Matters Of Policy & Politics: No Home Court Advantage In Atherton | Lee Ohanian, Bill Whalen, Jonathan Movroydis | Hoover Institution

>> Jonathan Movroydis: It's Thursday, February 2nd, 2023, and you're listening to Matters of Policy and Politics at Hoover Institution podcast devoted to governance and balance of power here in America and around the free world. I'm Jonathan Movroydis, senior writer of the Hoover Institution, and I'm sitting in the chair of Bill Whelan, the Virginia Hobbs Carpenter distinguished policy fellow in journalism.

So that he can answer questions and provide commentary about California policy and politics in which he is well versed. Bill Whelan, in addition to being a Washington Post columnist, writes weekly for Hoover's California on your mind web channel. And Edison publishes Eureka, a quarterly forum featuring sharing, analysis and commentary from Hoover scholars and California's top thinkers.

Whelan is joined today by Leo Ohanian, Hoover Institution senior fellow and professor of economics and director of the Ettinger Family Program in macroeconomic research at the University of California, Los Angeles. Ohanian also writes twice per week about the policy environment of the Golden State for California on your mind good day, gentlemen.

Let's talk about the latest developments in policy and politics in the Golden State. Bill, your column this week explores how Governor Newsom might approach the debate over gun control policy after three mass shootings that have rocked the Golden State over the past month. You assess whether he will use his standing as governor of America's most populated state to advance an assault weapons ban through Congress.

You maintain that he could learn from Bill Clinton. In 1994, the then president packaged a proposed assault weapon ban by Newsom's mentor, California Senator Dianne Feinstein, into a more sweeping measure. The Violent Crime and Law Enforcement Act, that included billions in funding for 100,000 new police officers, the construction and maintenance of prisons prevention programs, and the creation of a federal office on violence against women.

As you write, and to quote Vito Corleone, the Democrats gave the Republicans an offer they couldn't refuse. Footnote since 2004, that assault ban has been expired. If you wanted to Bill, does Newsom have the political demeanor and will to emulate Clintonian tactics with members on Capitol Hill and help reinstate an assault weapons ban?

 

>> Bill Whelan,: So good question, Jonathan, because it is a question of Will and Demeter. Will in this regard, this governor gets easily distracted. Last week he was just absolutely apoplectic about gun control, and I want to take him at his word that he's serious about it, that he's outraged by the tragedy.

It was a terrible thing and a horrible thing to happen to Californians, and we all feel a pray for the families of the victims here. But not soon after he went off on gun control and trashing Kevin McCarthy back east and Republicans in general. He then quickly shifted to a AP black history controversy in Florida and on a go.

So he just kind of bounces from outrage du jour to outrage du jour. And the problem with this Jonathan, Lee, is if you want to affect gun control, and be clear, I was talking about gun control in Washington. There's a separate track in Sacramento. The governor yesterday unveiling another run at a concealed weapon permit reform here in California.

The question is if he wants to engage in Washington, where Senator Feinstein has co sponsored an assault weapons ban. You mentioned the one that she got done in 1994, expired a decade later. They tried it in the 2010s, it failed, to do so involves a lot of just careful, nuanced movement.

And nuance is just not an adjective or noun you would apply to Gavin Newsom. He is about thunder and yelling and outrage, if you will. I went back and I looked at what happened in 1994 and what happened in 2013. And long story short, the assault weapon ban that year was tucked inside a much larger crime bill.

Lee and, Jonathan, you might remember Joe Biden, who took a lot of credit for the 1994 Crime Bill, had to walk back a lot of that when he ran for president in 2020 because it's a question of what effect it had on black incarceration. But they tucked this inside a larger bill, this was a year in which crime was a huge issue across the country.

Here in California, it was a year that three strikes was passed. And like Vito Corleone, they made an offer they couldn't refuse, which was, if you vote down this bill, good luck going home and trying to expend your constituents. In 2013, when Feinstein tried another measure, this time, Harry Reid decided to pull it out of a larger crime bill, and it died a rather undignified death on the floor of the Senate.

Feinstein urging her colleagues to show some guts and vote for it. And they didn't these were a lot of Democrats in Red states the following year who'd actually be defeated. Remember, there were a handful of Democrats in the Senate who were benefited from the Obama tailwind and tailcoats in 2008, but in 2014, they were swept aside.

So here we are now in 2023 and the question is, have Newsom got involved? How would he, and I apologize for filibustering here. He would have to, I think, first of all, very quietly work on relationships, especially with Republicans. Rather than trashing Kevin McCarthy, he would have to find a way to help Democrats pull five or six Republicans to get 218 votes in the House.

But then secondly, I think he would have to just generally come up with other sweeteners to throw into this mental health care. I think being a big, big sweetener in 2023. And my question, Lee, is why he doesn't do this with his fellow governors. Easiest thing as a governor of the largest state in America is you can develop consensus.

