Dynamist Blog

Time to Build: California's Housing Reforms Are About to Pay Off

This post went out to subscribers to my Substack newsletter on October 19. Check out all the posts, including ones from the archives not reposted here, and subscribe here.

The low-rise skyline of some of the nation’s most valuable land: downtown Santa Monica

In August, I intervened to inject some local policy knowledge into a kerfuffle over venture capitalist Marc Andreessen’s hypocrisy on housing construction. Famous for his 2020 manifesto “A Time to Build,” Andreessen wouldn’t seem a likely NIMBY. Yet there he was, along with his wife, filing a public comment to oppose a modest amount of multifamily housing construction in his ritzy suburb of Atherton.

It looked bad. It deserved rebuke. And it didn’t matter one bit.

As I wrote in a Bloomberg Opinion column:

Under a law passed in 1969, two years before Andreessen was born, every eight years California cities have to project the future demand for housing in several income tiers and specify where those homes might be built. The long, complicated and expensive ritual has produced many hearings and documents but not much housing. It offered too many loopholes.

Cities could lowball the numbers. They could identify theoretical sites in their plans but, when later faced with a real development proposal, impose delays and restrictions that required scaling down the project, increasing the sales prices or rents, or abandoning the whole thing.
“Housing element” plans didn’t have to make sure the owners of prospective sites were willing to sell. As long as cities went through the right motions, they faced no consequences for obstructing new housing.

Now they do.

California has toughened its approval process for the housing-element plans, and cities face fines of up to $600,000 a month if they don’t come up with an acceptable plan. The state can review at any time whether the city is complying with its promises. If not, it can require streamlining development permissions to keep those commitments.

Cities that fail to meet their obligations face fines of up to $100,000 a month. They can lose state funding. The state can even suspend their power to regulate land use.

That article—read the whole thing on my website here—discussed several different policy reforms that will bring more housing to Atherton. But the “housing element” hammer is what I want to focus on here. It’s coming down hard on cities in my own area. The threat to suspend land-use regulations isn’t theoretical.

Cities that don’t meet their deadlines face something known as the “builder’s remedy,” where the state suspends local zoning laws until the city comes up with a suitable plan. Any development that files for permission during the suspension gets a free pass. That’s what has happened in two of the most housing-short coastal cities in Southern California: Santa Monica and Redondo Beach.

In Redondo Beach, a developer filed plans to convert a power plant slated for decommissioning next year. The plans envision a complex including residential towers with 2,290 units, along with office, commercial, and hotel space. It’s the kind of large-scale projects current residents hate. Another 5,000 people might be able to live in Redondo Beach! The application was filed in August. The city had submitted a Housing Element plan in July but hadn’t yet received approval. Redondo Beach’s Housing Element plan gained state approval a month later. Litigation will undoubtedly ensue.

Meanwhile, in Santa Monica a dozen projects with nearly 4,000 housing units slipped in while the city’s zoning ordinances were suspended. They include a 15-story 2,000-unit building in a low-rise, mostly light-industrial area near Santa Monica’s eastern border with L.A. Nearby businesses include the headquarters of Riot Games. Santa Monica is a major employment center whose housing hasn’t kept up with its job creation, leading to major traffic jams heading to the freeways. As a resident of West L.A., just east of the 405, I feel the effects personally. Unless I can walk to my destination, I generally avoid going west of the 405 after 3:00 p.m. because coming back even a couple of miles can easily take 45 minutes. No afternoon eye doctor appointments for me.

A couple of weeks ago Matt Yglesias had a good Substack post looking back on a decade of the YIMBY movement. It traces some of the intellectual origins of the successful efforts to loosen regulations on housing, focusing mostly on the activist world. I’d ding it for giving short shrift to the academics at UCLA, USC, and Berkeley, whose empirical research has been important to understanding what the obstacles to new housing, particularly in California, are. Also important are Ed Glaeser at Harvard and Joe Gyourko at Wharton, whose housing research I first wrote about way back in 2002 and revisited in 2007, when I didn’t quite realize just how bad a mess California’s restrictions had made.

I have evidence from as far back as the seventh grade demonstrating my obsession with housing policy. In 1987, when Matt Yglesias was in elementary school, I published a WSJ op-ed titled “Tapping the Shadow Housing Market,” which I’ve just dug up and added to my website. It anticipates the recent reforms loosening parking mandates and restrictions on “accessory dwelling units.”

Unlike many of the housing-obsessed, I’ve never had the inclination to impose my personal lifestyle preferences on everyone else. I prefer dense, urban neighborhoods but defend the suburbs. I believe that building will follow demand and prices will send the right signals, resulting in a mixture of housing that reflects a mixture of tastes, budgets, and lifecycle stages—if, that is, regulators allow housing markets flexibility. Count me in the Market Urbanism camp, not the “everyone should ride a bike” school.

When I moved to L.A. in 1986, one of the things I most appreciated was the abundance of housing. I want today’s young people to feel the same possibilities I felt back then, including the chance to have their own space. And, like Matt, I think things are looking up:

Overall, though, I think the future is bright. Ten years ago, housing reform was considered a bizarre niche issue that nobody in the audience cared about and where change was politically impossible. Now, it’s a mainstream topic of discussion with real political champions, local activist groups around the country, and a blueprint for state-level change. More and more people also acknowledge these days that housing is just so central to the economy that you can’t treat it as a tiny quirky obsession of urbanists — anyone who cares about sustainable growth needs to care about housing supply.

Misc. links

How Substack got started. I read the free version of Sinocism, which is excellent. If I had a more direct professional interest in China I would definitely pay for a subscription.

Robert Graboyes, an economist with wide-ranging interests that overlap with mine, has a good Substack called Bastiat’s Window. Most of it is pretty serious. But this post about celebrity encounters made me laugh several times.

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