California’s affordability crisis isn’t slowing down — so we brought on Tom Steyer to talk about what it would actually take to fix it. In this episode, we dig into his plan to build a million homes in four years, why your electricity bill is so high and who profits from it, and whether California can lead a clean energy revolution that’s already underway around the world. Housing, energy, food costs — it’s all on the table. These are the questions Californians are asking every month when the bills come due.

Introduction

Tahra Hoops: Welcome to the Rebuild. I’m one of your hosts, Tahra Hoops, joined with Gary Winslett, and today we have an incredible guest. We are joined by Tom Steyer, investor, climate activist, and candidate for Governor of California. Tom is the founder of Farallon Capital and the progressive nonprofit NextGen America.

He’s spent the last 15 years putting his own resources towards California ballot fights on climate, taxes, and economic fairness. Now he’s running on the most urgent issue facing the state: the cost of living. We’re thrilled to have him here to talk housing, energy costs, and what it would take to actually make California affordable.

Tom, welcome to the show.

Tom Steyer: Thank you very much for having me.

Housing Crisis & Building 1 Million Homes

Tahra Hoops: One of the reasons I was so interested to have you on is that I attended one of your housing talks a couple weeks ago in Los Angeles, where housing activists and yourself discussed ways to actually make housing affordable. It’s now one of the major promises of your campaign, to build one million homes in four years.

That’s a huge promise. So what does the Governor’s office actually control that could help make those numbers achievable?

Tom Steyer: There are a number of issues that have to be dealt with urgently, permitting, zoning, cost per square foot, and relationships with local cities and counties. In every one of these areas, we have to move with urgency.

And let me say, this is an urgent issue because Californians cannot afford to live here anymore. The number one bill they have every month is housing. Getting this right is not a nice to have, it’s a have to have. We are in a crisis.

There was CEQA reform last year — the California Environmental Quality Act — to try and improve permitting. I supported that publicly. There was a lot of opposition, but it got passed in the legislature. There was zoning reform last year too, which also faced opposition but got done. But there’s a lot more to go in terms of making the timing and regulation of house building as fast and cheap as possible.

In some places in California, the fee to build a house is 20% of the cost of the house. That means the price goes up by 25% just because of fees.

We also need to dramatically drop the cost per square foot of building. There are tens of thousands of permitted, zoned units in California that aren’t being built because they can’t get built to a price people can afford. There are technologies to build offsite and assemble onsite that are about a third cheaper right now, and people think the price could drop by half.

Just to give everyone a sense of how harsh this is: the average first-time home buyer has gone from 28 years old to 42 years old. There are many people in California who think they’ll never be able to buy a house. And a house is not just some asset, it’s the place where you live, where you build a family, where you build your life.

The last issue on the table is opposition from cities and counties. To a large extent, they feel that building houses is an unfunded mandate. When they permit units, they expect people to live there, and those people require education and health services that cities don’t have money for. So they push back hard.

On that score, I think I’m the only person running for governor talking about this: I will call a special election right away to close a corporate real estate tax loophole that brings in $22 billion a year to localities for education and health. That should dramatically reduce their reluctance. There’s a carrot and stick here, if we’re providing this for you, we’re going to ask something in return.

Modular & Offsite Construction

Gary Winslett: Can I follow up on the modular points? We’re huge fans of that here at the Rebuild, we love technological solutions to the challenges we face. I had a whole piece last week on the American Housing Corporation doing offsite building and assembling on site. As you say, it saves a ton on development cost per foot. How exactly would the state help with that as governor? Is that procurement standards?

Tom Steyer: I think it’s procurement standards, permitting standards, and regulations. But it’s also that people are reluctant to try new things, and this is something whose time has come.

When you talk about modularization, I think we’re actually at a stage beyond that. When I think about modular technology, I think about building rooms offsite, putting them on trucks, and taking a wide load down the highway. That’s not what I’m talking about. I’m talking about technologies that can easily build nine to twelve stories, the ability to build apartments much cheaper, as well as houses.

Gary Winslett: So you’re talking mass timber, that kind of thing?

Tom Steyer: Yes, we’ve looked at that for a long time. But a lot of this is about building walls and floors offsite and assembling them on site. It’s been done very successfully with some of the biggest builders and homeowners in the world. The technology is here. The question is how we get it moving, and making sure the jobs that come out of this are good-paying, organized jobs.

Tahra Hoops: This all sounds like a no-brainer to me. I’m originally from New York City, which did a lot of building in the past. I grew up in a row home, everything was quite vertical. I’ve been in Los Angeles for two years now, and the first thing I noticed was just how flat everything is. I’d go on walks with my dog and think, we could be doing so much more here. Why do you think Los Angeles and California as a whole have been so slow to build?

Tom Steyer: I think there are a couple of reasons. One is cultural. When people are used to low-rise, they can’t imagine high-rise. They find it unpleasant to think about. But if you build it, that was true in New York. Before they built apartment buildings, everyone said, “I’ve never lived in an apartment.” Then they built some really nice ones and people said, “It’s great living in an apartment.”

