Here's a chart someone linked to on Twitter yesterday. It shows housing prices in various cities:
The basic idea here is that if you put up more regulatory barriers to building new housing, the price of housing goes up. I don't really doubt this. How could it be otherwise, in fact?
That said, take a look at Los Angeles and Riverside. Both are in Southern California. Both have almost exactly the same level of regulation. And yet housing in Los Angeles costs nearly twice as much as it does in Riverside. That's a huge difference.
What accounts for it? The answer is hardly rocket science: LA is a more desirable location than Riverside, which is hot, culturally desolate, and mostly just an endless sea of suburban houses.
In other words, desirable places have higher housing prices regardless of regulatory issues. Regulation can certainly make things worse, but I think it's pretty clearly a secondary consideration.
Hey, now. Downtown Riverside has its charms. And there's a UC campus. But yeah, also hot and dry and smoggy most of the year.
I think lots of people would make that work if the social opportunities were there. I wager that the real draw is partly climate but much more social. Beaches, sports events, high culture, bars, concert halls, festivals, etc. Especially for single people who want access to sites for dates and opportunities to meet people.
Just a repeat of the famous real estate saying: "Location Location Location"
"Both have almost exactly the same level of regulation. " Sorry, but no creditable person, with first hand knowledge, would make that claim. In your example, they both do NOT have the same level of regulation, fee structure, time to process application/regulatory certainty etc.
They almost literally do, as measured by the Wharton Regulatory Index. The difference is a rounding error. But I can't tell if it's LA County or LA City they're talking about. LA County has lots of loosely regulated land, while LA City is more highly regulated in general.
But even the City and Riverside are a lot closer than you'd think. The main difference is land use (which is pretty minor in the grand scheme of things) where LA requires more mixed use. That's why Riverside largely sucks, and the City is cool. There aren't acres of tract home without even a 7-11 in the City. But the building code itself is state law, and they have very similar laws regarding SFR and so on.
While the Wharton Regulatory Index may hold that claim, as a Wharton grad I have to laugh, I am certain Wharton is wrong on this front. From first hand knowledge, the regulatory burden in Los Angeles is far greater than Riverside.
Of note, the stated regulation in Los Angeles and what one can actually develop, in practice, are often different: I suspect the Wharton Regulatory Index does not capture this material issue. Further, issues like the availability of land, associated fees also impact costs in LA.
The main difference is land use (which is pretty minor in the grand scheme of things) where LA requires more mixed use. That's why Riverside largely sucks, and the City is cool.
Mixed use requirements are a recent innovation, and Los Angeles has been more desirable than the Inland Empire since, like, forever. LA's desirability advantage over the latter is mostly due to A) jobs (better, higher-paying opportunities, which would require a horrendous commute if you life 50 miles east); B) better access to amenities of every kind (which is mostly because LA is the heart of the metropolis, and important shit is situated there, and has been for over a century; this is mostly a matter of history; C) closer to the ocean, which, among other things, gives Los Angeles a more agreeable climate.
Anyway, your comment that LA is more desirable than Riverside because of the wisdom of the former's zoning officials plainly isn't the case. It's mostly a matter of history and geography: Los Angeles was an important and growing economic and cultural center one hundred years ago, when there were only 50,000 people in all of Riverside County.
I spent some summers in San Bernardino when in high school and college. I don't remember the temperatures being unpleasant. That was in the 1950's before the smog rolled in. You could see the smog wall to the west. My father retired to Sedona and said the smog followed him east.
If you're like most people you were skinnier years ago than you are now. That makes a difference. Plus, memories fade: we had plenty of very muggy days in the Boston suburbs where I grew up back in the day, and like most people in the 70s in that location we lacked AC. I don't really remember being uncomfortable, either. But now that I'm used to AC, I bet I'd find those conditions really uncomfortable.
Also, San Bernardino undoubtedly has hotter summers now than it did 60 years ago!
The weather in the Boston area changed in the 1980s. It wasn't that bad without air conditioning through the 1970s, but I remember 1983 as the first really hot, steamy summer that would not end. The next few years weren't that bad, but by the late 1980s, the summers were much worse, and they stayed worse. We installed central HVAC - heat pumps work fine in the area - and finally left the northeast.
As recently as 2002, adjusted for income changes, LA was less expensive than Riverside is today.
Without implying any critique of the observation here in the specific, the application of Regulation can also have significant real-world divergences such that the same textual regulation can have materially different outcomes.
(this is not to imply that would be the explanation here, only to make the wider observation).
Pretty obvious that Kevin doesn't know very much about Riverside.
I know next to nothing about the details of the housing situation in either place, but the basic principle is true. Even if regulation makes it harder or more expensive to build, if there is little (or less) demand, then the effects will be smaller.
Like most of current "conservative" thinking, the concept that LA is expensive due to excessive regulation is complete nonsense.
