California Enacts Legislation to End Single Family Zoning

Canada is holding Parliamentary elections, and the fate of President Trudeau will be decided. Trudeau called the election to capitalize on the liberal government’s handling of the pandemic. But the big issue Canadians are upset about is housing. Trudeau pledged to ban foreign investment in Canadian homes for two years and end the process of blind-bidding.

The villain in Canada’s housing crisis: investor speculation, particularly foreign.

California, also facing a housing crisis, instead carried out a witch hunt on single-family zoning, declaring it racist. Myopic municipalities with their onerous land use codes, glacial permitting processes, capricious citizen-review planning boards, and that chorus of NIMBYs that amass over every project — they’re the problem, in the eyes of the coalition of the California Realtors Association, the California Building Trades Association, and tech companies who backed California YIMBY (Yes In My Backyard groups). This coalition drowned legislators and op-ed pages with this narrative for Senate Bills 9 and 10. Despite voter opposition to these bills, Gov. Gavin Newsom enacted them into law last Friday, after President Joe Biden publicly admired us for ending single-family zoning to get more housing.

There is truth to the allegation that local land use policies seriously impede the construction of housing. Everyone has been to a hearing with a storm of NIMBYs protesting that this (insert proposed project here) will forever change the character of the community. The California Legislature raced willingly into the arms of delusion that increased supply alone will fix our housing problems. Let’s just get rid of local controls that stop building. If we just build more, it will trickle down, and magically become more affordable.

Santa Barbara’s AUD experiment proved that to be a fallacy. The new high-density units are more expensive. People with older properties increased their prices to just under that of the new units. Density doesn’t drop prices. Hong Kong, Vancouver, and New York have some of the highest home prices in the world. 

Trends sweep through the housing industry like wildfire. Some take decades to play out, before they end, badly. Remember the Public Works Administration of the 1930s? The big idea was to shove poor people into newly constructed government block apartments. By the 1970s, they proved an incredibly fertile zone for drug-dealing, gunfire, and entrenched, inescapable poverty. New York, Chicago, and Atlanta demolished those cell-block towers in the 1990s, moving to scattered-site public housing.

What will the new housing laws do to our community? Well, every homeowner with a minimum 2,400-square-foot lot is instantly wealthier. When you can build more units on a piece of land, the price of that land goes up automatically. 

Like the ADU law, SB-9 might take a couple of years to be felt in neighborhoods, as building takes more than a minute. When a neighbor puts up three new units in their yard, you won’t have any say, as there will be no hearings, no design review, no environmental review.

This will make California’s single-family homes even more desirable to the Blackstones and Deutsche Banks, who’ve snatched up an enormous supply of American homes. They have infinitely deep pockets to build and rent FOUR units on a single-family lot. Few California families command the financial resources to develop their properties.

These new laws do not require the units to be affordable. We successfully fought for amendments to try to curb the worst of these bills’ tendencies, like prohibiting building in the high fire zones and not spurring investor speculation. The amendments are not bullet-proof, however.

What about SB-10? It allows up to 14 units where a single-family home stands today. A local jurisdiction has to “opt in,” and parcels must be in a “transit-rich” area. That means within half-mile of a bus stop, which is pretty much everywhere in Santa Barbara and Montecito.

We’re three years down the road of the ADU law’s implementation, upon which Senate Bills 9 and 10 were crafted. “Spite-ADUs,” placed up against a neighbor’s fence, are cropping up. Second-story, view-blocking ADUs are going up. Reports that ADUs are turning into vacation rentals — that’s happening. The law’s intent was to spur affordable housing creation, but the local ADU rentals are not remotely affordable.

Back to Canada – if Trudeau wins re-election, foreign investors are ready with cash-in-hand to buy up homes before the ban takes effect, raising home prices even more in the short term. Over time, though, Canadians would likely face less competition for Canadian homes, which could help prices. California’s GDP is $1 trillion greater than that of Canada, yet we completely ignored the role of institutional investors driving up our housing prices.

A metaphor: a farmer grows crops that people need to eat. When a horde of locusts reduces the crops available, the price of the surviving crop goes up. People who need the food but can’t pay more go without. If the only strategy is “just plant more crops” — why wouldn’t the locusts just eat those, too?

Maybe we should deal with the locusts… like Canada.

We’ll see which strategy plays out better — over time.