You do not see those on immigration, for example, where the border governors come together and have a plan that they can throw to Congress. And you don't see it on gun control. And that's, unfortunately, the style of politics we live in right now, where Gavin Newsom takes potshots at Ron DeSantis.

Every time he gets a chance, DeSantis fires him. Return where he can, Governor Abbott and Texas in between he fires at Newsom and vice versa. You don't have Democrats and Republicans coming together. So, Jonathan, to again apologize for railing on here, it just doesn't seem to be in this governor's DNA to kind of do something just kind of quiet behind the scenes, bipartisan and low key, which is what gun control requires.

 

>> Jonathan Movroydis: Lee.

>> Lee Ohanian: Well, Bill, the challenge in having a governor that, for lack of a better word, seems to have some attention issues is that nothing really ever gets done. When he was first elected in the 2018 election, he talked about a Marshall plan for housing. And his speech, his acceptance speech was three quarters about a Marshall plan for housing.

Well, we're building housing, that's about 80% below what his target was. And he's essentially lost interest in housing. And now he's on to other things, including criticizing governors in other states whenever he gets the opportunity. So I would love to see more attention spent on California issues and actually trying to get something done.

Bill, what's interesting about this is that obviously, California tragically had two mass shootings very recently, and Newsom came out outraged and being very righteous. But what he didn't talk about is that California has really among perhaps the strictest gun control laws in the state. And that the shooter in the half Moon Bay shooting had committed that crime with a firearm that he had a permit for.

And the shooter in the Monterey park shooting in southern California, it's unclear where he obtained that weapon, but it may, I will say it may have been obtained legally. So at some level, this is a real embarrassment if, indeed both mass shootings were done by weapons that were legally obtained.

And the governor, I don't think, has the political will or strength to really form consensus, obviously, was perhaps the most difficult challenging, thorniest social, cultural issue in the country, which is about the Second Amendment and the 14th Amendment. Unfortunately, the second Amendment, I think, in my opinion, was poorly written.

And there's two clauses, one is about a well regulated militia, and the other is about the right to bear arms. And it's really hard to know how this is gonna go, Bill, at a broader level, because only 15 years ago, Justice Scalia, who in my opinion was an exceptional jurist wrote.

Like most rights, the rights secured by the second Amendment is not unlimited, is not a right to keep and carry any weapon whatsoever, in any manner whatsoever, for whatever purpose. So, how this will evolve over time is gonna be difficult. But what Newsom has been talking about, Bill, is regulating the carry conceal weapon laws.

Such that you cannot walk into, for example, any private business with a concealed weapon, unless that business displays a sign saying, guns are welcome here.

>> Bill Whelan,: Right.

>> Lee Ohanian: It's too bad we don't have our friend Richard Epstein on here, he could wax poetically for hours about the second amendment-

 

>> Bill Whelan,: And he would,

>> Lee Ohanian: Yeah, he would. Richard, we love you, if you're listening, and not being a constitutional scholar, but I suspect that law, and I think that law Will be signed by Newsom, I suspect that would be unconstitutional as well.

>> Bill Whelan,: So you know it's interesting, Lee is, after the second shooting, the one at Half Moon Bay, all of a sudden, California media discovered Half Moon Bay in this regard.

This mushroom farm, this community of people who work there, and they discovered kinda squalid living conditions and wage questions and so forth. And it's just all of a sudden, it was like literally going across the other side of the tracks, which in San Mateo county, just outside of San Francisco, where this happened.

It is the other side of the tracks, and it's the other side of Interstate 280. And what underscores Lee is just, there's a lot in California that the governor and lawmakers can be paying attention to, but they don't always. And just getting back to the governor and the share of politics, he's in a very funny zone right now.

We assume Joe Biden is running for another term, but everyone's waiting for him to actually make the announcement, and so is Gavin Newsom. And if Joe Biden does not announce, and I would guess that Gavin Newsom will run, but until then, he has to kinda wait this out.

And meanwhile, it's just the question of his attention to the state and is sticking to things, he's notorious for doing task force, he's notorious at pointing out issues. But the devil is always in the detail, and the devil is always in the follow through. By the way, Lee and Jonathan, circle on your calendar, March the fifth.

And what happens on March the fifth, Ron DeSantis is supposedly coming out to Orange County to raise money for republicans. Let's see where Governor Newsom is that day,

>> Bill Whelan,: Let's see if he tries to crash the event, let's see if he tries to put up billboards or whatever his usual stunts are at DeSantis.

Not that the governor listens to this podcast or reads my stuff, but he's just got to kinda take a break from DeSantis and just pay more attention to his state.

>> Lee Ohanian: Yeah, Bill, every week that goes by, I mean, I keep hoping that the governor will focus on state issues.

