California’s New Housing Laws: Here’s What to Know

[Manitopiaaa]

No matter where you live, you’re probably familiar with the exorbitant cost of housing in California.

The state’s median home price has crept above $800,000, more than double what it is nationwide. Among the 50 biggest cities in the country, we’re home to the top four most difficult places to afford a mortgage. And half of all Americans experiencing homelessness live in California.

Our housing crisis has a seemingly simple solution, according to the laws of supply and demand: Build more housing.

But for decades, resistance from suburban homeowners has stalled development as the problem has only gotten worse.

On Thursday, the state took a step toward creating higher-density neighborhoods as Gov. Gavin Newsom signed two high-profile housing bills.

....

S.B. 9 allows duplexes to be built in most neighborhoods across the state, including places where apartments have long been banned. S.B. 10 reduces environmental rules on multifamily housing and makes it easier for cities to add high-density development.

S.B. 9 essentially ends single-family zoning, but with a modest shift: Under the bill, property owners can build up to three additional units on their land, allowing single-family homes to be transformed into as many as four units.

A recent analysis by the Terner Center for Housing Innovation at University of California, Berkeley, found that S.B. 9 would most likely lead to 714,000 new homes across the state over the next several years.

https://www.nytimes.com/2021/09/20/u...sing-laws.html

Has California found the answer? Or is this a bandaid?

[10023]

Not really.

Supply and demand is of course real, but density doesn’t necessarily imply lower real estate prices (as evidenced by the fact that most of the densest census tracts in the country are among the most expensive). The additional supply that would be required to really change equilibrium prices would be enormous, and is not going to come from allowing duplexes.

Generally speaking, building more housing units in expensive neighborhoods should just result in a higher number of expensive housing units. You’d get lower prices if you make the area less desirable, of course - that’s how massive subsidized housing projects actually reduce real estate prices.

And it’s not necessarily single-family housing that’s the problem. In older cities with row houses, built 4-5 stories tall on narrow lots with small gardens, you have more density (based on square footage or residents per acre) than this would allow and yet you often have very high prices.

Still, it’s a good move because single-family zoning, like required parking minimums, is a stupid distortion of the real estate market.

[mhays]

It should be very effective.

On the for-sale side, prices are based on who's buying and selling NOW, with little relation to the size of the overall market. New inventory at even a small percentage of the total market can have a big effect. There's also the urgency bias...people currently buy high because they're worried the market will keep rising, and that might not be necessary or could even reverse. That said, a stabilizing in prices would also convince some people that they don't need to move away...a medium will still exist but it could be flat or lower.

For rentals and for-sale, development cost is the "structural" driver of buyer/renter prices. Land cost is a massive factor, often measured in a per-new-unit metric. That should drop substantially, as the potential supply of properties just literally multiplied, including existing houses and undeveloped sites. The costs of process, design/redesign, and land holding is another big factor, including a lot of uncertainty that costs money, and that's smoothed out too in some ways.

The devil might be in the details (like local governments not finding ways to gum things up), but it sounds like this might reset the norms.

[Yuri]

Originally Posted by 10023

Not really.

Supply and demand is of course real, but density doesn’t necessarily imply lower real estate prices (as evidenced by the fact that most of the densest census tracts in the country are among the most expensive). The additional supply that would be required to really change equilibrium prices would be enormous, and is not going to come from allowing duplexes.

Generally speaking, building more housing units in expensive neighborhoods should just result in a higher number of expensive housing units. You’d get lower prices if you make the area less desirable, of course - that’s how massive subsidized housing projects actually reduce real estate prices.

And it’s not necessarily single-family housing that’s the problem. In older cities with row houses, built 4-5 stories tall on narrow lots with small gardens, you have more density (based on square footage or residents per acre) than this would allow and yet you often have very high prices.

Still, it’s a good move because single-family zoning, like required parking minimums, is a stupid distortion of the real estate market.

But maybe without those new units in dense areas were not added, prices could be even higher. London and San Francisco are maybe the most well-known places with very high prices, fast growth and low construction rates.

I guess if they build much more, prices could at least stop rising and keep those cities growing indefinitely.

[mhays]

Using one city to project another is a general no-no in real estate. There are WAY too many variables. Particularly if a place like London is a comparison.

[Yuri]

Originally Posted by mhays

Using one city to project another is a general no-no in real estate. There are WAY too many variables. Particularly if a place like London is a comparison.

