California Enacts Two Important New Zoning Reform Laws

Senate Bill 9 and Senate Bill 10 would make it easier to build new housing in much of the state.

Yesterday, California Governor Gavin Newsom signed into law two bills that significantly diminish zoning restrictions that block the construction of new housing in that state. This is a significant step because zoning and other regulatory barriers are the main cause of housing shortages and resulting high prices that lock millions of people (particularly the poor and lower middle class) out of areas where they could otherwise find valuable job opportunities. In addition to preventing many people from "voting with their feet" and finding job opportunities, these policies also greatly diminish overall economic growth and productivity, thereby harming the nation as a whole, not just those immediately effected. Recent evidence suggests that the problem is even more severe than previously recognized.

There is a strong cross-ideological case for ending exclusionary zoning. It would simultaneously massively expand opportunities for the poor and minorities, eliminate major violations of private property rights, and boost economic growth.

California has some of the most restrictive zoning in the entire nation. Because of the state's size, location, and economic significance, its restrictions cause more harm than those anywhere else in the country. Until now, zoning reform in California has been stymied by opposition from "NIMBY" interests, progressives suspicious of free markets and property rights, and some conservatives (though the latter have little power in the overwhelmingly Democratic California legislature). But the enactment of SB 9 and 10 is a major shift. Here is a helpful overview of the two bills. And here's a more detailed description of SB 9, the more important of the two laws.

To briefly summarize, SB 9 allows owners of lots in areas currently zoned for single-family residences only, to build a second housing unit on the property. In addition, they can also divide the lot into two separate properties. A property owner who takes both steps can increase the number of units on his or her plot from one to as many as four.

Significantly, SB 9 exempts the new housing it authorizes from a variety of constraints often used by local "NIMBY" groups to block new construction, such as the CEQA law, which local activists have leveraged to stymie all kinds of new development, including even forestalling an increase in student enrollment at a major state university.

A study by the Terner Center for Housing Innovation at UC Berkeley, which is more pessimistic than many SB 9 supporters, still finds that the bill would allow the construction of some 700,000 new "market-feasible" residences, though it also warns that the actual results are likely to fall short of this figure, because it will take time to do all that building, and many owners won't take advantage of their new rights. Still, even if the true figure turns out to be only half that many, that's still 350,000 new homes, enough to house a million or more people.

In addition, the passage of SB 9 by large majorities in both houses of the state legislature could generate momentum for further zoning reform. Given California's political and economic significance, reforms that succeed there could also be copied in other states.

Orange County Register and Reason columnist Steven Greenhut, an expert on California politics and public policy, has some additional thoughts on the potential benefits of SB 9 here. Among other things, he rightly criticizes those conservatives who have betrayed their own supposed commitments to property rights and family values by allying with NIMBY Democrats to oppose the bill.

SB 10 is a much less sweeping bill. It allows, but, unfortunately does not require, local governments to upzone parcels located in "transit-rich" or "infill" areas for up to ten housing units. SB 10 is a considerably watered down version of previous reforms offered by its principal author, State Sen. Scott Wiener, California's—and perhaps the nation's—leading legislative advocate of "YIMBY" housing policies. The obvious limitation is that the decision on whether to proceed with  upzoning rests in the hands of local governments—the very entities most responsible for blocking new housing construction in the first place.

Still, a large part of the state fits in the areas covered by SB 10, and at least some entrepreneurial jurisdictions might take advantage of it. And, like SB 9 (though probably to a lesser degree), the passage of SB 10 could help generate momentum for further reforms.

Even under the most optimistic assumptions about the effects of SB 9 and 10, these reforms will fall well short of fully addressing California's housing crisis. But they are major steps in the right direction, as are similar recent successes in other jurisdictions. Hopefully, reformers can learn from and build on these victories.