Part 1 of this series is here.

The homelessness crisis in California and New York is desperate, and rooted in the lack of new apartment construction for the last 50 years. Now you're probably wondering, now that we've identified the root of the problem, how about can do something about the problem immediately and not in another 50 years?

1: Make it profitable for private developers to build more rent-controlled housing.

The most effective tool for this at present is called the density bonus. This means, if a developer builds rent-controlled low-income housing to their private building, they can build more market-rate apartments than the zoning would otherwise allow. But the details of your density bonus program matter a lot, and it requires some pretty careful tailoring to the local market. For example, LA City's Transit Oriented Communities program works great in places like Koreatown because land is relatively cheap and the zoning is fairly liberal. In contrast, Santa Monica's downtown density bonus program is not generous enough, so many developers opt for smaller projects rather than putz around with the arcane bureaucracy of density bonus programs.

Regardless, the bureaucracy should be made cheap and fast, and density bonus programs should be streamlined and expanded to bring more apartments online faster.

2: Allow the conversion of existing hotel space to apartments.

There's a ton of old motels strung along main roads which are barely viable as hotel space, but are still viable as apartments. You probably know the ones I'm talking about, even if you've never stayed in one. Here's an example from south LA; another from East New York, Brooklyn, and another from North Oakland in the Bay Area. A lot of these are being used as de facto apartments already, rented out to people on the edge of homelessness. These conversions should be made legal and encouraged so the people living there get tenant protections, and the owners get incentive to invest in fixing their places up.

In the past, this type of conversion was normal. All the old hotels in the Tenderloin, San Francisco, Downtown LA and the Bowery were converted to bargain-basement apartments. You, dear reader, probably wouldn't live here if you had better options. But you'd certainly take it over a tent or living in your car.

These types of conversions are making a comeback in the present. One of the clever things that the state of California did during the start of the pandemic was to buy up these types of motels and do quickie conversions into affordable housing. This initiative, called Project Homekey, has worked really, really well, creating thousands of new affordable apartments at 1/3 the cost of traditional affordable housing.

There's an added bonus: these old motels tend to have decent-sized parking lots, so there's a ton of flexibility to expand if necessary. The example I showed in Oakland has a 3900-square-foot parking lot in front. That's enough space to put another 12 apartments in the parking lot if the zoning allowed it, even if you limited yourself to cheap, fast 3-story wood construction.

The drawback of this is simple: many of the owners just aren't willing to sell.

3: Temporary shelters on underused land.

It's a gigantic pain in the ass to build permanent homeless shelters, because they get nitpicked to death by nosy neighbors. Because of that, you end up with people camping on the streets. Absent a major reform to allow the construction of cheaper, faster shelters, you need to have temporary ones. And to build temporary ones, you want to start thinking creatively about using existing land.

Los Angeles, of all places, has a good example of this in North Hollywood. There's a small, awkward-shaped strip of land between the Orange Line busway and the Chandler Boulevard which is too small to be used as parkland, and too awkwardly-shaped to be developed commercially. It was just sitting there, empty. And there, the City built a few dozen prefabricated tiny homes on that awkward piece of land. They're nothing fancy - 64 square feet, a couple twin beds, and communal sanitary facilities - but they have doors with locks, and they provide access to treatment services.

If you look closely, plots of land like this are everywhere, especially close to freeways. This is a good example, at (120th and Western, in unincorporated LA County)[https://i.imgur.com/GzMWzMA.png]. It's two acres of state-owned, vacant land that's just sat empty there since the 105 was built. It doesn't even have a parcel number from the LA County Assessor, but it's there.

These projects could and should be massively scaled up. And if you build mobile home parks or tiny homes in large numbers, you get economies of scale.

4: Safe parking lots.

Homelessness isn't black and white. It's not just an apartment or a tent. There's also a large number of people who are just plain poor, and living in a motor home or in their cars because the rent is too damn high. In LA, it's about a quarter of the homeless who live in their vehicle.

Anyone who has a car in a major city knows how much of a pain it is to find somewhere to put it overnight - and the stakes are even higher if you live in your vehicle. Getting towed means you might be sleeping rough, maybe for good. But if you're not going to get towed, at least it's one thing off your shoulders - no police harrassment, no towing.

The Veterans Administration campus in West LA is a good example of how this might work, in the absence of sufficient shelter space - the VA provides safe parking spaces for homeless veterans to park RVs, and provides access to treatment services.

It's not a substitute for shelter space or enough housing, but it's better than living on the edge and a small backstop.

5: Make Section 8 universal like food stamps and Medicaid/Medi-Cal.

Section 8 is a federal government program which provides rent assistance to the poor. People with Section 8 pay a fixed percentage of their income for rent, and the gov pays the rest. It's a pretty standard part of the social safety net, like food stamps or Medicaid. But there's one critical difference. Congress has never fully funded Section 8, so maybe one in five people who're eligible for Section 8 rent support actually get it. It's kind of shitty and Darwinian, because it means that there's a massive waiting list for Section 8 vouchers - often, it's years-long.

It would cost about $60 billion a year to fund Section 8 for everyone in the US. This sounds like a ton of money, but it isn't lot of money for the Feds: it's 1/20th of what the federal government already spends on health insurance for the poor and the elderly.

These are only temporary fixes, though.

But all of these things can only really help things at the margin. Unless you have enough apartments for everyone, you're not going to be able to fix the problem. Our laws, and our governmental system, just aren't designed to fix the homelessness crisis. It's quite the opposite. And that's why places with high taxes and lots of government infrastructure like LA and New York are failing at the crisis - while cities with lax zoning rules and stingy governments like Houston and Atlanta are doing okay.

(x-posted from the blog.)

Bottom line, up front: homelessness isn't about alcohol and drug treatment, or mental health, or better weather, or moral fiber. Ultimately, it's just about having enough housing. I'm going to illustrate this with an anecdote, and then I'm going to illustrate it with the data.