I might be narrow-minded here, but to me the answer is very straight-forward: build, build, build.

It works anywhere.

[eschaton]

I actually think that California is generally an area where densification would lead to significantly lower prices, because the walkable infrastructure is generally speaking so poor that you wouldn't see that many additional walkable commercial amenities popping up in an area even with a doubling of population.

[bossabreezes]

As a general rule, this will probably not do much more than create a really bizarre, high density, chop shop- Frankenstein suburbia with a bunch of tiny homes looking like trailers everywhere. I also foresee a lot of neighborhoods looking 5x junkier, and a lot of California neighborhoods are already junky looking without the added visual pollution this lack of structure will provide.

[ocman]

Mostly band-aid. Especially the duplex allowance, which is gonna add a fraction more of housing.

[SFBruin]

I feel like this will work. Will it solve everything? No, but it's a step in the right direction.

[homebucket]

Originally Posted by SFBruin

I feel like this will work. Will it solve everything? No, but it's a step in the right direction.

Agreed. It'll help but fixing California's housing problems will require a multi-pronged approach, and even if all the ideal solutions are implemented, it will still likely be one of the more expensive places to live. Hopefully it can at least change the prices from ridiculous to just expensive.

[SFBruin]

I'd be happy of the PNW to do this, tbh.

I've thought about moving to Portland, and even that's too expensive right now.

[RST500]

SB9 has a lot of loopholes that allow cities to limit and regulate new projects. On one hand there is NIMBY concern about upper middle class areas having more low income housing while there are anti-gentrification activists who claim it will lead to more luxury housing. It's hard to predict the overall impact but I estimate it will impact different communities differently.

[jd3189]

This law will probably make the most difference in the rapidly growing areas like the IE, Central Valley, and maybe a lot of relatively dense suburban areas in LA and the Bay.

As for neighborhoods potentially becoming tackier and less desirable, that's probably the point. If cities and states are to retain some semblance of a middle or low class that are involved with the majority of the action that goes down within them, most of the cities should have a majority of their housing be affordable for those folks.

It's essentially having different sub-markets for the overall housing market. Rent-controlled or public housing can still exist for the lower socioeconomic status folks and luxurious mansions and penthouses can still exist for the rich. But for the rest of us in the vast middle, especially in the most populated state in the country, we need more supply and variety of options in the housing market.

It's not even like places like SF or LA have to look like Manhattan. What California had done well was building dense suburbia during the growth era in the mid 20th century. Many of the smaller SFHs, garden apartments, and other housing still exists in a lot of places, especially in SoCal. All this law is doing in allowing more of the multifamily housing forms to continue on.

And if the value of current homeowners' property falls, so what? NIMBYs are already living in excess and will continue to gain value in their homes since most Americans, even millennials, still value owning a house. That mindset will slightly decrease as we embrace more urban and sustainable housing, but it ain't going nowhere.

[SFBruin]

Would this apply to super high-end neighborhoods, like Bel-Air or Saratoga?

[homebucket]

Originally Posted by SFBruin

Would this apply to super high-end neighborhoods, like Bel-Air or Saratoga?

I don't see why not, unless there are some hidden restrictions. Those cities wouldn't be ideal locations for this anyway, although I suppose anything helps. Hopefully these types of conversions occur more in SFH areas on or near rail or bus routes.

[RST500]

Originally Posted by SFBruin

Would this apply to super high-end neighborhoods, like Bel-Air or Saratoga?

In principle yes, but wealthier neighborhoods and cities could take advantage of loopholes such as historic preservation and fire risks to stifle the implementation.

[Reverberation]

My understanding is that in CA the state can do all it wants but a city like Atherton can just say “Thank you. We will take this under advisement.” And even if SFH are banned, individual redevelopment projects of higher density still need to get through the local approval processes (and litigation). Does this actually have teeth (as it does in Oregon and other states) or is it more of just a new posture under the same non-working system?

[Gordo]

No one is talking about banning SFHs.

The new law does have teeth for giving property owners the right to subdivide their lot and build two units on each of those, and it overrides any local bans on that.

[10023]

^ I suppose then the practical answer to the question of whether this applies to areas like Bel-Air is that generally it won’t happen. In those super-prime markets the larger lot is worth more than two smaller lots would be, for the same reason that combining two Manhattan co-ops into a massive duplex yields a property more valuable than the sum of its parts (due to prestige, scarcity value, etc).