Affordable Housing

Affordable Housing Debate Pits California Cities Against Suburbs. Both Need Freer Markets.

A flaw in a proposal that would let developers build more high-density apartments and condos is that it doesn't go nearly far enough

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Whatever one thinks of Sen. Scott Wiener's controversial bill that would make it easier for developers to build high-density apartments and condos around bus and rail stations, this much is clear: It has jump-started a much-needed conversation about housing construction and the way that limited supply is driving up home prices.

It's a close call, but I overall like the measure because, hey, it can't hurt to make it easier to build any type of new housing. Unfortunately, Senate Bill 50 ladles on layers of new mandates in exchange for the regulatory rollback—and it promotes only the one particular type of housing that planners prefer. The measure only deals with a small portion of the problem: rules that restrict higher-density construction in many suburban areas.

My Southern California News Group colleague Susan Shelley encapsulated her opposition to the bill in her recent column: "So if your neighborhood has a community college and a bus stop, you could wake up one morning to find the house next door surrounded by a construction fence and about to become a four- or five-story apartment building with no parking spaces."

I get the concern and rarely disagree with Shelley, but there's nothing free market about current single-family zoning rules. The suburban landscape largely is a creation of subsidies and zoning rules, which mandate only one house per certain size of lot and require umpteen parking spaces for every new shopping center, restaurant, office and church. Everything is micromanaged in the planning department.

I'm on the building committee of our church and have closely examined many proposed construction projects. It is so hard to build, expand or try any new development ideas because these planning edicts—designed mainly to protect our suburban way of life, and backed by residents trying to bolster their property values—are costly and inflexible.

Many suburbanites are aghast at "New Urbanist" efforts to create walkable, transit-oriented communities in their backyard. They never bargained for this change in philosophy, but those who live by government rules need to be prepared to die by them. On the other hand, I've got nothing against what my urbanist friends decry as "urban sprawl," and staunchly oppose their use of those same planning rules to force us to live like ants on a hill.

The debate over Wiener's bill is, on the surface, about housing supply. As the Legislative Analyst's Office has found, California is vastly underbuilding the number of houses needed to meet our population growth. It's a supply and demand issue. Land-use regulations and fees, which account for as much as 40 percent of the cost of every home built, are artificially restricting supply. That's why you need $800,000 for a modest home in Orange County.

But the underlying debate is about two visions of our California landscape. One side wants to protect our suburban model and the other side wants to urbanize. It's a false choice driven by their own personal preferences. We need more apartments and condos. We need more single-family neighborhoods. We need to allow builders to provide the housing products people want, and different people want different things. The same people want different things at different stages of their lives. I live on an acreage, but now that we're empty nesters, my wife and I plan to move into the city. That's why I'm squarely on neither side.

After my housing column last week, I've heard from readers who oppose the legislation. Frankly, I'm frustrated by some of their arguments. To summarize some comments: If you can't afford to live around here, then maybe move someplace else. There are too many people here already and too much traffic congestion. If your kids can't afford California, they should consider less-costly states. Such views transcend political affiliation.

Obviously, home prices in California, and especially in picturesque coastal communities, are going to be pricier than in the Great Plains. But critics often miss this point: Those prices are much higher than they need to be because of building limits, backed by Not In My Back Yard (NIMBY) attitudes. I'm sorry, but the "I like how things are now" argument does not make for sound public policy.

However, advocates for the SB 50 approach ignore how their own preferences, which have been guiding California land-use policy for at least two decades, are the main cause of the housing shortage. Housing markets are regional. Wiener is from San Francisco. You can build all the multi-family dwellings imaginable in that city and nearby Oakland and not make a dent in the Bay Area's shortage. Earth to New Urbanists: By setting aside the bulk of that area's land as open space, you've constricted supply more than the suburban advocates.

The Wiener bill's flaw isn't that it goes too far in allowing more construction, but that it doesn't go nearly far enough. It's time to open housing to market forces.

This column was first published by the Orange County Register.

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  1. What Would John Do?

  2. To truly solve the affordable housing crisis on the west coast, what’s needed are giant apartment towers, each containing their own markets and entertainment districts so people won’t have to rely on cars to get their basic goods and services. They could be called “Blocks” and protected by their own government-approved Citi-Defense Militias.

    Also, sustainability could be promoted through the use of recycled food.

