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California's Housing Reform Bill Is a Hot Mess. It Would Be Great If It Passed.

SB 827 is a progressive-backed mix of climate change goals and tenant protections. It is also a major free market reform.

Apartment constructionBoaz Yunior Wibowo/Dreamstime.comA climate change bill sponsored by a California Democrat with unimpeachable progressive bona fides and endorsed by the Natural Resources Defense Council does not sound like the recipe for sweeping market reforms.

Yet that is exactly what SB 827 is.

Introduced in January by state Sen. Scott Weiner (D–San Francisco), the bill would override local zoning restrictions on residential plots near transit stops, allowing developers to build up to eight-story apartment buildings where currently only single-family homes are permitted.

Weiner says his bill is essential to meeting California's ambitious carbon reduction goals.

"Because of low-density zoning around transit, you just push people into longer and longer commutes, so carbon emissions go up," says Weiner. He tells Reason that more people living next to and thus using public transit will "cause less congestion and create fewer carbon emissions. So that is the goal."

Fighting climate change and spurring transit ridership are standard progressive fare. The means Weiner is pushing for achieving those goals, however, are strikingly deregulatory.

If it passes, SB 827 could unleash a housing construction boom in swaths of what are now low-density, high-priced urban neighborhoods entangled in layers of red tape.

"This bill should make it easier for developers to build where they've wanted to build for a long time, where we use land really inefficiently," says Michael Manville, an assistant professor of urban planning at UCLA. "It's crazy that in so much of west L.A. We have nothing but single-family homes."

Manville isn't wrong. According to one estimate, some 80 to 85 percent of Los Angeles is zoned for single-family homes. In 38 percent of the city, homes can be no more than 33 feet tall, and have to come with two on-site parking spaces.

Making things worse are residential design guidelines that allow many cities' bureaucrats to shrink otherwise zoning-compliant developments that might clash with "neighborhood character."

All this limits how much housing can be built on the same amount of land.

Between 2005 and 2014, California added 308 units of housing for every 1,000 new residents. New York State, by comparison, added 549 units per 1,000 new residents in that same period. Among the states, California ranks 49th in housing units per capita.*

The predictable result of fewer homes being built: rising prices for existing units.

54.2 percent of the state's renters pay more than 30 percent of their income in rent, and 28.8 percent pay more than 50 percent. Of the 10 most expensive cities to be a renter, seven are in California, according to a January 2018 report from apartmentlist.com.

"The price of housing for everybody has gone up," says Manville. "We have not built housing to match the increase in demand."

SB 827 would address this by overriding the local ordinances that are depressing construction and inflating prices.

Under the bill, development projects that are within a half-mile of a "major transit stop" could be built without regard for local height requirements. Instead, a state maximum height restriction of 85 feet would be imposed (or 55 feet on narrower streets).

The bill would further exempt these "transit rich" developments from local density limitations, minimum parking requirements, and open space and setback rules. Local design and zoning laws that restrict the number of units one can add to an existing structure would also be overridden.

A detailed state-level analysis of the bill is still forthcoming. But a report for the San Francisco Planning Commission estimates that 96 percent of the city would fall within half a mile of a major transit stop. Maps prepared by Los Angeles city staff show that the bill would upzone major swaths of the city.

Unsurprisingly, the bill has sparked stiff resistance from the very local officials who will see their power over the development process curtailed, and who insist that they are already doing everything they can to respond to California's housing woes.

Last week, the Los Angeles City Council unanimously passed a resolution opposing SB 827 and declaring the city "must make every effort to expand affordable and middle-income housing, but not at the expense of local control over land use and community-driven planning."

San Francisco City Supervisor Aaron Peskin has threatened to sue the state if SB 827 passes, while San Francisco Planning Commissioner Dennis Richards has called the notion that the bill would create more affordable housing "B.S."

Other voices argue that allowing more housing construction will gentrify neighborhoods and displace current tenants. Berkeley Mayor Jesse Arreguín called the legislation "a declaration of war against our neighborhoods." An activist group in Los Angeles has accused Weiner of trying to "enact a 21st century Trail of Tears."

Weiner—himself a former neighborhood activist and San Francisco city supervisor—says he is sensitive to concerns over local control. But he thinks there needs to be a balance between community- and state-level decision-making.

"For many years we have operated under a system where local communities have almost total power to decide whether to build any housing," Weiner says. "They can opt out of housing entirely, or [allow] just a little housing, and there are really no repercussions."

