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Cataloguing California’s Cornucopia of Land Use Legislation

The Terner Center for Housing Innovation at the University of California, Berkeley has released a policy brief summarizing the effect on housing production of the bewildering array of new housing laws California has enacted since 2016.  A preliminary analysis of market effects of the new laws, accompanied by findings from interviews with California-based planners and land use lawyers, points toward the effectiveness of simple and direct legislation requiring localities to give ministerial approval to small-scale projects. For other laws, including those prescribing more complex formulas regarding affordability criteria for larger developments, it remains too early to gauge how housing production will respond. Of the legislation that has been enacted to date, California’s accessory dwelling unit laws (beginning with SB 1069 in 2016), according to those interviewed by the Terner Center, have been responsible for the astonishing twenty-fold increase in ADU permits documented from 2016 to 2021.  Legislation enacted in 2021 requiring ministerial approval for duplexes and lot splits (SB 9), estimated by the Center to allow for up to 700,000 new units, has not yet been widely used, partly due to localities’ use of other restrictive zoning regulations such as mandatory setbacks to impede use of the law.  Further strengthening of this law, in the same manner that the ADU law was fortified through 2019 revisions, may be necessary to unlock its full potential for new home construction.  Other new laws are in the early stages of demonstrating their effectiveness. The imposition of stricter requirements on localities’ Regional Housing Needs Allocation (RHNA) process through legislation enacted in 2017 and 2018 has resulted in dramatic increases in zoning capacity targets for the next eight-year period set by the Housing Element Law (of which the RHNA is a part).  For Southern California and the Bay Area, total housing allocation has increased from […]

Another of these studies that don’t mean what some people thinks it means

A group of researchers at the Urban Institute came out with a new study on zoning and housing affordability. At governing.com, a headline about the study screamed: “Zoning Changes Have Small Impact on Housing Supply.” The Governing writer’s spin was, of course, “there’s no evidence it [upzoning] makes housing cheaper.” Governing has published numerous articles that criticize pro-supply zoning reform (one of which I critiqued on this blog), so this conclusion seems to fit in with its general point of view. The most important conclusion (to me) of the study is that it reinforces the commonsense view that lower housing supply leads to higher costs. In particular, the study concludes: “Reforms tightening regulations are associated with increased rents, potentially worsening conditions for low- and moderate-income renters.” (page 4, emphasis mine). What about upzonings (reforms that allowed more construction)? The study concludes that they “lead to a 0.8 percent increase in housing supply, on average.” (p. 28). How small is 0.8 percent? In fast-growing Harris County, Texas (Houston and its inner ring suburbs), 17 percent of the county’s 1.885 million units have been built since 2010, or about 1.7 percent per year. So 0.8 percent increase would be only five or six months’ worth of new housing in Houston- not a huge amount. Given the miniscule amount of reform the lack of impact on housing prices should hardly be surprising. In other words, if zoning allows six months’ worth of new housing (compared to the pre-reform status quo), things stop getting worse but don’t really get better. If zoning allows less housing, things get worse.

Do The Cities Need The Suburbs?

Aaron Renn has an interesting article in Governing. He suggests that even though urban cores are responsible for a significant chunk of the regional tax base, “[t]he city is dependent on the suburbs, too.” In particular, he notes that downtowns are dependent on a labor and consumer pool that extends far beyond downtown. For example, Manhattan is valuable because it is at the center of a vast region. He’s right- if you define “suburb” broadly as “everything that isn’t downtown.” A downtown that isn’t surrounded by neighborhoods is just a small downtown. But that isn’t always the way Americans understand suburbs. If you think of suburbs as “towns outside the city with a different tax base that are usually much richer than the city” , suburbs aren’t good for the city at all. Because of the growth of suburbs, cities have stunted tax bases because they have a disproportionate share of the region’s poverty, and have to pay for a disproportionate share of poverty-related government programs. By contrast, if cities resembled the cities of 100 years ago that included nearly all of their regional population, they would have stronger tax bases. (This may seem like a pipe dream to residents of northeastern cities trapped within their 1950 borders, but plenty of Sun Belt cities include huge amounts of suburb-like territory). Similarly, if you think of suburbs as “places where most people have to drive to get anywhere” their existence is not so good for the city. When suburbanites drive into the city they create pollution, and they lobby for highways that make it easier for them to create even more (while taking up land that city residents would otherwise use for businesses and housing). And when jobs move to car-dependent suburbs, that devalues city living, either because carless city residents […]