Sadly, there is no shortage of state issues that really, really need his attention and leadership, and trying to form some consensus with some common sense changes. Ranging from public schools that are just abysmal, to homelessness, to figuring out how to deal with mentally ill people on the street.

But the governor's, I think from where I sit, the governor's pretty much put his governorship on autopilot and is too busy looking at Texas and looking at Florida. And I can't see anything other than he's heading full steam ahead for a national election.

>> Bill Whelan,: And here's a good place to start Lee, the National Association of Realtors the other day put out a report, it was on state movement in 2022, and guess what it found?

About 325,000 people left California, and about 319,000 people chose Florida as its preferred place of destination, moved to that state, so Florida's population gained, California's lost. So if I'm the governor, God forbid we created another task force, but I would look into why people are leaving my state.

And I would look into it and see are they leaving because they simply have found a better place to live, they wanna be closer to their family or relatives? Are they leaving for job prospects? Are they leaving because it's more affordable housing? Are they leaving because less regulation, more freedom?

Whatever the reason, he should just drill down on it, as to why that many people are leaving his state.

>> Lee Ohanian: No, Bill is remarkable, I mean, it is just remarkable how many people have left California. I took a look at some statistics, and every ten years, the state comes out with population projections for the following ten years.

 

>> Bill Whelan,: Right.

>> Lee Ohanian: And between 80 to 90, 90 to 2000, 2000 to 2010, those projections were pretty accurate, and if anything, tended to be on the low side. The state's projection from 2010 to 2020 was, at least the first time I can remember was over predicted, and over predicted by over a million people.

This is happening on the governor's watch, I'm not going to blame him for all of the challenges within California, many of them have been with us for decades. There's plenty of blame to go around between both parties, though obviously, it's a democratic state now and has been for a number of years.

But Bill, I just can't imagine whether the governor was Arnold Schwarzenegger or Jerry Brown version 2.0, or going further back in time your old boss, Pete Wilson, nobody would have just not batted an eye of this. Those governors would have said, something is going wrong here, we gotta figure this out, we've gotta stop the bleeding.

And you're not seeing any words like that coming from the governor, not even the formation of a task force, which, Bill, as you pointed out he just loves task forces.

>> Bill Whelan,: I know, it's like an old Mickey Rooney, Judy Garland when someone says, hey, let's put on a show.

But no, back in the 1990s with Pete Wilson to recite ancient history, which is when I worked back in Sacramento, Wilson investigated this and came up plans to deal with it. What sparked him was an interesting little factoid. California was running out of U-Haul vans, because people were getting a U-Haul and they were going one way elsewhere and they would not deadhead back to California.

So, it kinda hit him across the eyes like a two by four, he saw and started thinking, holy smokes, people are bailing on us.

>> Lee Ohanian: Yeah, I mean, California is losing population substantially, and there's nothing's come out from Sacramento, certainly not from the governor's office, I mean, not a peak.

It's somewhat shocking to hear him talk about Ron DeSantis when over 300,000 people left the state.

>> Bill Whelan,: Yeah. Yeah, I mean, look, people are moving to Florida, and we could discuss another time why they're moving there, but it's a very stark number for him to play at DeSantis, I'm just gonna throw that at Newsom all the time.

 

>> Lee Ohanian: Yeah.

>> Jonathan Movroydis: Lee, actually this topic relates well to your column this week for California on demand, in which you analyze San Francisco Human Rights Commission's proposal to pay every eligible African American adult living in the city $5 million. As well as making a list of other recommendations, including the cancellation of personal debts, annual income supplements, and the conversion of public housing to condominiums.

To put this in perspective, the total cost of the plan would be about $175 billion, San Francisco's budget for the current fiscal year is 14 billion. You conclude, Lee, that by conservative estimates, this proposal will have an average cost of 600,000 per household. And you argue that this is conservative for several reasons because it does not account for African Americans who lived there in the past, but still may meet eligibility requirements.

In a previous article, Lee, you mentioned that San Francisco had lost 60% of its population since 1950. Given that that city has been decimated and losing more and more people and businesses every day, is such a policy fiscally and I dare say politically possible?

>> Lee Ohanian: Jonathan, San Francisco's always considered us up to be an avant garde location out on the precipice of making changes.

For a number of years, many of those changes were really positive and other cities followed in San Francisco's footsteps. The city has changed over time. It's still out on that precipice, but I would say those changes are not ones that other cities are gonna be topping. California has a reparations commission and San Francisco has its own reparations commission.

And the San Francisco commission came out with this idea of paying every eligible African American, and that would be those who are over the age of 18. And there's actually many ways one can qualify including those who do not live in San Francisco now but who lived in San Francisco in the past.

So I got out my calculator, I added up the numbers, and I just included the current African American adults living in San Francisco, and that comes out to about $175 million. And that just alone, that is bigger than the budgets of all but three states, California, Texas, and New York.

