I have a general rule on this blog never to write about something while feeling strong emotions. These blog posts come out best when they serve as a curious exploration, which requires a certain level of practiced detachment regarding the subject matter at hand. Unfortunately, I am deep enough in housing activism that I hold my views with some emotional salience, and it can be difficult for me to practice this detachment. I do not believe the best persuasion or information comes when someone tries to beat you over the head with their perspective. But in the wake of current events in California, I thought it was worth making an exception to put down some necessary critical thoughts about the current state of affairs in housing discourse.
For those unfamiliar, the housing situation here in California is terrible and has continuously worsened every year in the recent future. For a long-time the best way to illustrate this crisis was in terms of rents: Zillow has tracked the steady upward trend in Los Angeles over the past seven years:
Notice that after the brief pandemic-induced dip in rents in 2020, the underlying trend of rapidly rising rents seems to have rebounded 100%. This trend has also exploded not only the rental market but also the market for first-time homebuyers. As of May, the average price for a single-family home in California passed $800,000 and stood at $818,000, the highest figure it had ever been. According to Zillow, ten years ago, the average home value in Los Angeles was $514,000. Today the median single-detached home value is $1.16 Million:
This trend is happening everywhere you look in the state: San Bernardino County and Riverside County saw prices rise by 21% and 23% from last year. This rise is shocking because these regions have served as havens for cheaper homes for the many people priced out of LA and Orange county.
I could go on, but there are limits to what you can accomplish by simply quoting statistics. What makes the housing crisis so dire is its effect on real peoples’ day-to-day livelihood. I have seen in recent years:
Multiple families in my church become homeless when they lost their housing, and everything on the market in the neighborhood was too expensive for them to rent
Many working people, both young and old, deciding it is better to move out of state (to Arizona, Texas, Vegas) because even though while they were far away from family (and often, their best opportunities to work), they could at least afford ren.t
Families forced to live in overcrowded, multi-generational housing had COVID spread rapidly last winter when sick family members exposed to dangerous working conditions had nowhere in their own home to self-isolate.
My friends, who are often Middle-class people with growing families, are increasingly finding themselves in uber-competitive bidding wars over the few remaining homes on the market. Homebuyers are asked to drop inspection and pay in all-cash offers; measures most cannot take.
What is going on here?
Land Use and Housing Prices
Two things are true about housing simultaneously: on the one hand, it is a complex economic and social issue. Many historical and economic factors have gone into getting us into this crisis. But, at the same time, when you boil down all of those factors, one stands out as the most impactful: the problem of housing supply. From 1940 through 1970, California was one of the most prolific states at growing and building new homes. But the last 50 years have seen growth slow dramatically, to the point where now California ranks 49th out of 50 states in the ratio of housing units to people in the state. According to a 2016 McKinsey report:
Since the 1970s, the state has added 6.7 million households and 19 million people, but only 6.2 million homes.
Now, it stands to reason that when you fail to build new homes and your population is growing; you will see prices go up. We saw this in 2021, where the impact of COVID-19 on new car production suddenly caused the market for used cars to go crazy for months, with some used vehicles selling for far more than they were worth two years ago. While this was not the only factor in driving prices up, it certainly was the most impactful, as can be seen by how the market for used cars is now finally cooling off, as projections show that the new car shortage will end soon. The housing shortage in California did not come on as quickly as the car shortage over the summer; California’s policy choices created the deficit gradually over fifty years. And unlike the used car market, there has been no correction in the market for home building to correct this shortage. Estimates are that California needs 3.5 Million additional homes across the state to see our housing market become more affordable.
Why is that? Again, housing is a complicated subject, and there are many reasons why the market for home building has failed to correct itself. But rigorous studies on housing consistently find one factor emerges again and again as a driver of housing shortages: the misregulation of land use. The proliferation in the last 50 years of more extensive zoning codes, parking minimums, lot sizes, environmental review, and floor-area-ratios have all worked together to essentially limit development in many of California's (and America’s) biggest cities. This misregulation has a measurable negative impact on housing and the whole economy: economists Chang-Tai Hsieh and Enrico Moretti argued that restrictive land use reduced US GDP growth by 36 percent from 1964 to 2009.
To contextualize this argument, I think it is important to note that while the government has always had an important role to play in urban planning, the urban planning tool of zoning is a relatively recent practice in American history. For most of American history, the idea that the government would dictate what goes on a plot of land was anathema to the American ethos. So historically, many cities allowed people to live in apartments next door to a grocery market, next door to a factory, next to a larger home. Zoning and other land-use regulations were primarily an innovation of the early 1900s progressive reform movements that wanted to protect people from harm that stemmed from this laissez-faire treatment of land use. The core concern is one of externality: when you live in a city, the actions of your neighbors have an impact on you as a neighbor. For example, a battery-smelting plant has a tremendous amount of pollution; it's generally ideal for pollution to be located away from residential development because pollution in the air does not stay on the original property where it emerged. Similarly, a liquor store may bring certain externalities (drunkenness) into a neighborhood that may harm those who live next to the store and do not drink. Thus, Creating planning mechanisms to regulate land use was an idea that had some merit.
