This is part of an ongoing series on the politics and economics of zoning reform. Previous posts have argued that the benefits of enabling urban development generally outweigh the costs, but that local government political dynamics may serve as a barrier to achieving those benefits. As a result, any plausible reform programme must account for political and institutional dynamics, which can either speed or stall change.

As I wrote a few weeks back, California has ended up in a mess on housing due to the unintended consequences of 1970s-era legislation that made it harder to get new housing approved (and easier for neighbours to object) and reduced the financial incentives that local government have for approving development. This has led to rising prices and housing affordability problems.

As an example of how hard it can be to consent new developments, especially in existing urban areas, take a look at this article from SFist:

Developers initially intending to turn a Mission District auto shop into 20 units of housing have backed away from that plan following a ruling by the city that the building has historical significance. Curbed reports that likely because of that determination, and the resulting requirement that any alteration to the 20,400-square-foot auto shop at 3140 16th Street retain said significance, Texas-based developer Mx3’s plans to demolish the building are no longer viable and the company will instead look to build a two-story restaurant.

Mx3 wouldn’t confirm, but a community meeting notice obtained by the publication lists the proposed building as having exactly zero housing units.

Here’s the building in question. As auto body shops go, it’s nice, but is it nice enough to justify a two-year consenting process that ultimately resulted in nothing being built?

auto_shop_significant

California’s housing affordability crisis is made up of tens of thousands of similar stories. Developments that could have gone ahead, providing people with housing, but which instead got mired in interminable consenting processes and endless rounds of public notification and objections. I’m all for public input on plans – it’s legitimate to have a say on how your city will evolve – but at a certain level this becomes insane.

Earlier in the year, California Governor Jerry Brown proposed legislation to try and modestly reform California’s system for consenting new housing development. In effect, the present system doesn’t allow ‘by-right’ development – you have to apply to the city for a permit to build even if the development complies with the zoning code. Brown had suggested creating an exception for developments that comply with the zoning code and provide a certain amount of ‘affordable’ units.

This is about the most mild reform imaginable, but it still went down in flames. The Los Angeles Times reported on the reasons for the bill’s failure back in September:

The measure challenged the primacy of local control over housing, inflamed powerful entrenched interests and was eyed warily by the very groups representing those the plan was supposed to help.

Because of the resistance, Brown’s effort became so unpopular in the state Capitol that not one of 120 lawmakers was willing to publicly stand behind it. After weeks of little action, the plan died a quiet death last month, never having received a vote in the Legislature.

The truly astounding thing was that the opposition to the bill was led by the groups that would have the most to gain from enabling more infill and redevelopment in cities:

Labor unions and environmental groups, both highly influential on the state’s ruling Democratic majority, became the proposal’s fiercest antagonists.

Their beef? Brown’s plan would have allowed qualifying projects to avoid additional review under the California Environmental Quality Act, known as CEQA, the state’s chief environmental law governing development.

The 1970 law has helped preserve the state’s environment, but has also been sharply criticized by many including Brown, who contends its restrictions can strangle development and that it’s abused by labor unions and others to leverage labor-friendly hiring rules and other perks.

Robbie Hunter, the head of the State Building and Construction Trades Council, acknowledged that some labor groups have used the environmental law this way. But he argued that’s no different than developers and businesses that have also threatened CEQA lawsuits to stymie rivals’ projects.

Ordinarily, you’d think that construction unions would benefit from enabling more construction in the midst of a housing crisis, while environmental groups should appreciate the fact that more medium-density development can help to curb urban sprawl. But not in California!

The most perverse element was the opposition from low-income tenants groups:

Aimee Inglis, the acting director for Tenants Together, a statewide advocacy organization for renters, said the governor’s proposal wasn’t going to improve renters’ lives. The more acute crisis isn’t the housing shortage, Inglis said, but rather land speculation and other forces driving poor residents from their communities.

Brown’s plan would have made it easier for developers to tear down existing housing to build new homes. Even if that new construction created more units for low-income residents, it still would have displaced those who have lived in neighborhoods for a long time, Inglis said. Beyond that, she said, removing some local approval would have cut renters from debates over where housing should go and what it should look like.

“We support affordable housing,” Inglis said. “But it’s not important enough right now for us to give up all this other power.”

I’ve put the last sentence in bold because it nicely explains why it is so difficult to reform California’s zoning and planning system. Essentially, the current system is badly broken, and the outcomes for housing affordability and social equity are terrible. But it’s also a system that gives many people leverage, in the form of multiple opportunities to object to development, propose referendums to carve out more for themselves, or partially insulate themselves from the adverse consequences of housing unaffordability (eg rent control).

While reforming the system would lead to better outcomes, the first step requires many of those people to give up their power to oppose or direct outcomes for development. That feels risky, and people don’t want to do it.

This tells us two important things about how to approach zoning reform in other places:

  • First, reform is easier if there are fewer ‘veto points’ for new development to start with. Opportunities to oppose give people power, and they will be reluctant to give it up later on, even if it turns out that there are unintended negative consequences. This doesn’t mean forsaking environmental reviews or notification to neighbours, but it does mean that it’s important to think carefully about how processes will work in practice.
  • Second, the politics of zoning reform tends to dominate over the economics. In other words, it’s not enough to prove that the outcome from reform would be better for society as a whole. Rather, it’s necessary to provide people with some certainty that they will be better off as a result of giving up power. Unfortunately, this often resembles ‘buying off’ politically powerful groups, which isn’t really that desirable.

What do you make of the California experience?

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8 comments

  1. It just shows people are selfish and work to their own interest. When you distort the market with restrictions & controls and don’t incentivise the wanted/required behaviour, you get problems like this. Nothing new.

  2. They should put panel beaters into their building and create plenty of noise and paint smells. Then ask the neighbours what they think of apartments.

  3. There is a situation that is similar to the lower income groups concerns happening in Auckland. Current low rent properties are being replaced by new buildings with apartment s that are ‘house priced’. We have a low rent property currently on the market that the purchasing developer has made perfectly clear he intends to demolish and replace with expensive apartment/ townhouses. There is no way current tenants can afford the new rents.

    1. The only reason the rent is low is because the landlord makes profit off the capital gains instead. You seem to be suggesting that there should be some law to stop property owners selling to realise their capital gains. If you did that, there would be no opportunity for capital profit and the only outcome would be huge rent increases to cover outgoings.

      1. Never suggested anything. Just pointing out an example of what us happening that makes rents higher, which follows with the low income groups logic in the article. Auckland with replacement of homes with townhouses and apartments is less and less affordable for the masses is all I was pointing out.

    2. It’s true. There is nowhere for poor people to go. Rents are too high as it is. I own rentals and have great tenants so I can’t bring myself to charge market rents which are just insane. The rents are so high because the everyone wants a good return on their overpriced housing. If I redeveloped or sold to a developer, my current tenants wouldnt be able to afford the rent.

  4. I think this sums up how f#cked people here are (http://hoodline.com/2016/11/3rd-generation-outer-sunset-resident-seeks-community-help-to-save-family-home). They don’t want anything to change, and expect other people to pay for them.

    Also look into Prop 13 which means we have people living in $2m+ houses around here, paying taxes like it was a $200k house, essentially a huge shift in burden from the home owning baby boomer generation lucky to have bought a house in California 30 years ago, to the current generation paying $4k per month for a 700sqft shitty apartment. It’s disgusting.

  5. This why we, Auckland, should have zoned the whole Isthmus THAB, with no exceptions.

    We are already seeing the council speciously restrict development in the THAB zone on the ground that they are next to other zones, grrrr.

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