If you were going to tax households within San Francisco, those households that are not African American, it would be $600,000 per household. Everyone's focused on the $5 million check that would be issued. But there's a number of other very expensive pieces to their report. This includes income supplements for the next 250 years designed to bring African American household incomes up to the San Francisco median.

Canceling all personal debts, paying parking fees and the homeowners association fees. Providing down payments for African American households to buy homes. Taking the 6000 public housing units in San Francisco, giving them to African American households for $1. So I added up the whole thing and it comes out, Jonathan, it comes out actually over $200 billion, all things considered.

And this would destroy the city, there's just no other way of thinking about it. This is 15 times its annual budget, there's simply no way one could implement this. And not to get into issues about morals or who should be responsible for this. But San Francisco is now about one-third Asian American.

So it's interesting to ask those Asian Americans and Latinos and Hispanic Americans to pay for this. So it would bankrupt the city. And Jonathan, as you mentioned, San Francisco already has lost about 6.5% of its population between 2019 to 2021. The new census numbers just came out, San Francisco continued to lose population in 2022.

So this would be the equivalent of pouring gasoline onto a home that's already burning.

>> Bill Whelan,: So, Lee, the National Review, befitting for a conservative publication, also crunched the numbers. And their numbers were a little more conservative for years but let me run you by theirs. Here's what they calculated, Lee and Jonathan.

They said that if you just calculate for half of the city's population, Black population, about 45,000 Black residents in San Francisco. So if you just do the numbers for half of them and use the $5 million, what you come at, Lee and Jonathan, is the city would be looking at a bill of $112.5 billion, with the b, dollars.

To put that in context, the San Francisco annual budget is about $14 billion. That's eight times what the city spends each year, good luck paying it. Two questions for you, Lee. Number one, let's be an economist here. Would you have to pay taxes on this? My understanding is that you have to pay taxes on mental anguish, pain, and suffering.

It's not a physical, it's a mental thing, and you pay taxes on that. So would that $5 billion actually be taxed or not? Which is one question. But the second question, Lee, is one of the problems, to me, with reparations is it's at all times a sliding scale, a slippery slope.

You look at San Francisco, San Francisco has a vibrant Asian population, Happy Chinese New Year. And there was a law in California in 1883 which specifically punished Chinese immigrants. It was nasty, it was punitive. Where's the reparations for that? What about the vibrant gay population? Historically, victims of discrimination in all sorts of quiet ways as well, where's their money as well?

You can just keep on coming up with a list of people who've suffered. To be facetious about this, I have a very good friend, lives in Los Angeles. She has sent two kids through 14 years of the very good private schools in Los Angeles. But the pain and suffering there of dealing with the relative idiocy of those establishments, that's pain and suffering.

And I'm being facetious here, folks, but the whole point is when we start trying to figure out who's owed money for past injustices and past pain and suffering, it's not gonna stop with one group. And so good luck, California. Now, Lee, if you want to we can shift and talk about the state for a moment because the state task force is looking at right now, among other things, who is eligible?

And here, what they're looking at is both residency and also what they describe as harm. And, Lee and Jonathan, here's what they describe as harm. Unjust taking of property, devaluation of businesses, if you're black, black businesses, housing discrimination, mass incarceration, and finally, what they call health harm. So there you go.

 

>> Lee Ohanian: Well, Bill, when I read the report, it's about 60 pages. My California mine piece has electronic link that people wanna take a look at it. I've never heard of a proposal to reward people for being criminals. This one does, this one says, if you've gone to prison for drug offenses, then you're eligible.

Or if you, if you have a parent or perhaps a grandparent who went to prison for drugs, then, that slots you right into this. And, Bill, what I found surprising by the report, not just, obviously, the numbers are just off the charts. But the report has no mention of any kind of fiscal considerations, which essentially makes it, I would think it's gonna make it a non-starter.

And reading the report is everything you read is that about whatever hardships black people are facing, it's 100% due to racism. And racism comes in all shapes and forms and affects people of all sorts of colors and discrimination has no bounds. So when you talk about the Asian population in San Francisco and Hispanics, I won't go into details, but there were programs that were very, very punitive and discriminatory to Hispanics in the 1950s and 1960s.

I just don't see where this can even get traction. Yet the president of the board of supervisors, says that he fully supports the plan, and a former supervisor believes that it doesn't go far enough.

>> Bill Whelan,: Be very interested, Lee, if they turn it into a ballot initiative and put on the ballot in San Francisco, because that's probably what you're looking at if you wanna do this statewide, it's interesting.

So Governor Newsom started this, he created the task force, the group, to look at this, he had to. He would surrender his woke credentials, his honorary BLM card if he did not do so. So he started this, but now the question is, where does it end? He vetoed a bill last year which would have extended the deadline from July 1st of 2023 to July 1st of 2024.

