million alligators in Florida. Think about that – 1 million alligators just in Florida. And what about Disneyland in California? There are no alligator warning signs at Disneyland. They don’t need them. If you are in Los Angeles and you want to see an alligator, you have to go to the zoo. In California, we think that’s where alligators belong!


President Trump has repeatedly threatened to cut off FEMA (Federal Emergency Management Agency) funds for California firefighters. Trump claims that California’s forest fires are the result of poor forest management by the state. In January, Trump tweeted: “Billions of dollars are sent to the State of California for Forrest (sic) fires that, with proper Forrest (sic) Management, would never happen. Unless they get their act together, which is unlikely, I have ordered FEMA to send no more money. It is a disgraceful situation in lives & money!”

There are 2 big problems with Donald Trump’s argument.

1. Most really big forest fires in California start on Federal land, not land owned by the state of California. That’s not surprising since the Federal government owns 48% of all the land in California, including most of the forest land in the state. For example, this past summer’s Carr Fire started in a recreation area owned by the United States Forest Service. The fire then moved onto private land and then into the city of Redding itself, where the fire destroyed over 1,000 houses. The most destructive and deadliest wildfire in California’s history was this past summer’s Camp Fire, which also started on land owned by the U.S. Forest Service. It was the world’s costliest natural disaster in 2018. A long list of Federal agencies own big chunks of California real estate in addition to the Forest Service, including the Bureau of Land Management, the National Park Service, the Department of Defense, and the U.S. Fish and Wildlife Service. All of these agencies are under the direct control of President Trump. While it is true that forests in California have been and are being badly managed, most of these forests are under the control of the president of the United States, not the governor of California.

2. Climate change and global warming are major factors in California’s forest fires. Over the past 100 years, the average temperature in California has risen by 3 degrees. In addition, the average annual rainfall in California has fallen. This warmer, drier air sucks water out of plants and the soil, leaving trees and grass drier than they used to be. The California fire season used to be late summer, but now, it is nearly all year round. California used to get some rain in late October that wet things down, but now, the rain doesn’t come until November or December. Global warming is not a controversial theory within the scientific community, but unfortunately, President Trump and most of the people in his cabinet believe that it is.

Sonny Perdue. The U.S. Forest Service is under the control of the Secretary of Agriculture, Sonny Perdue. Perdue believes that global warming is a hoax. He calls global warming “junk science” and “a running joke.” Perdue is also one of the neo-Confederates in Trump’s cabinet. For as long as I can remember, neo-Confederates have always frustrated me. I grew up in Maryland, which was a slave state until the end of the Civil War. When Perdue talks about slavery and the Civil War, he sounds like the pro-Confederate schoolteachers I had when I was a kid. When Perdue was governor of Georgia, he tried to put the Confederate battle flag back into the Georgia state flag, and he made April ‘Confederate Heritage Month’. Perdue believes that most slaves supported the Confederacy and that large numbers of them fought for the Confederacy too. Perdue’s claim that there was widespread support for the Confederacy among the slaves has come under a lot of criticism from historians, just as his speeches on global warming have come under a lot of criticism from climate scientists. When I was living in Maryland, I knew white people who shared Sonny Perdue’s belief that black people didn’t mind being slaves and that during the Civil War, their sympathies were with their owners and the Confederacy, just like in ‘Gone With The Wind’; however, I have never met a black person in my life who shared that view.

THE CALIFORNIA HOUSING CRISIS. All explained with just one statistic.

We need to build 200,000 housing units in California every year to keep up with population, but we are only building 80,000, and this has been going on for 20 years. This one fact explains everything. It explains why rent is so high, why house prices are so high, why people are doubling up in apartments, why recent college graduates in California move back home with their parents, and why even high paid software engineers in Silicon Valley are living in RVs. All this is happening because we are building less than half the number of housing units that we need to keep up with population. Why is this happening?
NIMBYism. It’s all due to NIMBYism. California is where the NIMBY (Not In My Back Yard) movement began. While everyone in California knows that we need to build more housing, everybody wants that housing to be built someplace else, not near them. You can see the effect of this very clearly at BART stations. When our subway system was built 50 years ago, everyone assumed that high density housing would be built around BART stations, but for the most part, that never happened. The area immediately around most BART stations looks exactly like it did 50 years ago. Why? Because the people who live near BART stations want new housing to be built at somebody else’s BART station, not their BART station. Just stand in the middle of the parking lot at the North Berkeley BART station and look around. All the buildings you see are old, built before the subway was constructed. The same is true at the Ashby, Rockridge, Orinda, Lafayette, and most other stations in the BART system. Why? It isn’t because real estate developers wouldn’t like to build high-rise apartment houses and condos near BART stations in desirable neighborhoods. It is because the people who already live in those neighborhoods won’t let them. Unless this attitude changes, and I see no evidence that it is changing, California’s housing crisis will only get worse. It is sad. This is, after all, aside from the high cost of housing, the best place in the world to live.


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 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.