By BENJAMIN DACHIS

The Business Journal reported last week that the median price of a house in Los Angeles dropped nearly 4 percent in October. Of course, "dropped" is a relative term because you still need $525,000 to buy the average home here. With most workers priced out of the local housing market, Mayor Antonio Villaraigosa is offering up a new affordable housing plan.


His plan, dubbed "inclusionary housing," would force developers to sell a percentage of their homes at below-market prices.


As a new resident of Los Angeles, I am living the affordable housing crisis first-hand. I am paying nearly 40 percent of my income in rent because I work near Santa Monica and didn't want a two-hour commute. Middle-income earners like me are eating mac and cheese in exchange for manageable commutes. Unfortunately, Mayor Villaraigosa's plan will make my plight, as well as thousands of low-income households throughout the city, worse not better.


Inclusionary zoning is really a hidden tax that makes it harder for everyone to find and afford housing. A 2004 Reason Foundation study by San Jose State University economics professors found inclusionary zoning laws already in place in parts of Los Angeles and Orange County have increased housing prices by $33,000 to $66,000 per home. In high-priced cities such as San Juan Capistrano and Laguna Beach, inclusionary zoning has added more than $100,000 to the price of each new house, the professors found.


To make matters worse, the study found the laws also prompted developers to build 17,296 fewer homes in L.A. and Orange County during the seven years after the adoption of inclusionary zoning regulations. That's $11 billion in housing that the laws scared away.


And while the inclusionary housing plan is driving up housing prices and reducing supply, it won't be producing the "affordable" houses it is supposed to. The Bay Area needs nearly 25,000 new affordable houses each year, yet that area's inclusionary zoning laws have resulted in just 228 "affordable houses" being built per year.


Good intentions

The inclusionary zoning study's authors, Edward Stringham, Ph.D., and Benjamin Powell, Ph.D., concluded, "Despite the good intentions of those who support inclusionary zoning, economics tell us that price controls on new housing will have the unintended consequence of reducing the quantity of new homes built. Rather than helping, inclusionary zoning will actually make the affordability problem worse."


So what should the mayor do instead?

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