On Tuesday, Los Angeles voters will decide about Measure S, a ballot initiative that would ban zoning changes for two years and make it harder to build more housing afterwards. It’s continuing a familiar story: Developers are prevented from building enough housing for people seeking “new economy” opportunities in Los Angeles, while tight vacancies and bidding wars over existing homes put pressure on working-class Angelenos to leave.
California’s overregulated housing market has become a zero-sum Thunderdome, a battle to bid the highest in the market or last the longest on a government waitlist for scarce housing. Slow growth of the housing supply has caused prices to soar: Zillow’s index for homes in L.A. proper rose roughly 65 percent from the 2012 low to the current high of roughly $614,000. The S&P Case-Shiller Home Price Index, for the broader L.A. metro area rose 56 percent over the same period, nearly eight times the rate of inflation.
“Los Angeles, and California as a whole, would do well to follow the supply-friendly examples of cities like Houston...”
Subsidies can reshuffle who gets a chunk of the housing stock, but it’s still just a zero-sum game of musical chairs unless more units are allowed to be built. A low-income household can take a middle-income market rate unit using a Section 8 voucher, but unless a replacement market rate unit can be built, that voucher merely displaces a middle-income household.
The only way to include people of all wages and incomes is to actually build more places for more people. Oddly, rapidly building cheap metro areas in states like Arizona, Texas, and Georgia — not known for explicitly progressive policies — have figured out this inclusive growth recipe.
Los Angeles, and California as a whole, would do well to follow the supply-friendly examples of cities like Houston: That metro area alone issued about as many housing permits as the entire state of California between 2000 and 2014. Correspondingly, median home prices reported by the Houston Association of Realtors rose from $123,500 in 2000 to $199,000 in 2014. Instead of booming in price, Houston boomed in quantity.
It’s not that fast-growing, cheaper Sunbelt cities are inherently more attractive in themselves. California has countless advantages: Hollywood, tech, great universities, world-class natural amenities, and generally high wages, to name a few. But the home prices are too high. And that’s because Californian governments won’t make room.
How would housing supply growth actually work in L.A.? The city is already mostly built up already between the mountains and the ocean. And since land is scarce, a single empty lot in a hot neighborhood easily sells for hundreds of thousands of dollars, pushing up the cost of a house before construction even begins.
This scarcity of vacant land is often regarded as the final word in why L.A. has such an inflexible housing market. But that can’t be right: Multistory buildings allow us to use less land per housing unit in response to high land prices. Once a foundation is laid, no more land is required to keep adding units. Indeed, higher land prices are a market signal to build taller buildings, ones that stack up more square feet of floor space per square foot of land — increasing what city planners call a “floor area ratio.”
Alas, most of Los Angeles is already built up to the maximum zoned “floor area ratio,” which in turn means that a zoning exception or “variance” is required for almost every new large project in order to build up any further. That’s why the Measure S ban on zoning variances for denser buildings is so bad for affordability in L.A.: The supply-side anchor on prices can’t function if zoning laws can’t easily be changed to allow more supply.
California’s cities have increasingly failed to make room for everyone, leaving the working and middle classes little choice but to vote with their feet for cheaper places, often with less dynamic labor markets. From 1880 to 1980, Americans tended to move to en masse to metro areas with higher wages; our era since 1980 is the first in which that trend has declined. This failure is not exclusive to California. Superstar blue cities on both coasts have not permitted the housing supply needed to allow Americans of all incomes to adapt to deindustrialization and access “new economy” job clusters.
High-wage, high-amenity cities need to start growing the pie for everyone again — starting with Los Angeles.
This piece originally appeared in the Los Angeles Daily News
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Alex Armlovich is a fellow at the Manhattan Institute. Follow him on Twitter here.
This piece originally appeared in Los Angeles Daily News