Welcome Michael Nahas

Market Urbanism is proud to welcome Michael Nahas as a new writer who will bring an Austin perspective to the blog. Michael’s Twitter handle is @MichaelDNahas, and he also blogs at City Econ. Here’s a short interview we did over email. Emily: How did you become interested in cities? Michael: A coincidence back in 2018 got me to look into cities. I had read a pop science article about how zoning policy in San Francisco was driving up the price of homes. The article stuck with me, because I’m fascinated by economics and it was so strange. I had always rented and didn’t know how regulated housing was. Then, at a party, I happened to mention this curious article in a conversation. The person I mentioned it to was Josiah Stevenson, an influential member in AURA, Austin’s YIMBY organization. He quickly recruited me into AURA and got me to look at cities. And once I started looking into cities, I wondered why economists haven’t studied them more! Cities are where they gather. They’re where information and goods are gathered. In cities, the biggest economic decisions get made and the most goods trade hands. Fission reactors work by bringing refined uranium into a tight space, causing an energy-producing chain reaction. Likewise, when you bring people into a tight space (with the right conditions), it causes the bright glow of economic activity. I believe that making that economic glow brighter will improve my life and everyone else’s life too. That’s what made me so interested in cities. Emily: What cities have you lived in? Michael: Ordered by the time I’ve spent as an adult: New York, Austin, Charlottesville (Virginia), Minneapolis, London (UK), Berkeley, and Nijmegen (NL). I have a great love for Philadelphia, having grown up an hour away, but I never […]

The fallacy of total rent regulation

One of the most-common beliefs many leftists in America hold is that the staggering increase in apartment rents is not a result of not building enough supply but rather a combination of greedy landlords, corporations buying out rental properties, and landlords intentionally keeping units vacant to drive up prices. Take for example this recent post by my former San Francisco supervisor, the socialist Dean Preston. He claims that San Francisco could become affordable within a year, and proposes a set of regulations to be imposed on the rental market.  How to you allocate housing? But these regulations have one fatal flaw. San Francisco is a very attractive city. Even if the economy is worse than it used to be, the culture, geographical location and climate make it a place where thousands of people would love to live, and are currently blocked only by the high rental prices. If you artificially lower these prices (through legislation), you end up with way more demand that the supply can handle. Even if you think this is morally the right thing to do, you have to address the mismatch between the demand and supply you’re creating.  In other words: how will you allocate housing in the absence of the market mechanism?  When confronted with this question, American leftists usually do not have an answer, or provide some muddy explanation that still focuses on existing residents, as if their living situation was never changing: they never got married, divorced, their kids never grow up, they never leave for a reason other than being priced out etc., and as if there were no new potential residents who would like to move to San Francisco for whatever reason.  History provides a warning In the absence of their answer, we can look at history. In the Eastern Bloc […]

Should governments nudge land assembly?

For a reading group, I recently read two papers about the costs and (in)efficiencies around land assembly. One advocated nudging small landowners into land assembly; the other is an implicit caution against doing so. Graduated Density Zoning Although he’s mostly known for parking research and policy, Donald Shoup responded to the ugliness of eminent domain in Kelo v. City of New London, with a 2008 paper suggesting “graduated density zoning” as a milder alternative. Graduated density zoning would allow greater densities or higher height limits for larger parcels – so that holdouts would face greater risk. Samurai to Skyscrapers Junichi Yamasaki, Kentaro Nakajima, and Kensuke Teshima’s paper, From Samurai to Skyscrapers: How Transaction Costs Shape Tokyo, is a fascinating and technical account of how sweeping changes put the relative prices of different-sized lots on a roller-coaster from the 19th century to the present. First, large estates were mandated as a way for the shogun to keep nobles under his close control. Then, with the Meiji Restoration, the nobles were released to sell their land, swamping the market and depressing prices. The value of land in former estate areas stayed low into the 1950s. But with the advent of skyscrapers – which need large base areas – the old estate areas first matched and then exceeded neighboring small-lot areas in central Tokyo. A meta-lesson from this reversal is that “efficiency” is a time-bound concept. One can imagine a 1931 urban planner imposing a tight street grid and forcing lot subdivision to unlock value on the depressed side of the tracks. That didn’t happen; instead, the large lots were a land bank that allowed a skyscraper boom right near the heart of a very old city, helping propel the Japanese economy beyond middle-income status. We should take a long, uncertain view of […]

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