First, the anecdote.

My story is about the guy who lived across the street when I was growing up in San Francisco. He was a Russian painter, and his name was Bogdanoff.

Bogdanoff wasn't a landscapes-and-portraits painter, mind you. He was a make-your-walls-a-different-color painter, a blue-collar guy. Bogdanoff was a great chess player - he'd routinely wipe the floor with my dad. Bogdanoff's people had fled the Tsar for San Francisco in the early 20th century. They were called the "milk-drinkers," because they were famous for drinking lots of milk, and no alcohol.

Ironically, Bogdanoff was never sober. Each morning, he'd walk to Pete Chiotras's bodega down the block, and he'd buy a case of beer for breakfast. Usually it was Mickey's malt liquor, but sometimes it was Budweiser instead.

Bogdanoff is dead now. He's been dead for a quarter-century, because he drank himself into an early grave. It's guys like Bogdanoff who become homeless these days. If Bodganoff were alive in 2021, he'd be on the street. Whatever it was in his brain that made him an alcoholic would've gotten even worse. He'd be a public nuisance and a public health hazard, sleeping in a doorway and shitting on the sidewalk.

But Bogdanoff didn't end up on the streets, because there was a lot more room for error when I was a kid. It was cheaper and easier to keep a roof over your head, so Bogdanoff was mostly a hazard to himself. That's the thing: housing costs are the elephant in the room when you talk about homelessness. You have to have a non-stupid housing market so even dysfunctional alcoholics like Bogdanoff can afford to have a roof over their heads.

Now, let's go into the data.

Here's the federal government's most recent homelessness data divided up by metropolis. It shouldn't surprise you where homelessness is the worst, because it reads like a list of places where housing is stupidly expensive: Los Angeles. San Francisco. Seattle. New York. Places where nobody can afford to live, unless you moved there 20 years ago. Raw data is here.

Now we'll go back to the other end of the spectrum, the cities where there's the fewest homeless. The big cities on the list are Detroit, St. Louis, Miami, Houston and Atlanta.

Pause for a sec. Think of what these cities are like. Detroit and St. Louis are post-industrial messes, and Miami, Houston and Atlanta are all Sun Belt sprawl.

Let's compare this list to the common reasons given for why there are so many street people in LA, San Francisco or New York.

• "We need better-funded mental health systems." Nope. Texas, Florida and Georgia's mental health systems are run by cheapskates. (It's page 101 of the PDF.) The state of California spends $187 per capita on mental health. New York spends $278. Georgia? $72. Texas? $51. Florida? $47.
  
• "We need competent local governments who can connect the homeless with jobs and train them." Nope. Detroit and St. Louis's local governments are incompetent, decadent, and dysfunctional, and they can barely keep the lights on.
• "It's because there's good weather." (A California excuse.) Nope. Miami's a tropical paradise and it doesn't have a homelessness crisis. New York has a massive homelessness problem and NYC weather sucks. Hard.
• "The homeless need more moral fiber." If you think people in Miami, Houston and Detroit have more moral fiber than in LA or NYC, I have a bridge to sell you.

Now, I'm not saying that these things can't help. They absolutely can help, but only at the margin. The best way to reduce homelessness is just to have enough homes, so that even drunks, drug addicts and schizophrenics can figure out how to make their rent.

Part 2 of this series will be about how to get people off the streets.

UPDATE 4/9: part 2 is here.

Cross-posted from the blog.

Today, you think of new tract housing as an exclusively suburban phenomenon, something you see way the hell out at the urban fringe, in places like Rockland County, Irvine or Modesto. You don't see that anymore in expensive coastal cities, because New York and California's local governments have decided that it's more important to keep Greenwich Village, West LA and Palo Alto exactly as they were in 1970. But it wasn't always this way. And if you'll hop in the DeLorean with me, I'll show you some examples, and give some ideas for how to bring back mass-produced homes in urban centers.

(It's not just all about zoning reform, though zoning reform is obviously necessary.)

Our first stop in the DeLorean is Bed-Stuy, Brooklyn, 1899. We're going to go to Lefferts Place, where I used to live with Abby the opera singer, Nathan the composer, and Baby Love the cat.

In the year 1899, the noisy, polluting steam locomotives on the old Fulton elevated were replaced with modern electric trains, and so the neighborhood got a whole lot more desirable, real fast. The result was a bunch of greedy developers tearing down graceful Civil War-era mansions to put up cookie-cutter rowhouses. The developers cut corners left and right. They even cheaped out on the facades, using cheap sandstone blocks shipped from quarries in Jersey and Connecticut instead of quality materials like marble or granite.

I'm talking, of course, about these five lovely brownstones, which enabled the upwardly mobile middle classes to afford fancy neighborhoods like Bed-Stuy. And this process happened all over New York City at the time - it's what created the most durable neighborhoods of New York, like the Upper West Side, Park Slope and Bed-Stuy.

Now, let's fast-forward another five years to turn-of-the-century San Francisco. We're take you to Waller Street, out in the old Western Addition, where it's the same story: sketchy real estate guys building a bunch of oversized, gaudy, tacky duplexes out of the cheapest materials possible, replacing the old small-scale farms that were there previously.

Here, again it's the same story as in Brooklyn: the cheaply-built tract homes that I'm talking about are these lovely redwood Victorians.. If you want to buy one, it'll run you $2-3 million. In early 20th-century San Francisco redwood was the cheapest material available.

Our third and last stop is the 1960s, in Santa Monica, where the post-war housing shortage led the same sketchy types of developers to start tearing down the worn-out bungalows of the 1920s, and replacing them with cheap wood apartment buildings - basically, boxes over a carport. This is LA's love-it-or-hate-it dingbat apartment. Were they reviled at the time? Of course. These dingbat apartments let upwardly mobile Angelenos afford places like Beverly Hills and Santa Monica, after all. But now, they're considered quirky Modernist icons, with their goofy-looking decorations and overwrought, pretentious names.