And by "nonsense" I am aiming squarely at what this phrase is always intended to mean, not that LA would not be more expensive anyway, but that without regulation it would be Cleveland by the sea or something.
If someone is going to pick up the over regulation thing and throw it out there, then they better at least cite an actual regulation and show how it makes things more expensive. They should then by the way, compare that to some similar situation where no such regulation exists.
Like most of current "conservative" thinking, the concept that LA is expensive due to excessive regulation is complete nonsense.
There's overwhelming evidence that making it illegal to satisfy market demand (which is the case in vast swaths of California, not just Los Angeles) makes housing less affordable. How could it be otherwise?
Also, this truth is recognized and widely embraced by progressive and liberal YIMBYs. Conservatives these days increasingly are at the forefront of the defense of laws prohibiting housing construction. (They claim liberals want to abolish the suburbs, doncha know?).
Anyway, you're either mistakenly engaging in conflation, or strawmanning: I don't think there's a single prominent critic of the NIMBY regime who claims housing deregulation would obviate the price differences between location of differing desirability. Sure, all things equal, most people would opt to live in comfort four miles from the Pacific Ocean than bake in an inland desert cauldron!
Kevin, you can't really be serious here.
If the regulations limit supply in the same way but the demand is different, than the supply-limiting regulations will have different effects. This is almost too obvious to be worth saying, but it seems like you are going to be willfully obtuse about this.
OF COURSE the demand is different. That's why the supply should be different too! But the supply-limiting-regulatory environment matters much more in the area where demand is higher - because in the absence of that regulatory environment, supply would be higher where demand is higher!
I mean, seriously, this is high-school-econ-level stuff. I don't really believe you think this is a good argument - you're too smart for that. Why do you keep making such terrible, obviously refutable arguments? Is it just because you don't like YIMBYs and like to make them mad?
L.A. is so damn expensive you can't find anybody who wants to live here anymore!
I don't know the regulation situation in Riverside but I do think there's a lot more than regulation behind the current affordable housing crisis. But the nimby vs. yimby debate on the left has gotten kinda dumb, and the only factor usually mentioned behind high prices is over-regulation. R/E developers and the anti-nimby left are now (strange) bedfellows.
NIMBYist supply restrictions makes housing less affordable than it otherwise would be as long as it results in bringing to market less housing supply than demand would absorb (which is to say, usually). NIMBYism probably wouldn't/didn't have much effect in Riverside County (or the exurbs of Phoenix or Orlando or Las Vegas) in the autumn of 2008.
Both LA and Riverside in 2022 are more expensive to buy or rent in than they would be in a deregulated housing market. But nobody should be claiming that the price-desirability difference between the two locations would vanish if housing were completely deregulated.
Of course people will blame regulations...because they can. It provides cover for price hikes. Of course, if there's a bidding war for a new house...
There might be one regulatory associated difference...how many lawsuits will happen?
What they're mostly talking about is exclusionary zoning. By virtue of the single family residential zones limiting the number of attached or detached homes, they support the creation of residential suburbs of very low density with a forced embrace of car culture.
It is often pointed out that, similar to redlining, exclusionary zoning was established to keep (poor) Blacks out of certain neighborhoods. The same can be said of neighborhood HOAs, many of which explicitly banned Black, Asian, etc.
Ending exclusionary zoning is imperfect with regards to its encouragement of gentrification.
There are other lesser forms of exclusionary zoning: Minimum required parking, extensive setbacks.
No "cover" excuse will allow a seller to hike their prices if there is a competitor willing to sell for less. With dozens or hundreds of houses on the market competing for buyers in any metro at any time, prices are determined by supply and demand, not shenanigans. Regulatory barriers to building new units = lower supply = higher prices. It really is that simple.
Typical elitist OC bullshit. Kevin has either (1) never actually been to Riverside (speeding through on the 91 doesn't count) and (2) has been, but his head was shoved so far up his ass that he didn't actually see anything.
This is too casual and lazy. I'm confident you know the real answer -- economies of agglomeration -- so I'd like to see your arguments against it.
I think the main non-regulatory factor in house prices is actually job availability. Looking at the labeled cities on the chart, what jumps out at me is that the ones that are above the curve are economically vibrant, while the ones below the curve are economically meh. Boston manages to be more expensive than Providence despite being less regulated for exactly that reason.
(As a side note, I visited Boston last year and was and was quite impressed by the built environment. They've got lots of new buildings and those buildings look seriously good. Bostonian architects are really on a tear these days!)
No trend line??
And then there is SF…. Which by the way had a (opinion?) piece written by an architect that said, in essence, if only the Painted Ladies and their single-family ilk were converted to eight story apartment blocks there would be plenty of housing.
Leaving the question of course, would it indeed still be San Francisco?
There are a limited number of places in the U.S. which are desirable. All of them were "filled up" by 1980, and if population had continued to grow at a modest/low rate, house prices in those areas would not have skyrocketed.