In February, Weiner addressed concerns about gentrification by amending SB 827 to include strict anti-displacement regulations. The bill would forbid developers who use SB 827's density bonus from demolishing renter-occupied buildings that they purchase, unless the developer pays the tenants' moving expenses and provides a rental subsidy for their new homes for as much as 42 months.

The bill would also defer to local demolition controls, and to local inclusionary zoning mandates that require developers to offer a certain percentage of units at below market rates. These provisions make the bill more politically palatable. They also risk blunting its effectiveness by watering down its free market approach.

Manville doesn't think these compromises will smother SB 827. Requiring developers to pay affected tenants rental assistance and move-out expenses "would be a damper if it wasn't the case that the bill also would open up so many areas that are owner-occupied homes to redevelop," he tells Reason.

Even with those compromises, the fact that such a bill is being seriously considered—attracting the endorsement of urban planning academics and more than 100 tech CEOs, including those of Lyft, Yelp, and Mozilla—is a sign that California's housing politics may be experiencing a sea change.

"Ten years ago, it was really hard politically to be strongly in favor of housing and of delivering housing faster and removing some of the obstructions," Weiner says. "Now the politics have flipped." He hopes his bill will capitalize on this wave of pro-housing sentiment.

"For 50 years we've made it progressively harder and harder and harder to create housing," he says. "We're now in the process of removing some of those hurdles."

CORRECTION: The intial version of this article said California ranked 49th in number of people per housing unit. Instead, California ranks 49th in housing units per person.

Photo Credit: Boaz Yunior Wibowo/Dreamstime.com

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  • ||

    It is also a major free market reform.

    No. It's not. Not even close. An expansion of options related to tightly controlled development is not remotely an expansion of the "free" market.

  • brokencycle||

    Agreed with you here. There's also the federalism-esque question. While I agree with expanding the rights of property owners to do what they want, should states override cities and other local forms of government? As a rule, the more we can delegate legislation to more local levels, the better.

    But giving owners the ability to build an apartment building rather than a single-family house in limited situations isn't much reform, though we should not let perfection be the enemy of good.

  • Jerryskids||

    Baby steps. First they have to recognize the reality of the fact that "affordable housing" and tight zoning restrictions that mandate only homes for the rich can be built cannot both exist together. To the extent that the state-level bureaucrats are dismissing the whining of the locals that they can't eat their cake and have it still, they're at least showing some glimmer of hope that they can recognize reality when it smacks them in the face.

    Next, we'll try to explain the principles of supply and demand and revealed preferences to them.

  • shawn_dude||

    It's an expansion of owner control over their property. The owner, as you point out, now has more options. That is more control. He or she can now build larger developments and use the property more to its potential.

    The state, through this bill, would be limiting the local regulation power over these properties.

    Though it's true it's still not an actual "free market." It isn't an actual free market until you can use your property however you want without any regulatory impediments of any kind.

  • Devastator||

    The true free market reform would be to deregulate, no zoning, and let land owners sell to whomever they want and remove building restrictions. Stop the NIMBYs at the city council level from enacting unrealistic laws on the landowners.

  • Fist of Etiquette||

    If this bill doesn't also hike the minimum wage, I'm not interested.

  • Jerryskids||

    And none of that phoney-baloney minimum wage hike stuff where employers just raise their prices to force their customers to pay for the employee benefits. If you're going to give workers a meaningful wage increase, there needs to be a law to keep companies from just turning around and raising their prices to offset the wage increase. And it needs to be a sizable increase, too. Nobody should be forced to work for a below-average wage so the minimum wage should be like 110% of the average wage in this country.

  • shawn_dude||

    California's minimum wage law already has it pegged to reach $15/hour in 2023.

  • My Dog Bites Better Than Yours||

    The bill would ... local inclusionary zoning mandates that require developers to offer a certain percentage of units at below market rates.

    Kind of like mandating that 90% of children must be above average. The flaws in this are intuitively obvious to everyone here. Why the hell do they insist on this crap? Normally, I would say "Follow the money", but is it really that easy? Are people really that dumb? Did I pick the wrong week to quit amphetamines?

  • BestUsedCarSales||

    You can actually have 90% above average. It just has to skew hard. 90% above median is the impossible one.

  • shawn_dude||

    You're not wrong. But it's more complicated than you make it out to be. In the end, it boils down to an unwillingness to just open the market up wide and let people lose everything and go homeless at even higher numbers. This is all the consequences of rent control, in general, and a very nasty version of it in particular. If you kill rent control now, you'd lose nearly 50% or so of the current residents of the city in less than a year as the market adjusted and raised prices. So they're adding new rent controlled units (aka: Below Market Rate) as a tax on development. But keep in mind that making $100K per year gross qualifies you for a BMR unit.