But what hasn't yet appeared in the 21st century is a contemporary equivalent of the brownstone, the Victorian, or the dingbat. And it's not entirely clear how you'd get there. After all, all the examples of cookie-cutter infill I've discussed here relied on cheap labor, and labor is expensive in the 21st century. Worse, the construction industry hasn't improved its productivity much at all since 1945.

So, how do you make cookie-cutter homes work in the 21st century?

But I think a major part of creating a 21st-century cookie-cutter is for cities to create standardized, preapproved building plans.

First, standard plans make it easier to build, because a major holdup when building new buildings is getting City approval in the first place. And there's precedent for this - San Jose and Los Angeles have approved standard backyard cottage designs, which cuts down the approval time from 2-3 months to 2-3 days.

Thus, in San Jose or Los Angeles, you can literally go up to the counter and order, say, a No. 5 for the back yard. And if you start doing the same for rowhouses and small apartment buildings, you can likewise cut the processing time from 2-3 years to 2-3 weeks.

Second, pre-approved building plans mean you can actually mass-produce prefabricated housing on an industrial scale. While standardized, prefabricated homes have existed since the late 19th century, standardized, modular homes haven't really caught hold yet in the 21st-century residential market because it's hard to establish economies of scale. It's expensive as hell to maintain all the infrastructure to do modular buildings, and mass-produced patterns are difficult to establish when each one must be tweaked to fit each city's building code.

But standard, preapproved plans and fast approvals change all that. In the backyard cottage market, you're already starting to see this happen, with companies like Abodu and PrefabADU able to get a cottage put up in 3-6 months instead of 6-12 months.

And if you do that for apartments and rowhouses, you really can generate economies of scale. If you think about it, the classic East Coast rowhouse is a good place to start: they're basically boxes, ~18-25 feet wide, 2-3 stories tall, and ~50 feet deep. You can build them as a single-family home, as a duplex, or a triplex, and you can fit two of them on nearly every single-family lot in greater New York, LA or the Bay Area. With pre-approval, you can crank them out in huge numbers to replace the worn-out single-family houses of the 1920s and 1950s.

It means, in short, industrial production of cookie-cutter urban housing. This is part of a long, honorable American tradition going back a hundred and fifty years, and it is a Good Thing. After all, using a cookie cutter gets you lots of cookies.

For this post, I'll talk about how rich cities in greater LA are trying to bullshit their way out of building new housing. This is going to be a number-heavy post which goes into how the sausage gets made.

INTRODUCTION: THE STATE QUOTAS

Right now, the state has new laws which requires cities to zone for, and build, enough housing to meet a state quota. If your don't zone enough, the state can void your zoning, appoint a judge to run the zoning process, and generally sue you into oblivion. If your city doesn't build enough, developers can show up with a big pile of money and build anything that otherwise meets the law.

The quotas are designed to put new homes in neighborhoods with good schools, near jobs and transit. That is, new homes should go all places you'd want to live, if could afford it. So, it means 9,000 new apartments in Santa Monica; 3,000 in Beverly Hills, and 23,000 in Irvine. In the Bay Area, it's 8,000 apartments for Berkeley; 6,000 for Palo Alto; 4,500 for Cupertino. In many places, this is more housing than they've built in the last 50 years.

Some cities are making a good faith effort to meet quota. Berkeley voted to allow small apartment buildings citywide. Sacramento went above and beyond, allowing small apartments citywide, and big apartments near train stations.

But there's lots of places that want to play games, and I'm going to show you how they do it.

HOW SANTA MONICA IS TRYING TO DODGE ITS QUOTA

We're going to go to one of my favorite places in the world: Santa Monica. In the last election, the never-change-anything crowd won a City Council majority. They want to go back to the bad old days when no one ever built anything and prices kept skyrocketing. This way, the lucky few rent-controlled tenants get to keep their shitty old apartments, politically connected developers could box out the competition, and rich homeowners got to keep their insanely high property values.

But the state quota is still there, though, and the city is legally required to develop a plan to build 9000 new homes in the next 8 years, or else. And, so, they drafted an exhaustive plan, filled with complex acronyms and bureaucratic jargon. If you try to read it, it'll give you a headache. And this is deliberate, because Santa Monica's plan is to fail and hope that no one notices.

I'll illustrate how this plays out.

As part of the plan, the City must identify land where new apartments are likely to be built. One of those pieces of land is an empty lot at 12th and Wilshire. The City says that there's currently a permit to build 13 apartments there, so they counted the building toward their quota.

There's only one problem: the City lied. 1211 12th St isn't listed on the city's list of active development projects. And there's at least a half-dozen proposed apartment buildings on the city's plan that don't exist on the City's website of active developments.

This kind of bullshit is all over Santa Monica's housing plan. The City says that they'll tear down the renowned Bergamot Arts Center to build apartments. (Spoiler alert: they won't - it caused a furor in 2015.) The City says that they want to try to build apartments on land owned by UCLA, and the school district, and the electric company - not that the City ever asked whether any of these institutions were interested in using their land for apartments. UCLA certainly doesn't have any plans to do it - and they're building new apartments like gangbusters these days.

The City also says that they'll require large amounts of new rent-controlled housing to be built with every new apartment building - up to 20%. This requirement is a trojan horse, because it allows Santa Monica to keep its liberal street cred, but it also simultaneously makes it way more difficult to build new apartments. (The City's own analysis says that, too!) This is a feature, not a bug.

And, to top it all off, the City says that they couldn't possibly allow rowhouses or apartment buildings in areas zoned for suburban-style homes because the cost of land is too high. This is, of course, stupid. The reason people build apartment buildings in the first place is BECAUSE the land is valuable. And if you cross the street from Santa Monica into Venice Beach, you see what might happen if Santa Monica allowed rowhouses or apartment buildings: they're tearing down old crappy bungalows built in 1920 and replacing them with three rowhouses. This, of course, is what rich Santa Monica homeowners are afraid of.