The other thing is there are reasons in terms of liability for developers as to why we never build condos in California. We only build rental apartments and houses, and it has to do with differential liability laws. There are a bunch of things we need to change.

But the biggest issue is there has been no sense of urgency. I went down to LA to look at a low-income housing site with the person who developed it, and they said it took three to four months after the building was fully built to get hooked up to the grid. No one can move into a building with no electricity. So that’s three to four months where you’re paying interest on your loan, paying all your costs, with absolutely no revenue.

That’s outrageous. We need to stop saying “let’s have the meeting in three months” and start saying “we’re having the meeting this afternoon.” There has to be a sense of urgency. Including ADUs, let’s get going, get units built, and make them at a price point people can actually afford.

Tahra Hoops: The process isn’t working.

Tom Steyer: We have decades of knowing the process is not working. So let’s stop that attitude. Affordability is at the center of our campaign. The ability to pay your bills at the end of the month is the biggest issue in California, and this government in DC is crushing us. I know it’s just one station, but $8 gas, what does that do to your monthly budget?

Energy Costs & Electricity Reform

Gary Winslett: California has some of the highest electricity bills in the country, and you’ve made bringing those costs down a centerpiece of your campaign. Your pledge is to lower energy costs by 25%. How are you going to get that done?

Tom Steyer: I know everybody feels like that’s impossible. Let’s be clear: California pays twice the average cost of electricity in the United States. If we drop rates by 25%, we’ll still be 50% over the national average. So when people say that’s a big cut, yes, it’s a big drop to a still-terrible place.

The three big utilities in this state are legal monopolies. You’re not allowed to compete with them. And monopolies always overcharge and always produce terrible service. They always explain that nothing else is possible, that without them, we go back to burning trees.

Here’s how utility economics actually work. Most people think electricity companies charge you for electricity, have costs, and the difference is profits. That’s not true. What they do is get a capital expenditure accepted by the Public Utilities Commission into what’s called the rate base, and they get a guaranteed return on that rate base. So their incentive is to get capital expenditures into the rate base.

If you and I are running an electric utility, we could put $200 million into the rate base and make $20 million, or do the same project for $100 million and make $10 million. It’s very much in our interest to choose $200 million. There’s no incentive, in fact, there’s a huge negative incentive, to do things cheaply. That’s a perverse incentive. I’m not angry at these people; that is what the state set up.

And meanwhile, there is a gigantic electricity revolution going on in the world. The cost of clean energy is incredibly cheap and getting much cheaper. The cost of batteries is incredibly cheap and getting much cheaper. It is much, much cheaper than fossil fuels. Several countries last year increased their electricity supply by 50% in one year. We’re talking about increasing ours by 2%. A ton of this technology is coming out of California. We need to be adopting it, not avoiding it.

No one’s walking into a utility and saying, “There’s this great new technology that’s going to reduce our earnings, we should adopt it immediately.” We need a different system. Part of it is changing how we oversee the PUC. We also need to introduce competition.

To put some numbers on it: solar and wind cost one to two cents per kilowatt hour. Batteries are a couple cents per kilowatt hour and dropped 80% last decade, with similar drops expected this decade. At PG&E, we pay 48 cents per kilowatt hour at retail. Think about that.

We’re moving to a world where local renewable energy generation with batteries is overtaking everything. But we have a monopoly here, it’s illegal to compete. We need to introduce microgrids, local competition. I’m not trying to destroy these companies. I’m saying you’re going to have to adopt the new technology. We’ll give you different incentives and pay you to do the right thing. But 48 cents versus four cents, that’s too big a gap.

Natural Gas & the Clean Energy Revolution

Tom Steyer: Everybody can see the cost of oil because you go fill up your car and get a different cost per gallon. It’s in your face daily. But nobody understands the economics of natural gas.

Traditionally, natural gas is a local market because it’s hard to ship, you can’t send it overseas easily. Oil is a completely global market. Even though nothing changed in the United States, we’re paying dramatically more at the pump because something happened in the Middle East. We’re a net exporter of oil, but the global market immediately changes everything at the pump.

Natural gas has been different. In the United States, we pay approximately three dollars per thousand cubic feet. In Europe, they pay $19 to $21 for the exact same amount. Why is that relevant? In Louisiana and Texas, they’re building multiple LNG terminals to export our cheap natural gas to Europe. And they’ve told us it won’t change domestic prices.

Really? You more than double the demand and it doesn’t change the price? In what fantasy world does that happen? Renewables are already way cheaper than natural gas for everything. Once we have a global market, which the United States is determined to create, to fatten the coffers of fossil fuel companies, everything that happens around the world affects us.

What we’re looking at with fossil fuels is a world that is already more expensive, already much dirtier, and already subject to supply shocks. And we’re saying, “That’s our future”? It’s incredibly dumb.

