Housing is expensive in California:
In 2021, San Jose had the least affordable housing among the 92 major US housing markets, with a median multiple of 12.6. San Francisco had a median multiple of 11.8, Los Angeles was at 10.7, followed by San Diego, at 10.1).7 Housing was severely unaffordable even in the interior markets, with Riverside-San Bernardino at 7.4 and Sacramento at 6.7.
And there are some explanations for why that is the case:
Dartmouth economist William Fischel published an early seminal review 9 of housing affordability in California (1970 to the 1990s). Fischel suggested that regulatory research should look for major changes that “are adopted in some places but not in others.”
Fischel examined the higher house price increases that occurred in California compared to the rest of the nation between the late 1960s and late 1980s. Fischel cites various possible causal factors. He found that the higher prices could not be explained by higher construction cost increases, demand, higher personal income growth, the quality of life, amenities, Proposition 13, land supply or water issues.
Instead Fischel cites stronger land use restrictions — There were two principal issues, the California Environmental Quality Act (CEQA) and local growth management restrictions.10
We have discussed this issue many times before on the blog, but Wendell Cox’s article is helpful in pointing out that zoning in and of itself wasn’t the problem. The problem arose, at least according to Fischel’s research, when these policies went from “ordinary zoning” to something that became a tool to restrict growth.
The illustrate what “ordinary zoning” means, Cox uses the idiom, “a place for everything, but everything in its place.” And I think this is an interesting way of putting it. Part of the reason why we have zoning is that it is a way to organize uses. It is a way of saying that sex shops and cannabis shops can’t go here, but they can go over there.
But the key part of this idiom is its first part: a place for everything. What this implies is that the answer should never just be, “no, sorry, you can’t build this.” At most, it should be, “no, sorry, you can’t build this here, but you can over there.” There is a place for everything.
Of course, this is much harder to do when you flip from sprawl development to infill development. Because now there are fewer places “over there.” You really have to figure out “here.”