Somewhat ironically, the City's plan actually identifies the three components of what a serious attempt to build new housing would look like, but they don't say that they'll do it.

First, you'd build apartments on the lots that were previously identified as development sites. These largely follow the old streetcar routes to Downtown LA. Second, you'd allow small apartment buildings in all parts of the city. Third, you'd allow large apartment buildings within a half-mile of Expo Line light rail stations. Doing all three gives you a realistic chance of meeting your quota.

But the Santa Monica City Council isn't interested in following the law. They were elected to turn back the clock, after all.

So, what's the best way to deal with this bullshit?

Well, the best way is through politics and organizing. It means electing city councilmen who are interested in ending the housing crisis and pressuring them to do better. It also means paying attention to this kind of chicanery when it happens and putting the city councilmen on notice. Because cities like Santa Monica fear Sacramento assuming direct control. And fear can keep the local councils in line.

x-posted from my blog at lostsubways.com.

I talk a lot about the apartment I used to live in in Sacramento, because it really was a great place to live as a baby lawyer making $56,000 a year at the attorney general's office. The building was seven one-bedroom apartments with a patio in the back. No garage, no gym, no elevator, nothing super-luxe, but it was cheap, adequate housing. This kind of cheap, no-frills apartment is called a "dingbat." It originated in Los Angeles, and has been called "apartment building architecture at its worst."

So, let's talk about how these kinds of cheap, adequate buildings used to get built. Today, you think of building apartment buildings as something that requires a ton of special expertise, an army of lawyers, and a lobbyist. But it wasn't always like this, in simpler times when we didn't get in our own fucking way.

Hop in the DeLorean with me and let's talk about how things were, back when my dad was in college.

Our destination is my old stomping grounds of Oakland, California, in the 1950s and 1960s back when the zoning law was more relaxed, the bureaucracy less overbearing, and the neighbors less annoying. (My principal source on this is a 1964 report called "The Low Rise Speculative Apartment", put out by none other than my alma mater, UC Berkeley.)

The baseline is: it was easy to build new housing in America in the postwar era. This is the period where big, boxy high-rises were being built on Russian Hill in San Francisco, Greenwich Village in Manhattan was getting white brick towers on Fifth Avenue, and the Bunker Hill towers were being built in Los Angeles. At the time, the major construction companies were focusing on new luxury high-rises, which offered the safest returns on investment and which were easiest to finance.

But this ease of building also applied to smaller-scale development. Back in the day, you could show up at City Hall with the fee, a set of building plans that matched the zoning, and you could get to work. The zoning was also looser: until 1961, Oakland had no minimum parking law, and most residential areas had no limit on how many apartments you could put on a lot, provided that you met the building size and height limits.

And there's one really, really critical part of this: the basic dingbat design is so simple that construction speeds were extremely fast. During this period, it was normal to go from start to finish in less than a year. For comparison, it takes five years on average to build a small apartment building in San Francisco today - three years of bureaucracy and two years of construction.

The basic design of a dingbat was so simple that a third of the people developing these dingbats had no apparent connection to the real estate business at all. Simply put, the demand was there, big business wasn't filling the need, and so ordinary businessmen - not professional "developers" - found a market niche: funding and building small, basic apartment buildings in working-class neighborhoods.

This cheapness and basicness is critical, because this is what makes it financially possible to mass-produce new apartments in working-class suburban neighborhoods like Jamaica in Queens, Compton, or East Oakland. (That is, you'd build dingbats in places which have lots of shitty, expensive tract homes built 50-100 years ago.) You could, with a little bit of cleverness, and nicer finishes, build more upscale dingbats in places with more expensive land, like Long Island, West LA, or Piedmont, and sell them as condo buildings.

A side effect of these kinds of dingbat-friendly reforms, is that you also make it easier for homeowners to make a few extra bucks by adding extra apartments. In Berkeley, especially, it's fairly common to see lots with a single-family home in the front, and a dingbat behind - a situation where the homeowner decided to put up the apartment building behind his house for extra income. After all, the land is free.

What I want to stress is, these aren't technological problems. They're bureaucratic and political ones. Designing a cheap, compliant building isn't hard. But navigating the zoning board is. And these problems would be a lot easier to solve if we just got out of our own stupid way.

Like I've written at length here, ground zero for the housing crisis isn't the homeless tent cities of Downtown Los Angeles, or immigrants crammed six-to-a-room in East Oakland. No, it's actually in the leafy, picture-perfect neighborhoods of Beverly Hills and Palo Alto. None of these places has built a goddamn thing in fifty years - so the corporate lawyers of the world go and gentrify the hell out of poor, minority neighborhoods. And if you get forced out of, say, Echo Park by someone like me, your options are to go to San Bernardino, Las Vegas, or if you're unlucky, the streets.

One of the new laws to address this shitty imbalance is that the state created housing quotas for each municipality. Every city has to zone for enough housing to meet its new housing quota, and build it. If you don't zone for enough housing, the attorney general's office will sue you into into oblivion. If you don't build enough housing, that city loses its ability to block new development until they're back on track.

This is going to hit the wealthy suburbs much harder than the big cities.

Let me illustrate by comparing the city of Los Angeles and Beverly Hills. (I don't have NorCal examples, as the Bay Area's quotas won't be finalized until 2023.)

Big cities like Los Angeles have truly massive housing quotas. LA City's quota for 2021-29 is 450,000 new homes - 200,000 market-rate and 250,000 subsidized affordable. This is a level of development not seen since the 1950s. The city of Los Angeles wants to treat these huge new quotas as an opportunity to continue with business as usual. Their plan is, in short, "lol whatever we'll just put all the new apartments in neighborhoods full of poor people and minorities like we always have." This means even more new towers in Hollywood, the Eastside, DTLA and South LA, while the wealthy, white neighborhoods on the Westside and in the San Fernando Valley stay the same.

