The “Yes In My Back Yard” movement in favor of more housing construction recently notched a big win in California. One bill (AB 2011) upzones many commercial areas to allow for construction of multifamily apartments. Another bill (AB 2097) eliminated the requirement that developers provide parking spaces in developments near mass transit, even if they prefer not to. A recent blog post by Darrell Owens discusses the political economy of these changes:
The [building] Trades knew the legislature was desperate to pass a housing bill and made clear that all new housing needed to be built by unions exclusively. In 2020, they demonstrated their seriousness by single-handedly smoking the entire housing agenda that year and threatened to do so again by opposing AB 2011.
But this time more unions got into the game: the Carpenters union, which also represents many construction workers, supported AB 2011 and rallied loudly. In the legislature, there’s a world’s worth of difference between supporting a bill on paper and mobilizing for a bill you support. The Carpenters and SEIU did the latter, which made all the difference.
The Carpenters’ perspective was that the lack of housing construction led to the decline of construction worker unions and that it was in unions’ best interests to keep housing supply up so that there’s demand for jobs. The other big union supporters of SB 2011 weren’t construction unions at all—it was SEIU, the public workers union, and the school workers union. They supported AB 2011 because their workers were harmed by the housing shortage. This was a profound entry of non-construction unions into the land use debate.
Note: The Owen’s blog post provides more detailed information on what’s in the two housing bills.
This reminds me a bit of the deregulation of transportation in the 1970s and the 1980s. Over time, regulations had become so burdensome that they imposed major costs on the economy. While there are losers from deregulation, it is not a zero sum game. When regulations are extremely counterproductive, it eventually reaches the point where the winners from deregulation are in a position to gain far more than the insiders would lose. Indeed, in some cases the regulations can become so burdensome that even the insiders gain from removing them. I suspect that many communist party insiders gained from market reforms in the 1990s, as they were well placed to take advantage of the new (and much more efficient) market economy.
In recent years, the California construction industry has shrunk dramatically from its heyday in the second half of the 20th century. It appears that things have reached a tipping point in recent years, where the political coalition for YIMBYism has started to win battles against the still powerful NIMBYs.
PS. While progress is being made, I won’t be satisfied until a 50-story condo tower is built right next door to my lovely home in a quiet portion of Orange County.
READER COMMENTS
Scott Sumner
Sep 27 2022 at 11:06am
No comments yet on this post, but there’s already a Matt Yglesias tweet:
https://twitter.com/mattyglesias/status/1574756773034135553
🙂
robc
Sep 27 2022 at 11:16am
I don’t know if you are familiar with it, but you were mentioned twice in the comments section of strongtowns.org in the last two days.
Once related to your view on the housing “bubble” in 2008. And then a link to this post.
It is possible I might have been responsible for both comments. 🙂
https://www.strongtowns.org/journal/2022/9/26/what-will-housing-prices-be-a-year-from-now
I like cross-linking seemingly unrelated blogs I read.
I discovered Strong Towns when Charles Marohn (who wrote the article above) was interviewed by Russ Roberts on econtalk. I think it was in 2014.
Scott Sumner
Sep 28 2022 at 4:35am
Thanks robc.
john hare
Sep 27 2022 at 4:24pm
There’s a lake community close to me that is fairly isolated. A few homes on acreage and a couple of ranches the only neighbors in several miles. They are up in arms about a developer that wants to build out a ranch as a subdivision. Accusations of selling out and contaminating the waterways and such. My interpretation is “I’ve got mine and others can go jump”.
Jared
Sep 27 2022 at 5:31pm
“While progress is being made, I won’t be satisfied until a 50-story condo tower is built right next door to my lovely home in a quiet portion of Orange County.”
I don’t know, sir. I think you’re aiming a little low: I’ll be happy when I get bought out of my house so a 50-story condo tower is built in part on my yard. Heck, gimme a unit above floor 30 or so and I’ll call it even.:)
Spencer
Sep 27 2022 at 5:45pm
There have been 12 boom/busts in the housing cycle since WWII (including Covid-19’s)
Higher interest rates impound savings, inducing nonbank disintermediation.
