Assistant Dean Carson Bruno on the Defeat of Measure S Not Enough for California Housing | Real Clear Markets
Defeat of Measure S Is Not Enough for California Housing
Last Tuesday, City of Los Angeles voters defeated Measure S – a draconian anti-housing development ballot measure, which would have halted all new high-density development in Los Angeles, exacerbating an already stressed housing market. As of yesterday, the measure was failing 70% to 30%, a decisive rebut of an initiative lacking any policy rationale.
But YIMBYs, affordable housing advocates, pro-housing environmentalists, and business and civic leaders shouldn’t breathe a shy of relief. Measure S’s defeat is more an anomaly than the standard. Much more action is required and the stakes are only getting higher.
Growth Is Good: There isn’t a single environment on this planet that is static. Simply put, we live in a dynamic world. It’s ridiculous, then, to think our neighborhoods and cities are or should be static. NIMBYism-Residentialism is rooted in the belief that there is a perfect equilibrium that must be maintained, preserved, or returned to. This is not only misguided, but also self-serving and hypocritical. Rather than attempting to (and ultimately, failing to) preserve the past, our political system and policy environment should reward appropriate dynamism when it comes to land use – anticipating our future needs. This means our civic leaders must be even more aggressive in promoting housing development and do everything possible to stop ballot box development.
“Mr. Gorbachev, Tear Down This Wall”: In addition to defeating any ballot measure that creates controls, mandates, or new rules on housing development, our leaders need to be actively tearing down barriers to entry for housing development at the municipal, regional, and state levels. Even the most basic process in California to get a housing project passed – whether its infill or not – is so byzantine its amazing anyone has the courage to actually propose a project. Between local General Plan zoning mandates that almost require multiple advanced degrees to comprehend, constantly changing opinions and attitudes of city councils, the myriad of appointed planning and environmental commissions, and CEQA and the guaranteed lawsuits to follow CEQA review, it takes a huge amount of effort, patience, and money to even get a proposal approved. Then building starts, which is further governed by employment and wage mandates, additional environmental review, and likely, new litigation. Being a Californian developer is not for the faint-of-heart.
If You Tear It Down, They Will Come: In California’s current housing environment, it is no surprise, then, that the most commonly built new development is luxury housing. Given the amount of time, effort, and money required to get a proposal approved and then built, luxury housing is the only type that can guarantee a profit for developers (and even then, it is sometimes cutting it close). However, not only might this issue not be as big a problem as NIMBY-Residentialists like to make it, it also goes to prove that our current land use system is massively out-of-whack.
Think of housing needs as a ladder. Right now all the ladder’s rungs are full with a long line of people at the bottom wanting to climb up. But if we add a new rung is added at the top (i.e. luxury housing), then those who could afford the new higher rung and on the ladder can climb up, thus creating space for others to climb up below. By relieving supply pressure at the top, even adding luxury housing can ease the housing unaffordability issue below. And we are seeing examples of this happening already (albeit slightly) in places like San Francisco. This, however, doesn’t happen overnight. Patience is needed by both politicians and the community alike.
But more housing at all income levels is ideally what we ought to be achieving. And to do so, you need to cut away the mandates, rules, and process layers that increase the cost to approving and constructing new housing. This is the only sustainable way to incentivize developers to build units up and down the income spectrum. By tearing down the barriers, the housing will come. To illustrate, take San Diego State Senator Toni Atkins’ SB 2 – which would impose new real estate fees to pay for low-income housing projects. First, this would add an additional cost to housing, but the bigger question is what sort of impact could this additional money have in the current regulatory landscape. It is estimated this new fee would bring in $300 to $500 million per year earmarked. On average, the cost per unit of low-income housing in California is just under $300,000 (but can go north of $500,000 in the costly coastal Californian metros). This means, assuming SB 2 doesn’t discourage more housing, under the current framework, it could only hope to fund 1,000 to 1,667 additional units per year – in a state that needs hundreds of thousands of additional units. The fact that there are already affordable housing developers attempting to navigate the housing quagmire in California, though, goes to show what could be if the hurdles were torn down.
But Sacramento and localities are not tearing down barriers. Victories like Measure S’s defeat are muted by further attempts by local elected officials, state leaders, and others to erect new hurdles for developers. Whether it’s Silicon Valley Assemblyman Kansen Chu’s AB 199 – which would force private developers to abide by the same prevailing wage mandates that cover public housing projects – or San Francisco Senator Scott Wiener’s SB 35 – which takes a step in the right direction by streamlining the regulatory process only to take two steps backward with another prevailing wage mandate – or local rent control and inclusionary zoning rules, or the union and Democratic Party-backed Los Angeles Measure JJJ, which forces strict zoning changes, and low-income housing, employment, and wage mandates on developers proposing new multi-unit projects, California has been heading in the wrong direction. And at the end of the day, this will have detrimental social, budget, and economic implications for the Golden State.