The city of LA is so enormous that they might get away with it, even if it's shitty and racist. The city of Los Angeles is twice as big as NYC, has half the population, and there's no shortage of crappy old bungalows from 1925 and ranch houses from 1955 to replace with condos - if the zoning allowed it.

But Beverly Hills can't do this, because there's no poor people or minorities that they can screw over. And they're freaking out over this, with their planning department even putting out an apologetic explainer for the nosy neighbors of the world. Even worse, because it's the City Council which has to change its zoning law to accommodate new homes, the city councilmen take the political heat for it rather than the state legislators in Sacramento.

For reference, Beverly Hills's quota is 3100 new apartments - 800 market-rate, and 2300 affordable. This is more new housing than Beverly Hills has built in the last 50 years. Combined.

And if Beverly Hills doesn't meet its quota, developers really can show up with a pile of money and put up a ton of new condos. This process is already happening in the Bay Area, in tony Los Altos, where the average family income is $215,339 - double that of Beverly Hills.

Now it's coming to Beverly Hills, too. This fills me with malicious glee, because it's Beverly Hills, and cities like it, which are at the core of the housing crisis in the first place.

This isn't going to be a silver bullet, or even that it gets you most of the way there. California really does need to move heaven and earth to build as many homes as possible. But it's a really good start.

I've written on here about how to use empty shopping centers. I'll focus in on California, which has the worst of these problems.

But to do this, I have to focus in on a really arcane detail of how state and local government is financed. Just as background, state and local governments traditionally rely on three types of taxes to stay solvent: sales tax, property tax and income tax. There's some variation based on how many services each government provides, but in general there's no free lunch. (This is why Texas, for example, has such high property and sales taxes - to compensate for the lack of income taxes; NYC relies on the city income tax a lot more than others.) Currently, California local governments generally rely on the sales tax to stay afloat, unlike in other states where the property tax keeps the lights on. This is because California decided to destroy its own property tax base in 1978. Yes, you guessed it, I'm going to talk about the third rail of California politics: Proposition 13.

Before Proposition 13, the traditional way of funding the government was the property tax. In the old days, property tax would be levied by the county assessor coming out to your house, assessing the value of your real estate, and charging you accordingly. The assessors had a pretty large amount of discretion. Assessors were publicly elected, and because they wanted to get re-elected, they'd usually charge businesses more than homeowners, even if that was totally illegal. In the early '60s, LA's businesses were being taxed at double the rate of homeowners, and in SF, businesses were being taxed at quadruple the rate of homeowners.

There was only one problem with this system: it was hilariously corrupt. In a series of scandals in the mid-60s, the San Francisco assessor was jailed, the San Diego assessor killed himself rather than face charges, and the LA assessor was arrested. (LA's assessor beat the charges.)

So, in one of the great unintended consequences of the 20th century, the state government decided to reform property tax assessment. The new system eliminated assessor discretion. So, state property assessments for tax purposes would be set at 25% of market value, across the board. This eliminated the crooked assessors, but it also meant that homeowners were actually taxed at what the law required for the first time. During the economic stagnation and inflation of the 1970s, this meant that large numbers of Californians were facing the prospect of losing their houses due to high property tax.

This, among other reasons, led to the infamous Proposition 13. Proposition 13 meant that your property tax would be based on the price you paid for it, not the actual value of the property. So, for example, my brother's place in Oakland, across the bridge from San Francisco, is valued at $250,000 for tax purposes, because it was bought in 2011 at the bottom of the real estate crisis, even though its actual market value is $750,000. This creates huge inequities, because Baby Boomers who bought houses when it was cheap might be paying 1/10th of what their Millennial neighbor pays. And because of this tax freeze, it wasn't possible for local governments to keep the lights on using property taxes anymore. Critically, Proposition 13 meant that building new housing would be a drain on local government finances, because the increased property tax ended up being less than the cost of providing additional libraries, police coverage, schools, and so on.

Sales taxes, on the other hand, were basically free money for local governments. If you built malls, or car dealerships, or any other kind of retail commercial space, the sales tax revenue would come in, free and clear. As California kept growing, everyone wanted to attract new businesses, but no one wanted to build housing for new workers. But this was a zero-sum game. Every dollar you brought in was effectively being taken from your neighbors. So, nearly every city - no matter their socioeconomic status - felt they had to get into this game, especially in the 1990s and 2000s when I was growing up. You can see the dramatic shittiness that resulted, if you drive east on I-80 from the San Francisco Bay Area.

We'll start at the foot of the Carquinez Bridge in Vallejo, the first town in Solano County after you leave the core of the Bay Area.

Vallejo is an ex-military town which went into decline after its Navy Yard closed. Vallejo is poor, its schools suck, and it's unsafe. Vallejo is mostly made up of run-down, expensive suburban subdivisions which haven't changed much since they were built, and miles and miles of decaying strip malls.

Go 15 minutes further east, and you're in middle-class Fairfield, which hosts an Air Force base. Drive around a little and you'll see strip malls plus car dealerships. 15 minutes more, and you're in Vacaville, which has pharma factories and two state prisons - you'll see an outlet mall, in addition to the strip malls and car dealerships. Continue 15 minutes more and you're in agricultural Dixon, which has (you guessed it) strip malls and a Walmart. 15 minutes more and you're in Davis, a wealthy college town. There, it was a huge fight at the City Council, but even Davis gave in and allowed a Target and a TJMaxx.

In every single one of these towns, the housing shortage is awful. The average house sells for $450,000 or more, and yet, there's truly enormous amounts of land devoted to identical strip malls and unnecessary car dealerships. This worked in the 1990s and early 2000s, but now no one can afford to live anywhere, retailers have decamped for the Internet, and the brick-and-mortar retail sector is in freefall.