    1. Recycled food is good for the environment and ok for you.

    2. In Paris I seem to remember seeing an entire city within a city all under the ground. I guess this how we all eventually turn into lizard people in the future.

    3. And of course, such beautiful communal living will require rules. You know, how late you can be out, what you can buy, what kinds of associations you can be in…

      Everyone will know that these beneficient rules are for the safety and harmony of the community. Some might need help to understand that. Help will be readily available.

      1. To ensure efficient service, the rules can be enforced by a select group of officers that have the authority to provide on-the-spot arrests and judgement of the accused. With advances in modern technology, we may even be able to clone the perfect specimens for this from our best political figures, and provide them with genetically-mapped firearms so criminals and right-wing death squads can’t use them.

        1. BOOOO! That movie sucked!

      2. I am from California and you cannot trust people to the right thing. They have to be told what is right by the state government.

    4. Rechewed beans would go great on a taco.

    5. Actually, the appartment towers are an excellent idea. Just the thing to amp up supply and drive down rents! But, the recycled food idea? Seems you’ve had some experience with recycled food. So how’s it taste?

  3. As the Legislative Analyst’s Office has found, California is vastly underbuilding the number of houses needed to meet our population growth.

    From the Legislative Analyst’s Office: California Losing Residents Via Domestic Migration.

    Uh. . .

    1. Yeah, they can’t afford the rents and home prices.

  4. There is a local message forum here in Irvine, and I am always shocked by how NIMBY these people are. Our neighborhood is largely older people who bought houses back in the 80’s or their children who took over the house using Prop 13’s homesteading exclusions. (These exclusions basically let a parent transfer a house to the kids without it resetting the property values, saving families upwards of $10k a year or more in taxes.)

    These people have “got theirs” and so they are going to do everything in their power to keep it that way. They decry and resist any attempt to build multi-family dwellings (and then bitch and moan about the unimaginative new house developments that park McMansions on 5000 sf lots). New office buildings, and shopping centers are also condemned because traffic.

    I live in an older Irvine neighborhood that is one of the best planned communities in the world. And it is the best not because of trails, location of shopping centers, schools, pools and parks (though they are awesome), but because it has incorporated EVERY facet of social life. There are churches nearby, and within a few blocks there are houses, townhouses, apartments and condos. My kids go to school with a healthy mix of children various socio-economic classes, and don’t get the gated community elitism that I did as a kid. And yet so many of the people who say this neighborhood is awesome, actively resist every attempt to replicate it.

    1. Very nice. Sounds similar to my neighborhood near Houston.

    2. I think this is a complicated issue in Irvine. People bought there with the understanding that the city would follow the master plan. To the extent that changing the character of the neighborhood is incongruent with the master plan, I think they have a beef.

      1. A city is not a proprietary privately developed planned community developed, including streets and utilities, on the private property of the developer and governed by a private home owners’ association organized by the private developer. In such a case, the character of the neighborhood is a condition of sale promised to the buyer and enforced by the home owners’ association.

        In a city with separate parcels, there is no promise by the seller of any particular character of the neighborhood outside the seller’s property.

        1. Actually, Irvine is a proprietary privately developed planned community, courtesy of the Irvine Company.

          1. Then, libertarian-wise, they have a right to control development on their property.

    3. There’s a specific name for places like that in which you live. I believe the term is “towns.” The difference is that most of these, miraculously, don’t require central planning to exist.

    4. I am always shocked by how NIMBY these people are

      You’re shocked by NIMBYism in Irvine?

      I grew up there – “NIMBY” is like a religion to those people.

  5. What the planners seem to want is to force high density car-free development onto suburbs while leaving the urban core inhabited by yuppies and key demographic groups untouched. I see no reason why they can’t build higher density in cities, they could even build on top of public schools and buildings like libraries, fire, and police stations, and why not build in parts of large parks too? But I guess city dwellers are already virtuous and it’s the suburbanites who need to sacrifice

    1. “I see no reason why they can’t build higher density in cities, they could even build on top of public schools and buildings like libraries, fire, and police stations, and why not build in parts of large parks too?”

      In stated preferences, the city-dwellers agree with you. In revealed preferences, not on YOUR LIFE!!!!!

    2. I don’t think these cities have any direct intentions regarding suburbs – city governments have every incentive to oppose affordable housing, regardless of what that may do to neighboring cities.