    That certain percentage is 18%, btw. In exchange for going higher than 18%, a developer can qualify for a variance to build higher and recoup the cost.

    Roughly 66% of San Franciscans rent. Almost the opposite of the rest of the country. This makes rent control very popular here.

  • Brian||

    Californians will love getting rid of local zoning regulations that harm the environment. They're so lovable that way.

  • Ron||

    you can build all the high rises you want it doesn't mean people will move into them. China has built entire cities that no one wants to live in.

  • shawn_dude||

    This aint China. People in the SF bay area are living in garages for over $2000/mo because they have no other options. People buy motorhomes and drive them from parking place to parking place for housing. If you build it, you'll have a line around the block with twice as many people willing to pay $4k and up for a place with no parking than you have units to rent or sell. We are 50,000 units short in just San Francisco alone. The entire bay area is several times that. And the LA metro is many millions of people more than the Bay Area and rapidly getting just as expensive due to short supply. It's so bad, I know people to live in Las Vegas and commute (4 hours each way) to LA for work. There are charter airlines that sell the idea of living in Nevada and flying to California for your daily commute as cheaper than owning a home in the center cities.

    You can build as much as you want right now with no lack of willing buyers.

  • Michael Ejercito||

    Wow.

    What jobs do thry have that eight hours of commute a day is worth it?

  • Sevo||

    "We are 50,000 units short in just San Francisco alone."
    WIH is that supposed to mean?
    Are you suggesting that if SF suddenly got 50,000 units, all would be well?
    What an idiot.

  • Devastator||

    This isn't China, if they could build hi rises people would move in to be closer to work and downtown, it's as simple as that. The unsuccesful ones would fail and could be torn down. It should be up to the builder to do his own research as to the viability of the hi-rise. This shouldn't be left up to a city council of random useless generic members who have no expertise in any of this.

  • Sevo||

    "This shouldn't be left up to a city council of random useless generic members who have no expertise in any of this."
    Let's see if this fits in the character limit:
    There is a particularly imbecilic supervisor, Jane Kim. She ended up on the board approving the "Affordable Housing" offsets required of those building new housing. She is stupid enough to fantasize that the builders will forgo some profit to provide these, rather than raise the cost of 'market rate' units to cover the costs, thereby increasing the average price of 'market rate' units.
    We now have what will prove to be a record-setting boondoggle being built downtown: The Transit Center. It's a bus station with thepretension to house the northern terminus of moonbeam's choo-choo, and is thereby clothed in 'green', regardless of the fact that the choo-choo is going from and to nowhere.
    (won't fit)

  • Sevo||

    (more)
    Now, the developer signed on to provide X 'affordable housing', and knowing full well that no one is going to pay the $2M for a condo (required to make it pencil out) if they are next door to a lotto-winner (that's what it takes to get 'affordable housing), so the affordable housing was sited about 3 miles west.
    Ms Kim arrived at her first meeting of the agency, and promptly changed the terms of the contract to require 'a-h' on-site.
    The developer bailed, leaving that project, like the choo-choo, funded by magic.
    Oh, and the de-watering required to build it seems to have caused subsidence under a 58-story residential tower next door, and you can imagine what what the taxpayers will pay for THAT!

  • shawn_dude||

    This article is missing some helpful context. In San Francisco, Weiner is not "progressive." He's hated by the progressives, actually, for exactly these kinds of positions. He's what people in San Francisco call a "liberal," which confusingly, isn't a "progressive." In the city, progressives are basically your actual socialists and every other Democrat is a "liberal" or, if you're neoliberal, you're a closet Republican. Less than 10% of the city is conservative based on voting data.

    [cont...]

  • shawn_dude||

    San Francisco has about 850,000 people living in 49 square miles. Rent for a 1 bedroom is about $3700/mo without parking and you wait in line and compete for that one apartment. The NIMBY crowd hates larger buildings because they increase the cars in the area which decreases parking and parking is so bad people parallel park down the sidewalks and along the curbs at the same time and then double-park here and there for variety. People illegally convert garages into apartments and so those cars are also on the road (or sidewalk or double-parked) as well. It's insane. And then you add the "progressives" who fight every single new development tooth and nail. They refer to gentrification as "ethnic cleansing" without irony. They vandalize bike rental racks and commuter busses. If a new development isn't 100% below market cost, they picket. Recently, they got a freaking laundromat declared "historic" in order to prevent the owner from building market-rate housing there. It's so bad that San Francisco tried to buy part of a nearby town in San Mateo county just to use the land to build more housing.

