Aug 28, 2019

Study: California's land-use rules worsen housing crunch

Houses and apartments in San Francisco

A view of homes and apartments in San Francisco. Photo: Justin Sullivan/Getty Images

Some California cities with stricter land-use regulations had lower growth in housing supply, according to a new paper out today from the Mercatus Center at George Mason University.

The big picture: Cities across the country are wrestling with housing affordability. Minneapolis became the first to scrap single-family zoning, followed by Oregon with the first statewide ban. Meanwhile, Des Moines is moving in the opposite direction with zoning changes aimed at lower density.

What they did: Researchers created an index ranking the level of density restrictions in 265 California jurisdictions using land use survey data and public regulatory data.

What they found: More building restrictions — such as setbacks, parking minimums, minimum lot sizes and height limits — in some cases led to less building and, overall, a significant housing growth deficit. That prevents housing supply from meeting soaring demand, keeping prices high.

  • Dublin and Irvine had the most rapid housing growth in the state, and also low regulation levels. The cities have a lot of developable land to build more housing.
  • Expensive suburbs like Atherton, Bradbury and Los Altos Hills had the worst growth records and strictest land-use rules.
  • Big cities including San Francisco and San Jose are actually less regulated than most of their suburbs. But the housing debate is intense in those jobs-rich cities, often with fierce opposition to some types of new projects.
  • Among the big cities, Oakland and Long Beach built the least housing between 2012 and 2018.

What's happening: A number of jurisdictions are trapped between urban growth boundaries, where development is prohibited, and density restrictions, said Salim Furth, one of the report's authors.

"They're frozen in a state of half-suburbanization, a patchwork of farms and subdivision. In some places, you can't build out but you can build up, and in others you can't build up but you can build out. In a lot of California, you can't do either one."
— Salim Furth, Senior Research Fellow at Mercatus Center

Yes, but: Furth acknowledged the correlation between regulation and growth surplus is driven by extreme cases. Housing growth happens fastest in places with available land and high demand growth, not necessarily in the least-regulated places.

What to watch: California state Sen. Scott Wiener has proposed a bill that would preempt density restrictions near most transit stations and job clusters, instead allowing more multifamily zoning. But it faces intense opposition and a full vote was punted to 2020.

Meanwhile: The super-hot Bay Area market could be cooling just a bit. Housing prices across the Bay Area dipped in July compared to last year for almost every Bay Area county — including San Francisco, where the median price dropped 3 percentage points to $1.6 million, per CurbedSF.

  • Even though San Francisco has added multifamily housing, single-family housing supply has actually declined — so demand continues to swell, according to a trend report by Compass, a real estate group.
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