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Accelerating technological change triggers regulatory reflex in Santa Cruz

By Steve Blum
Tellus Venture Associates
Special to Santa Cruz Tech Beat

November 4, 2015 — Santa Cruz, CA

San Francisco voters decisively rejected an attempt to clamp stiff limits on Airbnb and other online platforms that make it possible for people to rent out spare rooms and empty houses by the day. The measure was on the ballot in the first place “because the hotel industry is threatened,” said California lieutenant governor Gavin Newsom. He was the keynote speaker at the Monterey Bay Economic Partnership’s state of the region conference in Santa Cruz.

It’s not only the hotel industry that’s feeling the heat. Property owners can often make more money on a daily basis via Airbnb and similar outfits than they can renting out houses and apartments by the month. Reducing the supply of traditional rental properties raises the price. It’s no surprise, just simple microeconomics.

One solution is to embrace the market and build more places to live. But whether it’s meant for the open market or government managed programs – so called affordable housing – new construction faces vocal opposition from neighborhoods and seemingly endless regulatory hurdles. “If there’s one thing I would do, it is change CEQA [the California environmental quality act] to make it possible to build more housing in ways that are predictable,” Lynn Reaser, chief economist at the Fermian Business and Economic Institute told the audience.

That’s not likely to happen. Newsom made it clear that it’s a third rail he won’t step on – he jokingly said he was willing to get out front on “marriage and marijuana” but not CEQA.

Which leaves regulation as the tool of choice for confronting the law of supply and demand, something Santa Cruz mayor Don Lane favors. “The greatest need we have in our communities is affordable housing, more than visitor accomodations,” he said.

Managing a shortage is not the same thing as fixing it, though. Newsom said that economic change is accelerating. “The tech genie is out of the bottle, you can’t stop the future,” he said.

[Editor’s note: Presentations from this event are available for download.]

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