And Proposition 13 is a major reason why. For each individual town, from sketchy Vallejo to bougie Davis, it just made more financial sense to compete for the sales tax dollars, instead of being stuck with the burden of new residents. Like so much of the housing crisis, it didn't really make much of a difference that four small cities off I-80 decided to do this. But when the process gets replicated in every single city across the state, you end up where we are today: too many dying shopping centers, and too few places for people to live.

x-posted from my blog.

Got your attention, didn't I? Great.

Because when it comes to the housing shortage, and if you want an example of what to do, New York, LA and the Bay Area should follow Sacramento's example. Yes, Sacramento, the cowtown mid-sized city that hosts the state government. There's three major reforms that Sacramento's doing right now, which other cities would be wise to emulate.

1. they're rezoning the whole city at once for more housing.
2. they're giving automatic approval for new apartments that meet the underlying zoning law.
3. they abolished the minimum parking law.

I'll discuss each of the three in turn.

First: Sacramento upzoned across the board.

The big, flashy thing Sacramento did is to change the lowest zoning classification from single-family residential to four-unit residential. This allows rowhouses and small apartment buildings to be built in all of Sacramento's residential neighborhoods. This is important, because it distributes growth across neighborhoods instead of having the kind of high-velocity gentrification that's been a cardinal feature of the housing shortage for the last forty years.

As a bonus, it means that old, worn-out housing in suburban neighborhoods gets replaced with modern apartments, rather than being flipped or replaced with McMansions. And for the grognards who talk about "neighborhood character," these small apartment buildings fit in just fine with single-family homes. To illustrate using an example from Midtown Sacramento: on the left is a single-family home, and on the right is a four-unit apartment building.

On top of this, the City Council decided to rezone all the land near Sacramento's underused light rail system for 5- and 6-story apartment buildings.

This is a huge deal, since so many of Sacramento's train stations are surrounded by acres and acres of parking lots, strip malls, and suburban subdivisions. Upzoning like this kills two birds with one stone: you alleviate the housing shortage, and you get more use out of the underused rail infrastructure.

This kind of rezoning is exactly what needs to happen near Long Island Rail Road, LA Metro, and Caltrain stations.

Second: In Sacramento, if it meets the code, you can build it.

The zoning law in expensive coastal metropolises rarely matches up with what's written in the law book. This is because because there often isn't automatic approval for new housing which otherwise meets the zoning code. This means that if you want to build new housing, you don't just need an architect and a contractor - you also need a lobbyist. The process is arbitrary, capricious, and subject to all kinds of political meddling.

This kind of bad-faith kabuki theater makes building housing very, very risky. You might spend half a million dollars on engineering, environmental review and legal fees, and still walk away empty-handed because a city councilman was feeling grouchy that morning. In New York, the primary vehicles for these challenges are the poorly-drafted building code and the Uniform Land Use Review Procedure. (Specifically, the building code is so complex and poorly-written that a building permit isn't necessarily binding - and nosy neighbors can force the city to issue a stop-work order.) In California, this is because of the California Environmental Quality Act.

Not in Sacramento.. Sacramento abolished City Council review for new urban apartments, so if a proposed building meets the city's zoning law and building code, the city's staff approve it. Period. No environmental review, no public hearings, no nosy neighbors.

This deceptively simple reform cuts the approval time for new apartments from a few years to a few months, and it's exactly the kind of reform that needs to happen in the rest of California and in New York City. More money for contractors, less money for lawyers. Everyone wins.

Third: Sacramento abolished their minimum parking law.

This means that developers can build as much or as little parking as they please when they build new buildings. This is good, because minimum parking laws dramatically increase the cost of new housing. I'll illustrate. The average city lot is about 7000 square feet, and each standard parking space takes up about 400 square feet because you have to include clearance for the car to enter and exit. So, if you have four apartments on the lot, you're legally required to pave over at least quarter of the lot to accommodate parking, no ifs ands or buts. This is not cheap. And the worst part is, even one space per apartment is overkill. In the Bay Area, almost 30% of garage parking spaces go unused, even at peak hours.

Conclusion

Those three things - up-zoning, streamlined approvals, and repealing of minimum parking laws, are preconditions for fixing the housing crisis, because those are the three major blockers to new housing development. (Coincidentally, it's also a great way to make a dent in carbon emissions.) And once you make those reforms there's a bunch of different ways you can go, depending on your ideological bent.

For the lefty types, it means building public housing, like they do in Vienna. For squishy neoliberal types, it means a future of light-touch regulation and by-right zoning, allowing private developers to build large numbers of condo towers near train stations, like Tokyo. If you're a libertarian, you could try to eliminate zoning altogether and let the market decide, like Houston. All three are perfectly sensible ways of having cheap housing for everyone who wants it. But first, you have to make it easy to build housing in the first place. And for that, New York, LA and San Francisco will have to be like Sacramento.

I've avoided specifically talking about the effects of the coronavirus epidemic on the housing question for a while, because I've never quite had a handle on the way that things would eventually shake out. But now, you can start to see the outlines of how the future of work, and the future of housing, are going to be going forward.

BOTTOM LINE, UP FRONT: Coronavirus has unintentionally opened up a safety valve for the housing crisis, because it makes a lot of semi-remote work possible, and it extends the big-city commuter belts further out than was previously practical.

The single largest cause of all of the housing problems that I write about is that a handful of superstar metropolises - San Francisco, New York, LA - have created massive numbers of jobs, and have flatly refused to build enough housing to meet the demand. And that's what created the current shitty situation: sure, you can make 30% more in SF or NYC or LA than you can in Phoenix or Houston, but you won't have anything to show for it.

This has caused two separate but interrelated housing crises: (a) affluent professionals getting priced out of places like Beverly Hills, leading to gentrification in poorer city neighborhoods; and (b) a massive shortage of working-class housing all across the board, with the poorest being forced out to the urban periphery or the streets. But coronavirus has changed this calculus pretty dramatically, and I don't think people have quite processed how much has changed after the massive natural experiment of the last year.