    3. It’s the renter’s who are being forced to sacrifice. Both the urbanites and suburbanites are more than willing to use force of government to abridge the developers’ property rights to construct and sell high density housing.

  6. Totalitarians hate the free market because they can’t control it.

  7. You’re chump if you spend 800k on a modest house in Orange county.

    I live in suburban Houston, and my 3000 sq ft, 5 bedroom, 3.5 bath McMansion with pool is about 290k.

    Lovin’ it! (Houston is a damp armpit with nothing to see close by, but I’m ok with that)

    1. We spent significantly more on our house, moving from Colorado where we had about the same house on 2 acres for around $500k. But we also just about doubled our income, so for us it made sense. Even after the high taxes, high housing, etc we came out ahead. And for all the dumbass policies in CA, there are nice parts of it. Great restaurants, beaches 20 minutes away, and good schools where we ended up.

      However, for the middle class- even the top range- this place puts a tight squeeze on you. Not only do you have less income, but you have to spend so much of your precious time doing things to account for crappy government services like schools, DMV, housing authorities, etc. I don’t know how people do it.

      1. Two acres in Colorado seems dreamy to me.

        1. Two acres in Colorado seems dreamy to me.

          If you don’t have to deal with Front Range traffic, it can be.

    2. Weather, weather, weather… it trumps almost everything else, especially if you’re retired and spend most of your time outdoors.

      1. ^ This x1000

    3. Good luck finding any sort of of housing for under 900K in Silicon Valley. 2 bedroom condos start at a million bucks in Milpitas or Santa Clara, with a nightmare commute to match the mortgage payments. Closer to the high tech action that same 2 bedroom condo will be more like a million five.

  8. Land-use regulations and fees, which account for as much as 40 percent of the cost of every home built, are artificially restricting supply. That’s why you need $800,000 for a modest home in Orange County

    An actual question here. Is the zoning/regs REALLY the reason for that cost? ie is that really the construction/development cost or is it the land cost? Glomming that into the same category is just simply a way to FAIL to see the actual problem here.

    If that cost is really land (and this land value study says raw land in Orange County was $2.5 million/acre in 2010 or so – TableA2 – with no big difference between ‘urban center’ and ’10 miles away from center’), the only solution is to jack up land taxes and eliminate the Prop13 distortions.

    If the cost is the sort of regs that aren’t going away (eg earthquake stuff), then the only solution is an honest discussion in CA about those tradeoffs.

    If the cost is the usual zoning/code crap, then the usual libertarian mantra about the solution will work.

    1. Based on the data source, it appears that this study only applies to buildable and built-on land values. It does not reveal values absent the any land use restrictions that existed from 2005 to 2010, which this publication and the commenters thereon have repeatedly identified as part of the problem.

      1. Then compare the data within states. That should at least normalize the data for particular states where those legal issues are likely to be consistent.

        What the data really does show – even within those states, is exactly what the author hints at. CA has both the ‘traditional’ sort of city land value – like SF where the ‘center’ value is 9x the ’10 miles away suburb’ value – and the car-centered no-there-there everywhere’s-a-suburb type of land value like Orange County where it’s only a 1.3x difference. Trying to turn SF into Orange County or vice-versa is doomed to failure – but is very likely how the political argument gets framed.

        But if you are trying to create affordable housing, it can’t be done in that state. Not without some very unaffordable 3+ hour commute. Cuz land prices are way too high for anything ‘affordable’ to ever be built now. Which explains why only luxury stuff gets built there now. And older props never make it market.

        1. More bluntly – you can stick a tent on an $800,000 lot. That doesn’t mean the tent will be affordable to live in cuz the land is too damn expensive.

          1. You can stick a 100-unit highrise on an $800,000 lot and it’s a cheap $8000 land cost per unit. For a 4-plex that’s $200,000 land cost per unit. Plus, the higher density, accomodating a higher population per area, requires less land, thereby driving down demand, and driving down or slowing the rise of land prices.

            1. THIS.

              This is the problem. Forcing a single family home, vs a 4 plex, vs a 4 story apartment, etc changes how much that land is valued, and how much total housing can come of it.

              The supposed land value is only driven up so high because there is high demand for HOUSING, which is limited by zoning, and not necessarily that the land itself would be so expensive if there was not a lack of housing. Allow more housing units, and that perceived value of $800K will drop like a rock.

    2. The zoning regs and *planning* permissions are what drive up the costs of land and they’re what requires developers to have those much-hated ‘land-banks’ of land ‘that no one is building on’ (because its in the multi-year process of getting permission to build on it).