But national policy to increase the U.S. population started in 1965. The result was that in only 50 years, there were almost 90 million immigrants and U.S.-born children of immigrants in the United States, accounting for 28% of the overall U.S. population. California's population jumped from 20 to 40 million (!). The result is higher density / lower quality of life, soaring house prices, and a strain on natural resources (e.g. water) and infrastructure.
Business always likes immigration because it hurts labor. Unions opposed immigration for the same reason and so did the Democratic party for the first half of the 20th century. But Democrats in the 1960s, either due to naïve mid-century optimism, a byproduct of the (necessary) civil rights movement, or the propaganda that diversity is strength (a racist concept), changed their stance. We are now in a situation where the population will continue to increase rapidly along with the attendant difficulties.
Oh, and another thing. When a country undergoes rapid and massive demographic change, as has happened here, there's usually a reactionary response. History is full of examples. (More recently, it's why Brexit succeeded in the U.K.) I'm convinced that the demo change is the primary reason for the rise of Trump and possible end of democracy. MAGA is constantly saying the country "isn't like it used to be". It's clear why that's the case.
The United States population has increased every decade since we started keeping track in 1790. The idea that population growth is somehow a recent development is flatly untrue. Even now the US has a much lower population density than many other countries that are perfectly nice places to live, like France and Italy. Within the US, areas with higher density don't have worse quality of life; on the contrary, their residents clearly consider them desirable places to live because of the many amenities they can have close by. They're also better off economically, because a larger local population allows for more labor specialization, which raises productivity, which raises wages. We should strive to have more places like that, not fewer.
You also don't see many Trump supporters in the densest and most diverse localities. On the contrary, you find them in the non-diverse, non-dense areas which have few amenities and few jobs precisely because they aren't dense.
The United States population has increased every decade since we started keeping track in 1790. The idea that population growth is somehow a recent development is flatly untrue.
And indeed, US population growth has been slowing over the long term, even with our significant levels* of immigration (the 2010s tied with the 1930s for the slowest rate of population increase in history; and the 2020s are off to an even slower start). The country's population increased something like 15-fold in the 19th century, and about 4-fold in the 20th. We're quite unlikely to manage even a 2-fold increase in the 21st, at least absent a sea change in the political outlook for immigration reform. Essentially, population restrictionists have already won: they just want to ratchet down our low level of population growth even more sharply. I'm just not seeing the upside to this. I get the unease many people feel with respect to population increase (surely our species is hardwired for fear such growth, acquired over the aeons when resource depletion was an ever-present existential threat). But it can make it harder for a modern society to pay the bills—never mind compete with the dictatorship on the other side of the Pacific—if restrictionism goes too far.
* "Significant" is how I would term it: the US can no longer be described as a "high" immigration nation by rich country standards, at least adjusting for the size of our economy, which we should. Australia (to give one example) now allows for a net immigration rate fully 2.5X that of the United States.
Connecticut has a program under which the state purchases the development rights of farmland, which towns can then only value and tax for agricultural use, at a much lower rate than developable land. Wouldn’t ‘regulatory barriers to building new housing’ similarly depress the price of vacant lots? How does the price of land in Los Angeles compare to that in Riverside? I have a guess …
Is Riverside at least beside a river? According to Google maps, yes. That is, if you consider the Santa Ana River a river. Looking at some photos, around here we'd call that a creek.
Prices in coastal California are expensive because of both supply and demand.
Not only do people want to live there, but there is extremely limited flat space to build.
This limits the places to build, but also the lack of land causes higher regulations.
http://www.freddiemac.com/research/insight/20170929_is_geography_destiny.page
One estimate is that removing just regulations (many of which are due to either land limitation or natural disaster mitigation) would reduce the median house price in San Francisco by 26%.
If you could remove the geographic constraints, house prices would drop 54%
They could have cut of the negative population growth metros where the housing demand has been decreasing- upstate NY, Cleveland, Detroit, not sure which others- where the regulatory environment is irrelevent because the existing housing stock is bigger than the demand. Then you would clearly see a very, very strong line between the regulatory burden and the cost of housing that would go pretty clearly from Houston and other pro-growth Texas cities (not that this is entirely a good thing with how they are going about it) at the low end through Chicago before you get up to the places with absurd amounts of regulation like Seattle where it's overwhelmingly still single family zoned and of course SF. There will still clearly be some demand premium at the top end because the cost of building a unit itself goes up with higher income and higher density, and since the median new unit is probably built in the top quarter of the local housing market then newer built metros would be higher, but I think that adjustment would show relatively clearly the impact of the regulatory burden specifically. Also look at what Vancouver did in terms of vacancy taxes, would be a good route for LA/SF/NY/Miami to keep rental costs reasonable and reduce the overall housing inflation, there are some regulations that are helpful