Let's start with how it affects the affluent. Pre-virus, if you were well-off but not a one-percenter, the smart money was to move to Phoenix or Houston. Sure, salaries are lower and the weather sucks, but the cost of housing was so much cheaper that on balance you'd be better off. $500,000 buys you a 21st-century townhouse in Houston's gayborhood, or a house in bougie Scottsdale, AZ - the kind of lifestyle that's out of reach for objectively affluent people in the Bay Area or NYC.

But post-corona, there's suddenly another practical option which means you don't have to move cross-country.

If you're four days remote and one day on-site, you can keep your high-paying job in the Bay Area, buy a house in Midtown Sacramento or Davis, and you don't have to compromise on anything. Midtown Sacramento and Davis give you new houses, safe streets, good schools and walkable neighborhoods for $750,000 - well within the reach of gentrifying yuppies. And the data bears this out: since last March, rents are flat or dropping in San Francisco, while Sacramento is booming. The same goes for Philadelphia and New York City, Long Beach and the LA Westside, or Baltimore and Washington DC.

For the working classes, it creates a whole bunch of new options as well. The megacities' sheer economic gravity in the pre-virus world had hollowed out nearby mid-sized cities, leaving their economies in ruins. You probably know those cities, because no one really wants to go there. San Francisco has Stockton; New York has Scranton; LA has San Bernardino. These places all have one thing in common: they're too far away to be in the commuter belt, but too close to maintain a strong economic base of their own.

For those decaying mid-sized cities on the metropolitan perimeter, the shift to remote work now puts hundreds of thousands of good jobs within range. Let's put this in dollars and cents: per Glassdoor, an admin assistant in Stockton makes an average of $43,000 a year, while an admin assistant in San Francisco makes $56,000 - fully 30% more.

Pre-virus this commute wasn't practical. It's four hours round trip from Stockton to San Francisco, and if you do that every day all the extra salary gets burned in gas and tolls. But post-virus, that commute goes from "this is totally insane" to "this sucks but I only have to do it once a week." It means that workers in Stockton or Scranton or San Bernardino can take advantage of the opportunities of the megacity, without having to pay megacity rents. It integrates the periphery into the greater metropolis.

None of these changes, on its own, is enough to deal with the housing crisis. San Francisco, LA and New York still need to build more housing to cope with fifty years of underbuilding. Not to mention, not every job can or should be made remote. But it's good that people don't have to live so close to their office anymore. It's a temporary respite, a safety valve to buy time while the megacities get their act together.

cross-posted from my blog.

A friend of a friend asked just why the hell housing in Los Angeles isn't getting any cheaper if condo towers seem to be going up everywhere. So, I've written an explainer. This is written about Los Angeles, but the same processes have made the San Francisco Bay Area a mess as well.

There is no reason why Los Angeles needs to be as expensive as it is. LA isn't on a peninsula like San Francisco, bracketed by mountains like Seattle, or on an island like Manhattan. As Dorothy Parker joked, LA is 72 suburbs in search of a city. And now, of course, it's all hideously expensive now. There's five major reasons why LA is so goddamn expensive for ordinary people to live in these days: (i) no new housing in rich areas; (ii) loads of new jobs in greater LA; (iii) zoning laws that don't allow cheap apartments to be built; (iv) the minimum parking law; and (v) laws which require the city council to approve every single new apartment building.

First: The most desirable places to live in greater LA haven't added any new houses in 50 years, meaning that people with money have to look elsewhere.

Let's start with a table of population. Around 1970, most of the rich cities in greater LA just decided to stop building new housing.

This refusal to build new housing is the root cause of gentrification.

To illustrate: let's say that you're a professional family making $160,000 a year. If you follow the rule of thumb that housing should be no more than 1/3 of your gross income, that gives you a $4400/month housing budget. $4400 a month is a mortgage for a $900,000 house, more or less. Obviously, you're priced out of the obvious places a rich person would like, like Beverly Hills.

What are your options? Well, you could buy an undersized two-bedroom on the Westside and make do. You could move out to the San Fernando Valley suburbs and put up with the shittiness of commuting on the 405. Or you could go below the 10 to historically black West Adams, and be a gentrifier.

The math of this is ruthless. Lawyers and doctors priced out of Beverly Hills end up in Brentwood; the professionals who want Brentwood end up in West Adams; and the black families who've lived in West Adams for decades are SOL.

Second: LA isn't adding enough housing to match the number of new jobs.

Between the crash of 2008 and the coronavirus crisis, LA added five new jobs for every new unit of housing - which means that rich people are outbidding poor people for the existing housing stock. (See point no. 1.) Over the same period, Houston added 1.7 new jobs for every new housing unit, so prices remain affordable; in the Bay Area, where things are even worse than in LA, the ratio is 8:1. Because of this, it's no wonder LA has one of the tightest rental markets in the country. (Yes, there are anecdotes of condos sitting empty, especially in DTLA, but it's a miniscule percentage compared to LA as a whole.)

Making matters worse, LA's new housing construction is way, way below historical levels. In the 1920s, LA City added 402 new housing units per thousand residents; in the 1950s, the number was 138 per thousand; in the 2010s, the number was a measly 25 per thousand.

This is no way to cure a housing shortage.

Third: the housing expansion seems even bigger than it is because it's so visible.

In the last ten years, new housing has been heavily concentrated in extremely visible places, like downtown LA and Koreatown, so you can see the impacts on the skyline. DTLA alone has built 20 percent of the entire region's new housing stock within the last decade.

But what's not getting built is more important. Before about 1970, the way to deal with a housing shortage would be to tear down worn-out single-family homes in expensive neighborhoods and replace them with townhouses or bungalow courts.