Tahra Hoops: It reminds me of that joke tweet, typically the average person is wrong to say the president has a lever to make gas prices go up or down. But right now is the only time where that’s actually true, because he did pull that lever.

California as a National Model

Tahra Hoops: How can we actually ensure California is a model for a national cost-of-living agenda? We started the Rebuild because we thought Democrats weren’t doing enough. What’s your vision as governor to make that possible?

Tom Steyer: Affordability is at the center of our campaign because it’s at the center of the mind of every Californian, all the time. If we solve affordability and also deliver the services people need, education, healthcare, home care, we actually become the model for the world.

This is what the 21st century is supposed to look like: entrepreneurial, innovative, growth-oriented, and bringing everyone along. Working people have been getting the shaft for 45 years, and that’s why the affordability crisis is exploding.

We absolutely have the ability to create the best society in the history of the planet. Literally. We are rich enough and smart enough to deliver everything we’re talking about. We just need to drive down costs and be smart. If we do that, we restore the California dream, and we show what a society is supposed to look like: inclusive, dynamic, entrepreneurial, and forward-thinking. California invents the future. This is our chance to invent a really bright one.

Tahra Hoops: From the top of our coast to the bottom, we have been lead innovators. There’s been a lot of talk about people leaving California, saying it’s not the place to build and imagine anymore. I reject that.

Tom Steyer: The thing a lot of people don’t seem aware of is that young people are enduring, not living. They feel like their chances don’t look bright. Many think they’ll never buy a home. Many think great public schools are beyond them. That is not okay. Restoring that dream in a new time, with a new vision, that’s honestly what this campaign is about.

Tahra Hoops: As someone who is 27, I don’t think I’m buying a house next year— don’t have that in my plans anytime soon.

Rapid Fire Questions

Gary Winslett: Other than housing, what is something that you think is too expensive?

Tom Steyer: Food. Electricity’s too expensive, housing’s too expensive, and food’s too expensive. We need to deliver delicious, healthy food to our citizens, and we can do that. We grow the greatest food in the world in this state.

Gary Winslett: Food at the grocery store is right in your face, like gas prices. And people don’t feel like they can substitute down. You can try to do without something else, but you can’t not go to the grocery store.

Tom Steyer: What people do is substitute unhealthy food for healthy food. That’s the real issue. People can buy food, but the food that’s affordable has been designed to addict them to it, and it’s terrible from a health standpoint.

Gary Winslett: Last question, what is a policy or innovation that you think is underrated?

Tom Steyer: Batteries. Batteries are going to change the world. The ability to have a long-duration, cheap battery solves all the problems, because the only issue with wind and solar is when the sun doesn’t shine and the wind doesn’t blow. With the right batteries, they’re not intermittent fuels anymore. They’re baseload. That’s where we’re going.

But the second issue is cars. What is an electric vehicle? It’s a battery with a car built around it. This week, BYD, the biggest EV maker in the world, announced a $26,000 car that goes 440 miles on a charge, with one in development that goes 600 miles. Game over.

The technology is here for an electricity revolution. When you burn fossil fuels, you lose about a third of the energy, and for a whole bunch of reasons, you really end up with only about a third. We’re going to electricity on a massive level.

I wrote a book called Cheaper, Faster, Better: How We Win the Climate War. We’re not saying to people, “Buy a crummy, expensive car because it’s good for everyone else.” We’re saying, “Buy the cheapest car on the planet, and it’s amazing. And by the way, the pickup is fantastic.”

Tahra Hoops: From a competitive standpoint, we are dragging behind. China has understood the power of batteries for a long time and has built a monopoly around them. We’re slowly catching up, and we’re shooting ourselves in the foot if we don’t get to a united front.

Tom Steyer: The tech is coming out of California. But look, China doesn’t have any oil and gas. They have absolutely no political reason to prolong fossil fuel energy. And if you look at the history of the world, the country that dominates in energy runs the world. England dominated in coal. We dominated in oil. It’s over. The costs have crossed forever.

Battery costs are going to go down 80% this decade. Fossil fuels aren’t going down. They’re subject to interruption. They’re dirty. And they aren’t even paying their actual costs, they’re turning those costs into the bill paid by the people in Altadena and Pacific Palisades, saying: you want to know the tax on our emissions? Your house.

Tahra Hoops: I want to end on a positive note.

Tom Steyer: If I sounded negative about energy, I’m actually sensing something completely different. We are absolutely going to win this. We are at the point where there’s no doubt who the winner is. The faster we get on that train as a state, the faster everybody benefits. Cheaper, faster, better. Why don’t we lead the world and produce the technology, much of which is unique to California, that we can use to create huge companies and world markets?

Tahra Hoops: I love hearing that. Again, thank you so much for being on here. We wish you luck and can’t wait to see how far you’ll go.

Tom Steyer: Thank you very much. I appreciate it.

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