Monday Morning Thoughts: Upzoning Is Not the Answer

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By David M. Greenwald
Executive Editor

Was sent a pretty interesting analysis on upzoning by Dr. Cameron Murray.  The upshot is SB 9 hasn’t worked to generate huge amounts of housing for California by allowing property owners to subdivide their properties.

I was always a bit skeptical that this approach would really work in the short term—although I had no problem with the concept in general and believed the level of fear by existing neighborhoods was ridiculous.

It’s also why I don’t think there will be that much energy going into efforts to rollback SB 9 going forward.

Murray noted the Terner Center study from a year ago, which found in a sample of 13 communities including Sacramento, “A few hundred applications, and 50-something approved.”

We’ve reported on these things, but Murray’s analysis of why it’s not working seems important enough to elaborate on.

Senator Scott Wiener spent a good year of his legislative time pushing through SB 423 which made SB 35— “The Builder’s Remedy” —permanent.

Murray notes that California has implemented much in the way of planning and zoning reform, “There are many happening, but little change in the overall situation.”  He added that “despite years of effort, new housing development isn’t taking off in California.”

Or as UC Davis’ Chris Elmendorf tweeted last September, “Since Yimbys came on the legislative scene circa 2017, California has passed housing laws by the bucketful, yet the state hasn’t moved the needle on overall production.”

Part of the problem is, as Murray elaborates, “All this type of thinking is predicated on the idea that property owners want to invest in new home-building faster than they are. In this simplified view of the world, there is no room for property owners themselves to optimize and time their investment decisions.”

Basically, the problem is that, streamlining housing approvals processes aside, the actual rollout of building is premised on economic conditions.

Murray continues, “My personal preference is not to regulate private property owners to provide below-market housing but to do it directly with public and subsidized housing institutions.”

He continued, saying that “this argument points again to an economic constraint on whether housing can be made cheaper with new supply…”

He points out, “It cannot be true that small financial costs to property owners make projects unviable and also that housing will be produced so rapidly as to impose this cost by pushing down rents.”

That’s the basic problem—utilizing the private market, we’re not going to be able to actually reduce the cost of housing.

This is a point that real estate people have made on here a number of times previously—builders are not going to put out sufficient supply to reduce costs significantly.

The extreme NIMBYs will argue—see, you can’t build your way out of this problem.

That’s probably true.  Except both sides are ignoring a key factor here.  Our failure to build adequate housing created the huge ramp up of costs over time.

We may not be able to reverse engineer the problem as a means for a solution, but we can at least add adequate supply into the future to slow down the rate of increase.

That is point one.

The second point that we ought to take away again is the need to have subsidized housing.  That’s the only way we are going to really get large scale below market rate housing.  Some can be leveraged off market rate housing.  Some can be leveraged off land dedication—again from market rate housing.  But if the state is serious about solving the housing crisis—it is going to have to find a way to recreate RDA (Redevelopment Agency).

There is a third point that I think applies locally at the very least.  Just because things like SB 9 and SB 35 are not opening up huge swaths of housing doesn’t mean that we cannot further fix our housing market.

Consider that, in Davis, there really is a clear demand for housing.

I was a bit skeptical that the Davis Downtown plan would yield much in the way of housing, but it immediately opened up three housing proposals in the downtown area.

Moreover, there are now five peripheral housing proposals that are being slowed not necessarily by market forces, but by the ability of the city to process those applications—and of course Measure J.

That is indicative that Davis at the very least has a suboptimal structure to deal with housing market demands.

Those who argue that we don’t need any more “unaffordable” housing—if such a thing actually exists—miss the fact that the housing supply is so low, that not only is the cost of a house that comes on the market high but it is snatched up incredibly quickly.

All of which suggest that streamlining the approval process and lowering other artificial barriers to housing could generate additional housing in Davis.

Does that mean that the cost of housing in Davis would come down?  Probably not.  But it does point a way toward easing housing supply issues.

About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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2 Comments

  1. Richard McCann

    I’m not sure where Murry proposes that we get the funds for a sufficient amount of Affordable housing to make a real dent in the problem. As I pointed out earlier, giving 400K per house to a developer to make up the difference between market prices in Davis and an affordable house of $500K for 2,000 houses is $800M. That’s just one community.

    I agree reinventing RDAs is the real solution. Our Assemblymember is now the majority leader. We should be able to have some influence on getting this done, even if there is currently a state deficit.

  2. David Thompson

    Certainly additional sources of funding for Permanently Affordable Housing will be of value but will make a minor difference overall in Davis.

    However, for me, and particularly for Davis almost all the land developed as Permanently Affordable Housing has been achieved  on inclusionary parcels which were deeded free of any purchase cost. RDA funds were then used to subsidize the project itself but never the purchase of land. I think New Harmony is the only project where most of the land was purchased at market price.  In that case, the city made a loan (not RDA money I think) to MHA to first buy the land. The market cost of land in Davis is almost an insurmountable financial barrier to Permanently Affordable Housing.

    Free land is the most important component among all other options to house very low and low income families in Davis.

    I agree with Richard McCann there is not enough subsidy money to make market rate cost housing affordable to the missing middle.

    I would argue at this point in history in California that none of the programs put forward are going to have the radical impact upon the market to create nearly enough affordable housing for the numerical needs of the very low to moderate income households.

    The supply needle will not move so the market price for land will stay high and there is nowhere near anough subsidy to make much difference in meeting the size of the Affordable Housing  need.

    We in Davis can have some impact as annexations occur but land locked cities like San Francisco where almost all land is market priced are never going to meet their RHNA numbers and there is no other solution on the docket at this time.

    It is almost a worldwide problem of a marketplace economy.

    My own thoughts and not representative of Neighborhood Parners, LLC or the Twin Pines Coooperative Foundation

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