That tells me he wants to get this over with as quickly as possible. You can be cynical and say he may be thinking if he's running for president, he surely doesn't want this hanging around his neck in 2024. Lawmakers, you don't see a lot of enthusiasm in the legislature for this as well, so I think what you would see is just kind of like a matador.

They would wave their cape and let it run by and get on the ballot. And I will, knowing a thing or two about California politics and ballots, I would wager you I'd give you about 30% as the over under for what support it would get in the state.

And why is that? It's not because California is a deep, dark, racist society. It's, again, it would pit groups against each other. Asian Californians, latino Californians, gay Californians, would all kind of wonder, why carve out for one group? And I think it would just die a very undignified death as a result.

 

>> Lee Ohanian: Bill, I agree completely. And you know what I really think, as I was researching this article and writing it, I came across a discussion by a fellow, a gentleman who specializes in technology office leasing. And here's what he had to say about San Francisco. He says, five years ago, if you were a tech company and didn't have an office in San Francisco, meaning 2018, just before the pandemic, it meant you weren't a player.

 

>> Bill Whelan,: Right?

>> Lee Ohanian: Suddenly nobody wants to be in San Francisco, San Francisco is emptying out. And this was a Snapchat, the parent company of high technology company. He's talking about Snapchat leaving San Francisco, and he says, take a look at Snapchat. They have offices in Palo Alto, Mountain View, Santa Monica, LA, New York, Seattle, London, Dubai, Tokyo, these are all expensive places.

Yet out of all of their office locations, San Francisco was the one they wanted to leave. That's how a lot of tech companies now view San Francisco. So that city has got to pull itself together, and this is not the way to do it.

>> Bill Whelan,: Yeah, it's just it complicates people's views in California as well, because this story gets out and I start getting emails, you probably do just say, is this real assistant?

Is this a real article? Is this from the Onion? And I'm saying, no, it was a real thing. By the way, one final rant about this, we can move on. Next topic is, if you look at the board, the statewide board that's considering this, it's not just monochromatic and skin color, it's monochromatic as intellectual outlook.

The governor did not in any way try to get people of different viewpoints on this panel. No effort to put a Thomas Sowell or a Shelby Steele or a black conservative on it. It's all folks who just kind of think the same way. And so it's just really, it's bad in that regard.

 

>> Lee Ohanian: And Bill, ironically, I suspect this will just go down as another task force that spent time, came up with recommendations that are not going anywhere. These recommendations shouldn't, in my opinion. But that seems to be what California politics is coming to. Form a committee, form a task force, lend a sympathetic gear, and then just watch it drive and blow away.

 

>> Bill Whelan,: Right.

>> Jonathan Movroydis: Gentlemen, this wouldn't be a California podcast if we didn't have the occasional chat about NIMBYism. The Golden State Warriors star guard Steph Curry and his wife Ayesha, did not prevail in their objection over a rezoning of parcel land into an affordable unit. Nearby, their home in the San Francisco suburb of Atherton, that was overruled by that city's, by that city's officials.

Atherton is considered one of the priciest zip codes in the state, which already has a large shortage of affordable housing. This week, in fact, was the deadline for cities to submit their plans for affordable housing to Sacramento. Most did not meet their deadline, the state could wipe out a jurisdiction zoning regulations if a city falls out of compliance.

In fact, this happened in Santa Monica last year, and after that happened, that city was subsequently flooded with permits, built 4000 apartments. NIMBYism is a messiah, gentleman, what can the state do to get serious about building more housing? For example, is there a chance of reforming CEQA, which even the LA Times acknowledged in an editorial, has too easily thwarted?

The state's pressing housing needs while being too slow in achieving environmental progress.

>> Bill Whelan,: So before Leo addresses the grim reality of CEQA and other ways to expand housing in California, I guess we could end the podcast with a simple no, by the way. Let me give you a couple words on NIMBYism, I did a little homework on this.

NIMBYism comes in all sorts of shapes and sizes in California, there is, most notably, celebrity NIMBYism. Lee, we saw this back in 2014, there was a fight in Malibu of so called Save Malibu Effort, in which you had Steven Spielberg, Tom Hanks, Barbra Streisand, the director, James Cameron.

All giving money to a campaign to stop Malibu from allowing chain store developments. God forbid that a Costco or a Walmart come into Malibu. Two years later, Leo in Los Angeles, there was measure S, I don't know if you remember that or not. This would have imposed a two year moratorium on any construction that increased development density, Leonardo DiCaprio, Joaquin Phoenix, Kirsten Dunst were behind that one, it got a whopping 30% support.

It got crushed by voters. But it also takes on a different look and form, which gets into some uncomfortable aspects of society, including race. And in 2021, this reared its ugly head in San Francisco, in Japan town, of all places. In San Francisco, there was a proposal to develop a hotel, turn it into 131 units of housing for homeless.

