California’s judges, meet John Maynard Keynes

California's lack of affordable housing and high cost of living have been getting a lot of public attention lately. Unfortunately, what is generally overlooked is the substantial contribution the state's judges have made to these problems. The key to recognizing their contribution lies in an aphorism of a long-dead economist.

John Maynard Keynes is now famous largely for a theory and an aphorism. The theory, Keynesian economics, suggests that government spending can help control economic cycles. The aphorism is: "In the long run we are all dead."

The aphorism is not a cynical comment about the brevity of life. In context, Keynes was reminding people that the immediate effects of a policy can differ from the policy's long-term effects. California has the highest poverty rate in the country when the cost of living is part of the equation, and the state's extraordinarily high housing prices comprise much of those living costs. California is now "in the long run" from decisions made decades ago.

Some of those decisions were legislative. However, the state's appellate and Supreme Court judges -- the ones whose published opinions become law throughout the state -- have contributed a great deal to our problems. A few key points:

Many decisions were unnecessary. For example, developers need to know when they can finish a project without having the rules changed. In some states, zoning gives a right to build. In California, judges decided that government can change the rules until a slab has been poured in good faith reliance on a valid building permit, and sometimes even later. This is a judicial doctrine, untethered to specific constitutional language. In order to offset the risk of being blocked after years of effort and millions of dollars of investment, developers will not build housing unless they expect higher sale prices. The long-run result is that housing will cost more and there will be less of it.

Many decisions are against the law. For example, California's environmental review statute commands judges twice, and the procedural statute commands judges once more to defer to cities and counties when reviewing environmental decisions. (The technical phrase is the "substantial evidence" test.) Judges "interpreted" that to defer to the challenger in many situations and even to ignore the city's evidence. In the short run, judges signaled their virtuous concern for the environment. (Sort of; many challenges are about property values and private views.) In the long run, the result is more studies, more lost time and more risk -- and thus higher prices, less housing, and fewer middle-class jobs.

This is still going on and will get worse. Judges will award attorney fees to people fighting housing, even if all they were doing was protecting their property values. By contrast, developers who win their cases do not recover their fees. In one recent case, when an environmental group sued unsuccessfully to stop a park project, an appellate court held that the fee award depended on whether judges liked the politics of the loser; politically favored groups need not pay the other side's fees even after losing expensive lawsuits.

The U.S. Supreme Court has held that development conditions must mitigate the impacts of the project. To get around that, the California Supreme Court upheld a set of price restrictions on new housing by characterizing them as mere economic regulations -- even though the price restrictions were conditions on new development and only on new development. To justify the investment, lower prices on some units require higher prices on all the others, plus some more to cover compliance costs. Most of the judges who agreed with that evasion -- Chief Justice Tani Cantil-Sakauye and Justices Carol Corrigan, Goodwin Liu, Mariano-Florentino Cuéllar, Leondra Kruger and Ming Chin -- are still on the court.

The California Supreme Court required that "large" -- which it did not define -- projects produce detailed studies on their greenhouse gas impacts or comply with a local plan. However, the court -- including again Cantil-Sakauye, Liu, Cuéllar and Kruger -- refused to say they would actually uphold either approach. Thus, large projects now face extra studies followed by costly litigation with no assurance that anything will work. If you doubt this was a political decision, consider that the court issued its opinion to coincide with the opening of a major United Nations conference on global climate change. The premise of the opinion is nonsense: Development allows people who already exist to move, so no housing project, no matter the size, increases global emissions. Indeed, given California's Title 24 regulations, moving people here probably reduces total emissions.

Judges have had a major impact on housing costs, perhaps more than any other level of government. Most taxing and land use decisions arise from local governments or the Coastal Commission, but one city's silly idea becomes state law after an appellate court or the Supreme Court has published an opinion upholding it. These are the decisions that raise the cost of construction and housing. The full list of harmful decisions could fill a book.

These rulings exemplify Lord Keynes' aphorism. These rulings have éin common short-run effects that are different from their very harmful long-run effects. In the short run, judges' new rules hurt only the party who loses that lawsuit. In the long run, the market adjusts: homebuilders and other middle-class job creators will not supply their product until there has been a compensating increase in the market price of what they sell. Supply shrinks and prices rise. The harm caused by the state's judges takes longer to manifest, but it is there, nevertheless, and it is substantial. 