CBs’ disintermediation is not predicated on interest rate ceilings.
Disintermediation for CBs can exist only in a situation in which there is both a massive loss of faith in the credit of the banks and an inability on the part of the Federal Reserve to prevent bank credit contraction as a consequence of currency withdrawals from the banking system. The last period of disintermediation for the CBs occurred during the Great Depression, which had its most force in March 1933. Ever since 1933 the Federal Reserve has had the capacity to take unified action, through its “open market power, to prevent any outflow of currency from the banking system by forcing the banks to contract credit.
Matthias
Sep 27 2022 at 7:43pm
Even in Singapore 50-story condo towers aren’t all that common. But I guess a man can dream.
(They definitely exist and we have quite a lot of them. But something like 40 stories seem more common.)
Scott Sumner
Sep 28 2022 at 4:03am
Yes, I thinks the economics of construction get progressively worse after about 40 floors.
Bobster
Sep 27 2022 at 9:41pm
It’s a small win.
Cities can simply boost affordable % requirements to kill any new housing. Both bills allow for that.
“Inclusionary zoning” which is really just cross subsidies are used to slow down development regardless of other rules. It is the binding constraint.
Until property taxes get fixed, cities don’t have any incentive to build housing and will continue to resist it.
Scott Sumner
Sep 28 2022 at 4:04am
Good points.
BC
Sep 29 2022 at 2:57am
I am puzzled about the economics of 50-story condos and NIMBY. I often hear that single-family homeowners are an obstacle to development because their homes are worth more when supply is limited. I could understand how that might be true of a condo owner that doesn’t also own the land on which his condo unit sits.
But, what about owners of standalone houses, who own the property lots as well? Like Scott, each one individually at least could maximize their property value by replacing their single-family house with a 50-story condo, or at least some other multi-unit, building. (If not, then there would be no need for zoning laws to prevent individual property owners from doing so. They wouldn’t want to even in the absence of zoning laws.) It could be the case, however, that if all of them did so, then there would be so much supply that individual unit prices fell so much that, despite the increase in units per lot, overall property values declined. In this case, it would make sense for property owners to use zoning laws to enforce a housing cartel.
But, if aggregate property value is maximized with single-family homes, then doesn’t that mean that property is being allocated to its highest value use? If the aggregate value placed on multi-unit housing by all the families that would have otherwise lived in it exceeded the aggregate value placed on existing single-family houses by the (smaller number of) families currently living in them, then why wouldn’t the existing property owners want to change the zoning laws so that they could all replace their single-family homes with more valuable multi-unit housing? In other words, even if single-family homeowners collude through zoning laws, shouldn’t we expect them to collude to maximize aggregate property value, which in turn means that property gets allocated to its highest value use? If so, then why would single-family homeowners be an obstacle to development? They own property (land), not just the houses sitting on top of the property.
Scott Sumner
Sep 29 2022 at 3:12am
I believe it has to do with different interests within the broader homeowner group. You might want to read up on proposals to allow individual streets in the UK to upzone. Apparently, it is likely that at the block level homeowners might prefer to upzone, while at the broader city level they might oppose doing so (fearing added traffic, without much benefit to their property values.)
TMC
Sep 29 2022 at 11:55am
I never understood why a commercial area would be limited to no housing. You’d think there would be good reasons to want it. I do understand the inverse. Zoning like that should not be separate, but more tiered by allowing X and anything higher.
” I won’t be satisfied until a 50-story condo tower is built right next door to my lovely home” I heard it was a pig farm approved for next to you. All good, right?
Drea
Sep 30 2022 at 4:09pm
That’s exactly how zoning works in Japan. There’s a rank order of zone impacts, and you can build X or anything of lower impact in the X zones. Only major industrial zones can’t have residential.
Jose Pablo
Sep 29 2022 at 1:08pm
Support for regulation is frequently based on Bastiat’s What-is-seen-and-what-is-not-seen effect. When the “not seen” part becomes visible and clearly to a significant number of people, the support for regulation is not sustainable any longer.
Corollary 1: making what is not seen clearly visible is an effective way of opposing regulation
Corollary 2: Thank you Scott!
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