  • Sevo||

    "Rent for a 1 bedroom is about $3700/mo without parking and you wait in line and compete for that one apartment."

    Thank Rent Control for that.

  • PoxOnBothYourHouses||

    shawn_dude: "Rent for a 1 bedroom is about $3700/mo without parking"

    The apartmentlist.com report cited in the OP shows San Francisco to have the most expensive rental housing in the nation, but not /that/ high. They show the median 1-bedroom to be $2,440, and the median 2-bedroom to be $3,060.

    Still, that's nearly $30,000 per year for the median 1-bedroom.

  • Sevo||

    "Still, that's nearly $30,000 per year for the median 1-bedroom."
    Yep, there are more people who want to live in SF than there would be if there were *no* zoning nor NIMBYs at all. It is a lovely place to live.
    And regardless of "dude's" bullshit claim there is some finite number ('50K" of housing units'), like an economic good in general, there is no limit to demand.
    So, if you can't afford to live here, leave. I don't care to hear the gripes.
    BTW, I live in SF, and I cannot afford to live on the Presidio Wall, as do Feinstein and Pelosi. I do not see that as a reason for entitlements to allow me to do so, and I'd bet neither of them do, either.

  • sharmota4zeb||

    It might be time for libertarians to start having some "no justice, no peace" marches.

  • Devastator||

    Not everyone can be put in your limited world view, there is a spectrum of political liberalism just like there is conservatism. A green is way different progressive. Just like cucks are different than alt right.

  • Sevo||

    First, Weiner is an idiot; if he gets anything right, it is purely accidental.
    But he was also an SF Supervisor, who slopped mightily at the pubic trough; the 'honest' ones handle it this way:
    "If you, Mr or Ms Developer, wish to build in my district, you understand that there are various 'remediation rules' to make your development 'complimentary' to the district. We at city hall have made the remediation easy to understand, but making is a certain percentage of the overall project, varying, of course with the size of the project.
    You might, for instance, have my friend Jeff, here, do a nice public sculpture (Jeff being a contributor to asshole's campaigns), or you might fund a 'Neighborhood House' for some time. We'll be happy arrange staffing for you..."
    These tin-pot despots welcome this like (NY) governor Clinton welcomed the Constitution.

  • John C. Randolph||

    Hmm... What's the definition of a "transit stop" in this bill? Does it have to be a billion-dollar eyesore like a Bart station, or does a bus stop suffice?

    I'd love to buy a five million dollar mansion, scrape it off the lot, and build a 30 million dollar apartment tower in it's place.

    -jcr

  • sharmota4zeb||

    Midtown Manhattan had its building boom when Grand Central Station went up a century ago. In a capitalist society, high density development accompanies mass transit construction. In a socialist, mass transit is a sprawling mess designed to claim territory for progressive ideologues rather than move people from point A to point B.

  • roark||

    This seems very much like Massachusetts 40B Law.

    The basic idea is to prevent "snob" zoning.

    Towns are exempt if they keep building some affordable housing.

  • CraigGorsuch||

    The tin-foil-hat-wearing-conspiracy-monger in me says this is a means of controlling the placement, density and movement of the population for easier "monitoring". All "for your safety", of course...

  • T. Busse||

    I live in Senator Wiener's district. He understands effective legislating and has confronted some of the unsexy issues. This law wouldn't be so discussed if it wasn't for Wiener's passage of SB35. He quickly established himself as an effective legislator and he's built coalitions across the aisle (You won't read that in the SF Chronicle) - and this libertarian alignment with Wiener's "progressivism" is just one case in point. In the Case of SB35, he took a good idea and a reform that that was researched by the nonpartisan legislative analyst office and actually passed passed it. Housing Element law went back to governor Reagan, but was broken for three decades. If Wiener can get that done, the fear is he can get other things done, which is why this bill gets more press than the typical Press-Release of a bill that goes straight to the suspense file.

    Most of Wiener's work is done in secret - a craft honed in the San Francisco City Attorney's Office (along with a love of taxation without lip service to efficiency), and he has the typical arrogance of a CalBar attorney. In the case of SB35, he announced the bill on Medium, but it was an empty bill, so if anyone actually checked the content, it was just he header. This is an old Willie Brown trick that can let a bill it can be amended last minute, meaning the public can be blindsided.

    For this reason we don't know what SB 827 actually will contain because Wiener is hammering it out behind closed doors.

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