      My house cost $210k. Bare land in this area is going for 20k an acre (if you want to really get away from everything, there are massive areas where its only 1k/acre). So approximately $45k of that cost is land, the rest is house and ‘permission to build a house’. The house is a 1600ft2 3 bedroom split ranch – not exactly a complicated build so can get some idea how much the cost to build was.

      And that’s in Yuma county (outside any municipality) when this are had, like, 3 mobile homes on plots within a half mile (when it was built) and the rest was empty.

      1. Zoning regs may drive up costs of land at the margn – but land taxes are a bigger factor cuz they are what allow developers/speculators to sit on large land-banks for years – or force them to develop the land. Taxes and interest costs are the carrying costs for that. And large speculation land banks are what massively limits land supply from hitting the market.

        A place like Houston doesn’t need ‘zoning’ cuz prop taxes are high. If you can’t pay those taxes, then you sell to someone who has an idea to develop it for better income to pay those taxes. And the neighbors end up being more concerned with making sure that the prop tax base is solid – cuz otherwise their own mill rate will go up in future. That dynamic doesn’t apply in CA which is entirely an I’ve-got-mine-fuck-you group of landowners. Those sorts of folks create zoning regs.

        1. That is true to a point… But you’re ignoring that the government has decreed tons of land cannot be built on period, OR for land that is already developed it can’t be redeveloped into anything of higher value than the single family home already on it.

          There really isn’t a ton of vacant land to build on in the important parts of the bay area, it’s all built on. You get to the super deep burbs and there’s some stuff around, but that’s because people don’t want to live there as much and so there isn’t the demand to build anything there like there is in SF proper or whatever. My home town in the north bay, like 40ish minutes from SF with zero traffic, has property values probably under 1/4 of SF itself. There’s land there still, but nobody wants to live there, so not much is built.

      2. I have a feeling that permission to build is the majority of the value of homes in America’s major metropolitan areas.

    3. It’s the zoning code crap. The more housing units that can be put on each acre of land the lower the land cost per unit. The greater the supply of housing, the lower the price.

  9. My understanding is that teh law says you still have to meet lcoal ordinances so its really just another layer of bureaucracy on top of the local bureaucracy so i see no bennifitt to the law plus i don’t like the state telling cities what they can or can’t do with their land that is even less libertarian

    1. I don’t like cities and planning commissions telling developers how much housing they can build on their own private property, which is un-libertarian.

  10. EVERYTHING needs freer markets.

    literally EVERYTHING you can think of.

  11. “California is vastly underbuilding the number of houses needed to meet our population growth.” This quote shows a complete lack of understanding of markets. If prices are not regulated markets will clear over time. That includes the California housing market. If prices are too high for some people, they will move out or not move in. There is no magical “correct” housing price in California. You can argue whether people should be free to build more housing there, but the market for the purchase and sale of homes in California is virtually a free market, so the price that gets set is the price that clears the market.

    1. In California the building code is a large reason for the lack of housing due to cost to comply with rules that are often BS. Without a building department people could build homes almost out of pocket which then eliminates the need for insurance. as it is now permitting fees alone varies from $10 to $25 per s.f. eliminating that huge upfront cost would help a lot. By the way I’m a building designer and I don’t care if people build their house out of straw, wood or brick.

      1. Maybe true, but you didn’t get my point. If all regulations were lifted housing stock would rise and a new market-clearing price would develop. At that point there would still be people who would want homes in California but wouldn’t want to pay the price. So the supply of houses still wouldn’t meet demand (in the Legislative Analyst’s Office parlance). But that doesn’t mean anything. Every product that isn’t free has people that don’t buy it because the price is too high. That doesn’t mean the supply is too low or the demand is too high. That’s not the problem in California. The problem is that government is messing with the market, as you point out.

        1. Supply would meet demand. There would be enough houses for people willing to buy those houses at that price.

          If you’re going to say ‘meets demand’ means ‘provides for everyone at every possible price point’ – well, that’s physically impossible and not what that phrase means.

        2. Without restrictive zoning regulations and powerful planning commissions restricting supply, there would be more supply. With the increased competition on the supply side, supply would then meet demand at a lower market price. Sure there may be some net in-migration due to lower prices. But in-migration would divert demand from other areas of out-migration, lowering the market prices in those areas, thereby dampening migration, and limiting rise in prices.

