Analysis: Why Bay Area cities should call it quits with CEQA, PLAs, rent controls
Image by Gerard Van der Leun
The Independent Institute's latest Golden Fleece report highlights local gov't-created “regulatory obstacles” that constrain housing supply while spiking up costs. Also, the Institute offers five powerful suggestions for reform—starting with ditching zoning/land use restrictions and streamlining building-permit approvals.
This Golden Fleece report dares to state an unavoidable truth: housing prices and accessibility are determined by the interaction of supply and demand, and government regulations have constrained the supply side of the equation, exacerbating California’s housing and homelessness crises. Bureaucratic red tape impacts every stage of the development process, and there is no shortage of actors trying to maintain the status quo because they benefit from it financially or in other ways. Despite much hand-wringing and pronouncements by politicians to “fix the problem,” state and local governments have made the problem worse, especially for lower-income residents.
In July 2019, San Francisco Mayor London Breed asked, “Why does it take so damn long to get housing built?” This Golden Fleece report answers her question, and many more, and offers much-needed solutions. Fixing the problem requires a multipronged approach.
California legislators must ease state regulations that impose huge costs on housing construction, stop or delay projects, and disincentivize more rental properties. Local officials need to liberalize zoning and other building regulations, especially in high-demand areas, that prevent much-needed construction of new housing or that prevent the conversion of old buildings into residential housing. Entrepreneurs should be encouraged to enter housing markets across the state to provide creative and low-cost solutions to meet consumer demands for housing, thereby eliminating the government-created shortage....
1. Reduce zoning and land-use restrictions
Zoning rules and land-use restrictions limit the type of housing that developers can build and where they are allowed to build them. These rules take many forms: height restrictions, residential density or occupancy restrictions, limits on multifamily buildings, and explicit growth limits such as caps on permits, moratoria on new development, “green belts” or urban growth boundaries and other limits on developable land. These restrictions increased precipitously in California after the mid-1980s. For example, today “two-thirds of California coastal cities and counties have adopted policies that explicitly limit the number of new homes that can be built within their borders or policies that limit the density of new developments,” according to Matt Levin of CalMatters. Local zoning rules often intentionally limit or ban the construction of multifamily housing or low-cost “prefabricated” or mobile homes, which can make entire regions of the state inaccessible to middle-and low-income people....
2. Streamline building-permit approvals
Housing construction often requires permits or approval from many government bodies: the planning department, health department, fire department, building department, and city council or county board. Lengthy permitting times and costly fees raise the cost of housing construction, and can slow or even stop projects. Brian Goggin with the Terner Center for Housing Innovation at the University of California, Berkeley, examined permitting data from the San Francisco Planning Department from 2009 through 2017. For projects adding 10 or more units, the average time for a development to be permitted was nearly 4 years. The average time for total development (from application to completion) in San Francisco was 6.3 years. But he found that 20 percent of these housing projects take between 10 to 15 years to complete. The notoriously slow pace of approving housing has its consequences. In many parts of the country, a developer can build multiple projects in the time it takes to build one project in California, so they build elsewhere.
As a result, home builders can “build and sell substantially the same house in Texas for $300,000 as they build in California for $800,000,” writes Pete Reeb, a principal at John Burns Real Estate Consulting, in a new analysis. It can take 10 years or more to get a master-planned community approved for development, according to Dean Wehrli with John Burns Northern California. Even subdivisions that are already substantially in conformance with local zoning laws can take three to five years for permit approvals. Permit delays is an important reason why home prices in California are more than 2.4 times higher than in Texas and 2.2 times higher than in Florida....
3. Abolish the California Environmental Quality Act (CEQA)
CEQA is used primarily to stop or delay housing projects. CEQA is responsible for the creation of the new word “greenmail”: unions threaten CEQA lawsuits to extract PLAs from builders; environmental groups use CEQA to force developers to set aside more land for nature preserves; local governments and neighborhood groups use it to blackmail developers into building parks or incorporating other amenities that they themselves will not pay for; businesses use it to harm competitors; and all of these parties use CEQA to try to stop specific projects through endless delays and additional costs.
This article originally appeared in the Independent Institute. Read the whole thing here.
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