But as is always the case with complex social problems, well-intended tools often are used to achieve less than desirable outcomes. Specifically, zoning and land use regulation have been used, both intentionally and unintentionally, to severely limit the housing that has been built over the last half-century. We see this pattern in many cities, but few have done it as effectively as Los Angeles and San Francisco. The previous 40 years of LA history have seen our city’s leaders and voters convince themselves that they should use land-use regulations to keep LA’s neighborhoods frozen at a particular point in time. One way this happened was 1986’s Proposition U, which essentially cut the maximum allowed heights of Los Angeles commercial corridors in half. Prop U severely limited the growth of density within urban cores within the city and thus restricted the new homes built for the millions of new Angelinos moving to the city. At the same time, development to the lower-density neighborhoods was severely limited by single-family-zoning, which mandates that 75% of land in Los Angeles must have only one single-family detached home on it.
Ultimately, to address the housing crisis in Los Angeles, we probably need to revisit both of these commitments. Los Angeles needs to allow density development of housing in our decentralized commercial cores throughout the city. Los Angeles also needs to commit to making it easier to build modestly more dense homes across the city, including in single-family neighborhoods. But, of course, neither of these ideas are popular with elected officials in LA’s city council, who have shown through the years that they are not interested in changing the city’s policies. There is a whole extensive literature on why city governments are afraid to change housing policy. The most straightforward understanding is that local politics is dominated by homeowners, also known as “homevoters.” “Homevoters” have less of an incentive to build new housing (and, in many cases, are actively opposed to new housing) and make their voice heard very loudly in local politics.
California’s State Efforts
Thus, much of the attempts to reform land use in California in recent years have focused on the state government. There have been many attempts to try to deal squarely with the issue of land use and housing production. Thankfully, there have been some victories through the past few years:
Through a series of bills, California now allows Accessory Dwelling Units (ADUs or backhouses) to be built on almost every residential property in the state.
Through SB 35, developers have a pathway to bypassing local land-use regulations in the 90% of local jurisdictions in California that are out of compliance with the commitments to building affordable housing.
SB 330 made it much harder for cities to “downzone” or decrease their zoning capacity.
While these bills have had a significant impact, they are not nearly enough to account for the scope of the housing shortage in California. In recent years, the more dramatic housing supply bills (like SB 827 and SB 50) have failed as opposition arguments swayed California’s elected officials.
However, as I write this, we have finally seen a small breakthrough. California passed two bills through the Senate and Assembly (they have not made it to the governor's desk yet) that can significantly make a difference: SB 9 and SB 10. SB 10 is an effort to make it easier for cities to build small apartment buildings around their public transit stops. SB 9 attempts to allow homeowners to built two homes on a parcel of land in many neighborhoods that currently only allow single-family houses. When UC Berkeley's Terner Center ran the numbers, they found that SB 9 would have a modestly positive impact on housing production and prices while not creating a significant amount of neighborhood disruption and not lead to existing tenants losing their housing. The report projected “700,000 new, market-feasible homes would be enabled under SB 9,” though given that construction is often slow, we likely will only see a fraction of those coming onto the market in the next few years.
These are significant steps in the right direction (as I will talk about later), though sadly, probably not going to reverse the dramatic uptick in housing costs anytime soon. To see a more reasonable and just housing market, we need to see dramatically more land-use policy reform in the coming years.
The problem is that this recent history of freezing California’s cities in historical amber came about because building less housing has been a popular, bipartisan consensus between progressives and conservatives here in Los Angeles. And bi-partisan agreement can be hard to unmake. So I will devote the next three blog posts to examining the case for zoning reform along with three different ideological lenses: that progressives, conservatives, and Christian compassion, if they consistently apply their philosophical principles, would find it ideologically imperative to support land-use reform. The beauty of housing is that one can appeal to all three of these ideological perspectives with minimal compromise or contradiction: both perspectives can be valid simultaneously.
My sincere (and maybe counter-intuitive) conviction the longer I have paid attention to this issue is the biggest obstacle on housing is not people with extreme ideological beliefs. Yes, some extremists sidetrack the debate because of their ideology; but they are a small minority. Instead, the primary problem in housing politics is that the vast majority of people are unwilling to be intellectually committed to their beliefs when it comes to housing. I suspect that part of this is because people have individual self-interests. For example, while many people do not feel directly affected by agricultural subsidies or anti-trust regulations, virtually everyone owns or rents a house. This personal investment makes it hard to reckon with how your convictions may cut against what is most convenient for you personally or how your self-interest may cloud your beliefs.
So here goes my attempt to convince you, dear reader, that whatever your convictions, you should re-think your approach to this issue. I look forward to it!