And a city supervisor wrote the following in response to the plan, and I'll read it to you, quote. Japan town has endured a painful history of racist, state imposed decisions that left a legacy of distrust from internment to redevelopment. We need to recognize that making decisions for instead of with the J town community can reopen generational wounds.

So there you are, so there's obviously a little celebrity myopia, but there's also displaying the race card. Now, when we look at Atherton, Atherton, for those who are not familiar with Northern California, Atherton is just north of Palo Alto, it's about ten minutes from where I live. It's a very small town, Leo and Jonathan, of about 7000 people, the average household income is $525,000.

You mentioned the zip code, Jonathan, it is indeed the most expensive zip code in America. The median home price is about $7.5 million, this is not where you go for a starter home. It's not also what you call a bustling, vibrant community. It's just a very kind of sleepy little town full of very nice houses.

But, Lee, here's what's interesting about the whole Steph Curry flap. It has obviously developed national news because it's again, a celebrity, a basketball player who made the very great mistake of writing a letter to the mayor. The old joke about what is the e in email? It stands for evidence, just don't put anything down in writing.

It's much smarter for him to have invited the mayor over and ordered him personally. Instead, he wrote a letter, as did a few years ago, Mark Andreessen, the noted venture capitalist here in these parts, also railing about development. But, Lee, what's interesting about this is what I think the media don't quite capture.

And what people need to understand, is that this ultimately is not a fight over affordable housing, because the issue here is developing a group of townhouses that I think if they actually see the light of day, they're gonna be anywhere from 3 to $5 million. Now, is that affordable housing in California?

I don't think so. So, Lee, maybe it's, at this point you should explain really kind of what's going on in Atherton, how that ties into the bigger mess of housing in California.

>> Lee Ohanian: Well, the state puts out essentially demand to communities to come up with a housing plan for the next eight years.

 

>> Bill Whelan,: Right.

>> Lee Ohanian: So what Atherton just went through, and what every community just went through are how many houses they would build between now and 2031. And, Bill, what's problematic about this is that the state is essentially forcing communities into a one size fits all solution. The state says, we're not building enough housing, so let's go ahead and force communities to do this.

Well, take a look at Atherton, 7000 people, it's five square miles. Atherton chose many years ago to have a lifestyle that was going to be fairly bucolic. There's a minimum lot size of one acre single family homes. As far as they know, Bill, I don't know. Is there any commercial activity there whatsoever?

 

>> Bill Whelan,: Yeah, there's a car wash.

>> Lee Ohanian: A car wash?

>> Bill Whelan,: So Atherton is divided by El Camino Real, which runs from San Francisco down to San Jose. And there is a little office space here and there. There's a hotel, there's a car wash, as I mentioned. So I'll get my car washed.

There are a few small offices, leave for some real estate and so forth. But, no, it's not a bustling place. If you live in this area, you don't set up your business at Atherton. You do it in Palo Alto or nearby Menlo Park, but not Atherton. It's a residential community.

 

>> Lee Ohanian: It's a small residential community. Those who live there specifically wanted to have a particular lifestyle. And now the state is somehow thinking that Atherton can help solve its housing problems, which is just silly. And, Bill, as you pointed out, Atherton, the median home price is $7.5 million.

The average household income is north of half a million dollars. And what Steph Curry, San Francisco Warriors basketball star, was concerned about is that he and his wife bought a house for $30 million that now is going to back up onto a property where a developer may put in 16 condominiums or townhouses.

And, Bill, as you mentioned, these townhouses would sell for north of 3 million, perhaps 5 million. So this has nothing to do with affordable housing. It's silly for a community like Atherton that is essentially just a bunch of one plus acre single family homes, along with, you mentioned, a car wash.

And there's a 20 acre park that was deeded from Stanford, the Menlo Park. And the city council mayor is trying to figure out, well, you're forcing us to build 348 new units between now and 2031, how are we going to do that? Are we supposed to go walk from door to door and ask people and put a gun to their head and say, I want you to tear down your house and put up a fourplex?

And that's essentially what's going on here, Bill, because they have very few options for building new houses other than to say, we're gonna force people to put in these kinds of units. And what Atherton came up with, essentially, was to say, here's our plan. They've submitted a plan to the state.

I don't know if the state will accept that plan or not, but they said we've supposed to put in 348 units. Well, our plan is to put in 280 to 300 accessory dwelling units, or what are more commonly known as granny flats. The idea that people who have single family homes will put in a small type of studio, 1000 square foot unit.

But this is simply government overrule reach. Housing should be built where it's affordable, where communities want more housing. This doesn't satisfy Atherton whatsoever and won't move the needle in any way about achieving affordable housing in California. It's a silly requirement to force communities such as this to come up with, hey, you've gotta build 350 more units to do your fair share for California housing, why?

Bill, I did a calculation that the taxes paid by Atherton, income taxes and property taxes are north of three quarters of a billion dollars. At some level, we should be thanking the people who live in Atherton for all they do for us, including Steph Curry, who's paying? Let's see, on a $30 million house, probably $350,000 a year in property taxes.

