Among the 200-odd housing-related laws that the California has enacted since 2015, many – if not most -- were designed to increase density in one way or another. Some laws encourage housing units where now there are only big boxes and offices. Some encourage developers to build higher in exchange for housing lower-income residents. Others literally put new housing in people's backyards, by way of accessory dwelling units. The entire RHNA process is, essentially, an exercise in densification.
To an extent, this is the YIMBY dream writ large.
At last this weekend's annual Journalists Forum at the Lincoln Institute of Land Policy, David Garcia, policy director for the UC Berkeley Terner Center for Housing Innovation, had the burden of summarizing all these laws. But he was joined by, among other panelists, Patrick Condon, a Vancouver-based planner and professor who predicted, provocatively, these laws may simply lead to more expensive housing.
For at least as long as the YIMBY movement has been around -- calling for, broadly speaking, as much upzoning in as many places as possible -- Condon has questioned the orthodoxy of density.
Condon has lived in Vancouver long enough to see high rise condo and apartment buildings rise on a peninsula--which includes its central business district--like the redwood trees that covered it a century ago. Vancouver also encourages duplexes, fourplexes, "lane houses" and other forms of suburban upzoning. Since 1970, Vancouver's population has increased by more than 50%, from around 420,000 to nearly 665,000; thanks in part to pro-density zoning, its number of housing units has doubled, according to Condon's numbers. Its density is over 14,000 persons per square mile--fourth highest in North America.
And what happened to its housing prices? They are, according to Condon, among the highest in North America, with the average house costing 24 times the average annual salary.
So Condon cautions that increased density does essentially nothing for housing costs.
"Land prices absorbed all the benefit of that new supply," said Condon. "Because the capacity of those parcels was increased in terms of the financial return on it, it's reflected in this tremendous rise in land value."
To explain: If upzoning, say, doubles the number of units allowed on a given piece of land, the seller will calculate the upzoned value and raise the asking price accordingly, thus sticking it to the buyer, who must, as a matter of necessity, pass on the added cost to residents. In Vancouver, Condon says 40% of the rent or price -- at whatever density -- goes right into the land.
Anybody who's been involved in a transaction involving a piece of newly upzoned land will understand this. It's the reason, why, say, prices for a tract of modest homes near my home in West Los Angeles shot up after the adoption of the city's TOC ordinance. Enticed by the possibility of density bonuses, developers were willing to accept inflated prices in order to build a multi-hundred unit building. On a micro-scale, there's no doubt that the potential to build an ADU or duplex in place of an existing single-unit home can raise the price buyers are willing to pay (a phenomenon I personally felt in a recent, unsuccessful, quest to buy a house in Los Angeles).
Condon insisted that, absent a policy mechanism to moderate land prices--such as, perhaps, a Henry George-style land value tax -- this pattern is almost inevitable. He suggested that the only way to ensure that upzoning does not raise housing costs is to require aggressive inclusionary provisions so that the cost of below-market-rate units substantially counteract, on average, those of "luxury units." He pointed to none other than Cambridge's recently adopted 100% inclusionary requirement. (He did not, though, explain how these projects would pencil out, though he might argue that land sellers would have to settle for less and, thereby, enable developers to break even.)
As Condon repeated several times, his argument spells bad news for anyone, especially YIMBYs, who hopes that upzoning will reduce housing costs. To his credit, though, Condon is not nearly as much of a curmudgeon as certain venerable density scolds who favor Valencia over Vancouver. Emphasizing that "adding density is a good thing," Condon acknowledged that density may embody other, nontrivial benefits that outweigh--or at least offset--whatever its costs might be. He cited reductions in greenhouse gas emissions, increases in transit ridership, and diversity of housing types.
What, then, does all of this mean for California and it's 5 bazillion new housing laws?
At a glance, it doesn't bode well. California's coastal cities, at least, share a lot in common with Vancouver. And yet, there's reason to believe that, even if Condon is right about Vancouver, he may yet be wrong about California.
Most obviously, Condon's argument is arguably a straw man. Many YIMBYs would acknowledge that increased density is not necessarily intended to lower housing costs. YIMBYs might be satisfied if the density simply reduces the rate at which housing costs increase. That's where Condon's analysis is incomplete: might Vancouver's costs be even higher in the absence of upzoning? Is it possible that Vancouver did not upzone enough? Or, is it possible that British Columbia did not upzone enough?
Whatever Vancouver has done, its housing market still exists alongside those of Burnaby, North Vancouver, and even Victoria. As the Terner Center's Garcia pointed out, jurisdictional inconsistencies in California have often kept housing supply constrained and costs high. Even if Emeryville or Oakland says "build, baby, build," its new units do next to nothing to counteract the reticence of Lafayette, Walnut Creek, and all of Marin County. "Oakland is pulling its weight, but suburbs prop up housing costs," said Garcia.
Rather than focus growth on one small peninsula, as the upzoning in Vancouver has done, most of California's new upzoning laws apply statewide. Notwithstanding cities that complain about (and sometimes sue over) Sacramento's incursion on their sacred right to self-determination, if every housing-constrained region and jurisdiction in the state has to upzone, then we might actually get an economy of scale, and we might actually meet aggregate demand.
Of course, the demand for deed-restricted affordable housing will always outstrip the market's ability to supply it. This is where Condon's admonishment really comes into play. Roughly speaking, most cities' RHNA numbers require zoning for roughly equal amounts of market-rate and affordable housing. But, of course, there are no laws, incentives, or funding programs -- locally or statewide -- that approach the 100% density bonus in Cambridge that Condon touts.
Whether you’re Cambridge or Canada or anyplace in between, urban economics will always involve combinations of alchemy, soothsaying, and dead reckoning. We can’t predict the future, and we can’t control for every variable. Whether Condon is right, wrong, or somewhere in between, his analysis is crucial for at least one reason: it compels us to define our goals and acknowledge that reaching some goals may be at cross-purposes with reaching others.
Then again, given the number of new housing policies in California, it’s hard to keep track of all the goals. And, maybe that’s the point. If this goes well, California might just stumble its way into affordability and abundance. And, really, we’re going to have to. At those prices, we can’t all move to Canada.