      2. “Without a building department…”

        But, but…what about the jobs?

      3. The CA building code isn’t that bad. IMO the major driver here is, along with urban growth boundaries, the ‘sweeteners’ that municipalities demand.

        A building code is pretty set and can be accommodated. Having to ‘negotiate’ with the city council for bullshit extraneous costs like ‘resurfacing all the roads within a quarter mile’ or ‘put 1/2 of your units up for sale/rent at substantially below market value’ crap.

        1. A building code is pretty set and can be accommodated. Having to ‘negotiate’ with the city council for bullshit extraneous costs like ‘resurfacing all the roads within a quarter mile’ or ‘put 1/2 of your units up for sale/rent at substantially below market value’ crap.

          ^ This. The building code can be an extreme annoyance (like with clearance requirements for electrical panels such that they wind up in the middle of your living room wall and it’s illegal to cover them), and they do add some cost but the real burden is trying to get that new development past the City Council and all the demands they’re going to put on you.

          Some of them are not unreasonable, like paying to upgrade storm and sanitary sewers to handle the added capacity, building new roadways, and the like. But much of it is just extortion.

          Comparing Oakland with adjacent Emeryville is instructive. Oakland is a very difficult city to build in, while Emeryville is less so. At least in the sense that Emeryville actually negotiates its demands and gets projects built. You can physically see the Oakland-Emeryville border at the spot where the new high-density mixed-use developments in Emeryville but up against the long-neglected and rent-controlled single-family sprawl-blight of West Oakland.

    2. you’re just nitpicking. there should be many more houses and apartments being built, if it wasn’t so hard to get approval to build them. obviously the market will set a price to clear the available inventory. the crazy high prices show the inventory is way too low.

  12. “You can build all the multi-family dwellings imaginable in that city and nearby Oakland and not make a dent in the Bay Area’s shortage. ”

    Bullshit.

    1. That quote is self refuting on its face. I’d be embarrassed to have printed that statement and attached my name to it.

    2. to be fair, they haven’t really tried it to find out. can’t endanger historical laundromats, or get too much shade in the parks no one uses.

  13. The Wiener bill’s flaw isn’t that it goes too far in allowing more construction, but that it doesn’t go nearly far enough. It’s time to open housing to market forces.

    Never underestimate the power of the market force.

  14. I think any politician who supports this is going to lose his or her job when their suburban constituents find out about it. NIMBY’s vote.

  15. To fight climate change all new construction should be limited to igloos.

  16. There is no housing crisis; only a population crisis. The answer is to reduce the number of people – not to build more crappy houses.

    1. Thanos approves.

    2. …reduce the number of people…

      Yeah, maybe holocaust all the renters. Maybe forced sterilization. Maybe a good bloody war.

  17. So I’ve lived in Seattle for a long time, and one of the things that really irritates me about the NIMBY attitude is that it doesn’t even achieve NIMBY goals well… Let me explain.

    My neighborhood was decided to be one of the ones that got densified some years back by the dildos on the city council. Given that tons of assholes have been moving here, and they needed to be shoved somewhere, what this amounted to was almost every single lot that is upzoned has been built up. Like every fucking one almost.

    The entire neighborhood is now a steaming pile of ugly shit apartments. Everybody hates it.

    This is largely because of the NIMBY attitude… See, what they don’t realize is that if EVERYWHERE was upzoned, no particular neighborhood would have to be completely obliterated. Instead of cramming in 200,000 new assholes in a couple areas, it would have been a few apartment buildings here, one over there, some town houses here, a new duplex there, etc.

    If it all got upzoned, no particular area would be hit hard enough to completely turn it to shit, which is EXACTLY what has happened to every area Seattle has upzoned. It’s painfully obvious, but many people I’ve talked to over the years didn’t get the concept until I explained it to them… Then they promptly said “Well why the hell didn’t they do it like that then? That would have been way nicer!” And of course it also would have helped keep property values from sky rocketing like they have too.

    *Sigh* people sure are morons.

  18. SB50 is incredibly transit unfriendly, and needlessly destroys neighborhoods. Upzoning commercial lots along major roads has the same housing benefit, and is transit-friendly, as shown by this urban planning firm analysis – a Win-Win solution.
    https://urbanfootprint.com/can-one-street-solve-the-san-francisco-bay-area-housing-crisis/

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