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| 1. | Brandon Donnelly | 14M |
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On July 1 of this year, a new California bill, called the "Affordable Housing and High Road Jobs Act of 2022", will go into effect. And the goal of this legislation is to significantly increase the supply of new homes in the state by allowing multi-family construction on lands that are currently zoned for commercial uses.
On some level, it is of course curious that there even needs to be this bill. Because what we are effectively saying is, "hey, we should allow people to build a mix of uses on our main streets and with high enough densities that we might actually be able to support transit." Why was this not always the case? (Rhetorical question.)
In the words of architect and planner Peter Calthorpe, who was recently interviewed here in ArchDaily, this is a "landmark piece of legislation" that has "received very little attention." So that's why we're talking about it today.
Calthorpe was actively involved in crafting this legislation, and his work apparently started with different scenario land-use models. The first experiment looked at a 43-mile stretch of El Camino running from San Francisco to San Jose (pictured below). And what they found was that this one strip alone could accommodate somewhere around 250,000 new infill homes.
To put this into context, the state of California is currently building about 140,000 new homes each year, through a roughly equal (1:1) split of multi-family and low-rise single-family. Already this represents a shift, as supply used to be slanted (3:1) toward low-rise. (I don't know when exactly this was the case, but Calthorpe mentions the figure in his interview.)
Moving on from El Camino, Calthorpe and his team then ran a similar exercise for the five-county inner Bay area. And here they found that some 700 miles of commercial land could produce up to 1.3 million multi-family homes at "reasonable densities." This was then expanded to the entire state of California and the number increased to 10 million new homes.
Of course, as we have talked about before on this blog, not all of this land might actually be feasible for development. Sometimes the math doesn't work even at a zero land cost; you might need a negative land cost in order to pencil a new development. Meaning, you might need to be paid, perhaps through some sort of subsidy.
So what Calthorpe and the team did was use MapCraft to quickly run development feasibilities on the above sites. They had it run 6 different pro formas using local rents, construction costs, city fees, and so on. And what they determined was that this 10 million number drops down to 2 million when you apply the economic realities of the world.
As a disclaimer, I'm not at all familiar with MapCraft. But I'm going to take this number at face value and say that this is still a lot of new homes. And this is what people are hoping for come July 1 of this year.
Image: HDR / Peter Calthorpe
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."
According to this recent New York Times article, California is set to put into effect a new mandate that would require 100% of passenger vehicle sales in the state to be fully electric by 2035. Included within this mandate are also interim targets: 35% of all sales by 2026 and 68% of all sales by 2030.
When I first read the article, my first thought was: "Isn't 2035 kind of far away? Can't we do this sooner?" And this is usually how my mind works when I see some date in the future. But then I remembered that EV sales last year in the US only totaled somewhere around 5% of all sales.
So there is work to be done, and mandates like this will certainly help. As I understand it, this will be the first mandate of its kind in the US and also one of the strictest in the world. A lot of other countries have simply set targets, rather than all-out bans.
This is what it means to lead. You do things before others.
On July 1 of this year, a new California bill, called the "Affordable Housing and High Road Jobs Act of 2022", will go into effect. And the goal of this legislation is to significantly increase the supply of new homes in the state by allowing multi-family construction on lands that are currently zoned for commercial uses.
On some level, it is of course curious that there even needs to be this bill. Because what we are effectively saying is, "hey, we should allow people to build a mix of uses on our main streets and with high enough densities that we might actually be able to support transit." Why was this not always the case? (Rhetorical question.)
In the words of architect and planner Peter Calthorpe, who was recently interviewed here in ArchDaily, this is a "landmark piece of legislation" that has "received very little attention." So that's why we're talking about it today.
Calthorpe was actively involved in crafting this legislation, and his work apparently started with different scenario land-use models. The first experiment looked at a 43-mile stretch of El Camino running from San Francisco to San Jose (pictured below). And what they found was that this one strip alone could accommodate somewhere around 250,000 new infill homes.
To put this into context, the state of California is currently building about 140,000 new homes each year, through a roughly equal (1:1) split of multi-family and low-rise single-family. Already this represents a shift, as supply used to be slanted (3:1) toward low-rise. (I don't know when exactly this was the case, but Calthorpe mentions the figure in his interview.)
Moving on from El Camino, Calthorpe and his team then ran a similar exercise for the five-county inner Bay area. And here they found that some 700 miles of commercial land could produce up to 1.3 million multi-family homes at "reasonable densities." This was then expanded to the entire state of California and the number increased to 10 million new homes.
Of course, as we have talked about before on this blog, not all of this land might actually be feasible for development. Sometimes the math doesn't work even at a zero land cost; you might need a negative land cost in order to pencil a new development. Meaning, you might need to be paid, perhaps through some sort of subsidy.
So what Calthorpe and the team did was use MapCraft to quickly run development feasibilities on the above sites. They had it run 6 different pro formas using local rents, construction costs, city fees, and so on. And what they determined was that this 10 million number drops down to 2 million when you apply the economic realities of the world.
As a disclaimer, I'm not at all familiar with MapCraft. But I'm going to take this number at face value and say that this is still a lot of new homes. And this is what people are hoping for come July 1 of this year.
Image: HDR / Peter Calthorpe
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."
According to this recent New York Times article, California is set to put into effect a new mandate that would require 100% of passenger vehicle sales in the state to be fully electric by 2035. Included within this mandate are also interim targets: 35% of all sales by 2026 and 68% of all sales by 2030.
When I first read the article, my first thought was: "Isn't 2035 kind of far away? Can't we do this sooner?" And this is usually how my mind works when I see some date in the future. But then I remembered that EV sales last year in the US only totaled somewhere around 5% of all sales.
So there is work to be done, and mandates like this will certainly help. As I understand it, this will be the first mandate of its kind in the US and also one of the strictest in the world. A lot of other countries have simply set targets, rather than all-out bans.
This is what it means to lead. You do things before others.
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