Steph, thanks, Keep doing that for us. Please stay with the Warriors and don't go join another team. And we should be leaving Atherton alone when it comes to forcing them to build more housing.

>> Bill Whelan,: Now, to its credit, Lee, Atherton did not try to do it Woodside, nearby Woodside tried to do.

Remember, they're the town that tried to impose the infamous mountain lion sanctuary provision to try to get out of housing development. So I guess maybe Atherton's not privy to mountain lions or critters or anything like that. We're gonna try to duck it but here's the question. Lee, you mentioned that Atherton has to send in a compliance to the state as do other cities in California, as Jonathan mentioned in the opening, a lot of cities are bothered not to do this right now.

So the state will do what if they don't get something from the city or not to their liking? The state will step in and do its own thing, right?

>> Lee Ohanian: Well, Bill, Jonathan mentioned what's called the builder's exception. So if a community does not have an approved plan, then builders can go in and start building without city oversight.

And this is what happened in Santa Monica, Santa Monica let their plan lapse. I don't think it was anything intentional, I think it just happened. Builders saw this and just jumped on it, thinking, okay, Santa Monica, they're licking their chops and thinking, let me start tearing down some houses and putting up three story and four story condos and townhouses.

I don't know what the current status of that is, but at the end of the day, Bill, we talked about CEQA, California Environmental Quality act. That's really been weaponized to fight development. But at the end of the day, a lot of people would love to live in coastal California.

Coastal California is very, very expensive. It will continue to be expensive, not everybody can live there. And the simple economics says that you've got a budget, you live where you can afford to live. And there are affordable areas in California, and we should be thinking about those areas.

And we've often talked on this podcast about the two Californias, and there's another California out there that's much more affordable, that's less glitzy and less ritzy, and there's more poverty, and it's inland California. And that's a California that, in my opinion, has really, really been neglected by those folks in Sacramento.

 

>> Bill Whelan,: So, Lee, there's a poll came out yesterday. Public Policy Institute of California PPIC released a poll Wednesday. There was good news for Governor Newsom, he got a 58% job approval. That's up about four points since before the election. But like all polls, you go dig into some of the numbers and there's some trouble here.

One is, again, a plurality of Californians think the state's on a right track. So they may like the job the governor is doing, but they don't feel good about the state itself. They then got into the issue of housing, Lee and Jonathan, here's what they found. 70% Of adults and 74% of likely voters, say, housing affordability is a big problem in their part of California.

45% said the cost of their housing makes them and their families seriously considering moving out of that part of California where they currently reside. 34% say they would move outside the state. And here's the capper, nearly nine in ten adults and likely voters are at least somewhat concerned that the cost of housing will prevent their family's younger generations from buying a home in their part of California.

And leave the most skeptical part of California in this, where people living in the Inland Empire. People who, in theory, flee from Los Angeles to find more affordable housing in that neck of the woods. So getting back to what Jonathan asked earlier, we could talk about secal reform, which languages every year in Sacramento.

But really, outside of here, what's to be done here in California? Create more affordable housing. Cuz again, when we talk about Steph Curry, when we talk about these celebrities in Los Angeles who don't want development, affordable housing is not really issued there. But what can be done about affordable housing in California?

How can we come up with building $500,000 homes just to throw a random number out there?

>> Lee Ohanian: Well, Bill, really, I mean, the solution is to reduce regulations. It just makes absolute, I mean, what I'm gonna say now is obvious, but San Francisco is renovating one bedroom apartments at a cost of $1million.

I just have no idea how they can spend that much money putting in new carpet and redoing the kitchen and the bathroom, and put some new paint on the wall. Somehow that's working out to be $1 million. There's just enormous opportunities to reduce the regulatory burdens on builders, particularly those who build in the sphere of what's called affordable housing.

Sadly, the construction costs of building an affordable house are much more than building a market rate house. We simply let the market work, there's a lot of opportunities to build lower cost housing. Labor costs are lower, land costs are lower away from the coast. These are much more affordable, these are areas that we can lever in terms of trying to reinvigorate those economies.

There's only so many people are gonna fit into Beverly Hills and Santa Monica and Atherton and San Mateo and Palo Alto. Only so many people can afford to fit into those places. We should just need to realize that and figure out that there's other areas that we can build in.

A lot of other areas, California is remarkably densely very unpopulated outside of the coast. So there's an awful lot of opportunities to create this activity, but that never really seems to gain much traction within the state.

>> Bill Whelan,: Yeah, but the next time we do a podcast, it'll be right around the time the governor is doing his state of the state.

So let's see what he has to say about housing.

>> Jonathan Movroydis: Gentlemen, let's talk a little bit about Bay Area native, Tom Brady, the future Hall of Fame quarterback, considered by many to be the greatest player of all time, announced his retirement yesterday on Instagram after a 23 year career.

He's expected to join Fox as an analyst. Last year, he signed a ten-year contract with the network worth $375 million. Considering that he will be broadcasting from Fox's Los Angeles studios, he may be looking at a hefty tax bill if you combine federal and California state income taxes.

Lee, in 2021, you wrote about why athletes may wanna think long and hard before working or playing and living in California, given the state's heavy tax burden and high cost of living. But for Tom Brady, if he elects to fly into California and work once a week, flying in from Florida, I assume that he can save at least a little bit of money, right?

 

>> Lee Ohanian: Jonathan, I would love it. I would love it if Tom Brady were to make California his home. Sadly, he is not. I think he will be one of those fellows if he doesn't already have. Bill, if he doesn't already have a home in Florida, I think he's gonna get a home in Florida where there's no state income tax, lots of golf courses, good weather for some parts of the year, California-like warm, sunny beaches.

So, yeah, Jonathan, I once was speaking with a fellow who worked in the golf industry, and he rattled off the top 20 PGA Tour, Professional Golfers Association Tour winners of that year. And there were people like Tiger Woods and Phil Nicholson, people who had lived in California at one time.

And he told me, of this top 20,18 now live in Florida. And he said three words, no state income tax. I guess that's four words, four words, no state income tax. So that's what we're gonna find with Brady. Yeah, the tax code is complicated in terms of California will take whatever they can.

If you think you've earned income in the state of California, then you've got to file those taxes. But Brady is gonna save a lot in tax dollars, considering that our class of income tax rate is 13.3%, that would apply to an awful lot of what Brady earns compared to Florida.

I've already got him going to Florida, but if he went to Florida, he would be paying zero. So yeah, he can save himself an awful lot by not living here.

>> Bill Whelan,: Yeah, the Brady housing situation is complicated, because he was playing in Tampa until he, well, we think he's retired now.

I don't think he could come out of retirement again. It will come a joke at a certain point, although I do know a team in San Francisco would be keenly interested and we could get to that in a moment if you want. But his ex-wife has apparently got a home in Miami now.

He is looking at a place in Miami, too, that's where the kids wanna go to school. I was thinking, Lee and Jonathan to be really devious about this. If the goal here is to minimize his time in California doing business, maybe he wants to cut a deal. It's a $375 million deal and if Fox is paying that much money for him, they're obviously desperate to have his services.

I wonder if he could play hardball and say, I'll do the studio hits from here in Florida, I won't come out to LA for that. I'll reluctantly go do the games in Los Angeles when I have to. But maybe he could try to play around that and try to avoid going to the California games, just ways to avoid California taxes.

But we joke about this, but it is a serious thing for athletes and as we see now with other wealthy people leaving California. You mentioned Tiger Woods, Lee. Tiger Woods went to Stanford for, I think two years. And I remember, cuz I was working for Governor Wilson. We put this to a speech right away the moment it happened, as when he announced he was going professional.

It coincided with him announcing that he was now a Florida resident for one reason, he was not gonna pay income tax on all his newfound wealth. You see it happening time again. So, let's see how TB 12 decides his time. Now, if he does pull a 180 on retirement yet again, decides he has more football in him, the speculation is he would go to the Raiders.

His former offensive coordinator is the head coach there, it's a natural fit. But there are the San Francisco 49ers who Lee and Jonathan have this, a rather ironic existence right now. Whereas the tech sector in the Bay Area is laying off people left and right, the San Francisco 49ers are hiring and they're hiring quarterbacks.

They went through four quarterbacks in the last season, tragically, including the last game. Maybe Tom Brady wants to play one last season in the Bay Area, even if he's willing to pay the taxes.

>> Lee Ohanian: Bill, I'd love that. I'd love to see him play for the 49ers or for the Raiders.

We can make it a lot easier for him with that 13.3% income tax rate. But if that income tax rate changes, it's only gonna go up, sadly, it's not gonna go down.

>> Jonathan Movroydis: Yeah, very good. Well, this has been very interesting and timely analysis as always, gentlemen, thank you for your time.

 

>> Bill Whelan,: Thank you, Lee, thank you, Jonathan.

>> Lee Ohanian: Always fun, gents.

>> Jonathan Movroydis: You've been listening to Matters of Policy & Politics, the Hoover Institution podcast devoted to governance and balance of power here in America and around the free world. Please don't forget to rate, review, and subscribe to this podcast wherever you might hear it.

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Please visit the Hoover website @hoover.org and sign up for the Hoover Daily Report, where you can access the latest scholarship and analysis from our fellows. Also, check out California On Your Mind, where Bill Whalen and Lee Ohanian write every week. Again, this is Jonathan Movroydis sitting in Bill Whalen's chair this week.

He'll be back for another episode of Matters of Policy and Politics. Thank you for listening.

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