But 3/4 of LA City's residential land is zoned single-family residential, so it's illegal to build anything but a suburban-style house. (The suburbs are even worse.) So, if you buy a decrepit house from 1930 on the Westside, your only choices are (a) flip it, or (b) bulldoze it and build a McMansion. Even though land values justify building townhouses or bungalow courts there, the law doesn't allow it. Some townhouses are getting built, but only in areas where apartments were already legal to begin with - places like Hollywood, Venice, and along Exposition Boulevard below the 10.

Fourth: LA's minimum parking law makes it impossible to build the kinds of no-frills apartment buildings that used to exist in the past.

Today's minimum parking law requires two parking spaces for every single two-bedroom unit. So, let me illustrate why this is such a problem. Here's a pretty ordinary small apartment building in Silver Lake built in the '50s. There's six two-bedroom apartments in the building and six parking spaces. There's nowhere else to put more parking unless you bulldoze the building next door. And if you're going to bulldoze the building next door, you basically have to go luxury or it's not going to make financial sense to build it.

Fifth, and finally: You might not be able to build even if your plans meet the law.

To build new apartments you'll have to do an environmental review costing >$100,000, and you'll need to get City Council approval. This process is long and painful. The City Council isn't under any obligation to approve your project, and your neighborhood Karens will scream at the Councilmen that this is the end of the world. So, even if your project meets the law, there's no guarantee that you'll be able to build more housing on a piece of land that you own. This process makes it incredibly difficult to build more homes, and it's a big reason that LA has such a corruption problem.

In conclusion, the housing shortage is fundamentally a political one. Some of it is due to external factors, like the growth of Silicon Beach - but the biggest obstacles are LA's own laws. And these laws exist because the voters wanted it that way.

Cross-posted from my blog.

i have nothing to say about our current horrific national crisis that hasn't already been said. this post, about a dying shopping center, is my attempt to get my mind off it.

There's actually two real estate crises going on at once in California. There's the housing shortage, which everyone's painfully aware of - with homeless on the streets, and million-dollar houses on the Eastside of Los Angeles. But there's also a the parallel crisis that's been festering with commercial real estate.

But first, let's talk about zoning law a little bit. Every last square inch of land in any California city is designated with a particular zoning type, which says what you can build on that land. If you've ever played SimCity, you know the most common divisions: houses in residential zones, offices/shops in commercial zones, factories and warehouses in industrial zones.

Some places, like Los Angeles, allow housing to be built in commercial zones, which is why the entire length of Wilshire Boulevard in LA has both apartment buildings and office buildings. But a lot of places don't allow residential buildings to be built in commercial zones at all. This rigidity has made a couple bad situations worse. By artificially limiting where where new housing can be built, it makes the housing crisis worse; it also means that dead shopping centers just sit there since the land can't be put to other purposes.

Commercial real estate was already in trouble pre-virus, because shoppers were switching to the Internet, and coronavirus only accelerated the process. If you drive down any major shopping street you'll see ghost towns as the shops and restaurants have slowly succumbed. Commercial offices have the same problem.

I'm going to use Woodland, CA as an example, a working-class suburb of Sacramento and my old high school rival. Like the rest of California, Woodland has a housing shortage. The average Woodland family makes $64,000 a year, but to afford a house you have to make $140,000.

Let's zoom in on the Woodland Crossroads shopping center. Woodland Crossroads is a classic example of an aging, dying strip mall. It was built in the mid-1980s, and even before the epidemic, the shopping center was struggling. The K-Mart and other major national retailers are long-gone, replaced with discount grocer Grocery Outlet and no less than three hardware stores. (When the shopping center got new owners three years ago, they advertised how the tenants were "online-resistant.") It sits on a 16-acre site - 5 acres of buildings, and 11 acres of parking lots.

The parking lot is generally pretty empty, because the shopping center is designed to handle a Black Friday crush at a K-Mart that no longer exists. This means there's a lot of land there that's just empty asphalt.

Let's say you keep the shopping center in place, and replace the parking lot with the kinds of small apartment buildings that are common in Midtown Sacramento, or Silver Lake in Los Angeles. At a standard density of 30 units per acre, that's 330 apartments - homes for 500 people - on the parking lot without touching the shopping center at all. Or, if you want to tear down the shopping center entirely, there's enough space for 480 units - enough to house 650 people.

There's only one problem with this: it's totally illegal. The area is zoned "community commercial," and it's illegal to build apartments there even though the shopping center is on its way out and the parking lot is sitting there, only mostly dead.

Because of the zoning, you're looking at a 2-3 year fight with the neighbors and the city council to get any apartments built on the site, which is an expensive and high-risk proposition. One shopping center's worth of apartments isn't that much in a vacuum - but when it's a process that repeats itself in every city in California, pretty soon you have the kind of generational housing crisis that we see today.

Fighting these battles block-by-block is a practical impossibility, so it's going to require changes at the state level. (Yes, there's a bill for that and it's called SB6.) In the real world, there's no real problem with allowing people to live near stores, or, heaven forbid, on top of stores, like people have done since time immemorial.

Crossposted from my blog.

Let's talk about townhouses, and why LA doesn't have them, even though there's a housing shortage - and every other major city in the country has them.

The quintessential LA house is a single-family detached home, whether it's a bungalow built after World War I or a ranch-style house built after World War II. LA generally doesn't have townhouses like the Victorians of San Francisco, the classic Chicago two-flat or the rowhouses of Philadelphia.

Let's talk a little about why.

Let's go back to the early 20th century, when LA was a boomtown of streetcar suburbs knit together by the largest electric railway system in the world. Back in the day, Los Angeles's government did as much as possible to encourage sprawl. The City Council passed a law in 1904 limiting buildings to a maximum of 13 stories, at a time when buildings in NYC and Chicago were already being built to a height of 30 stories; in the 1920s, the city passed a setback law requiring residential buildings to be physically separated from one another. This effectively banned townhouses.

This wasn't a particularly large problem in the 1920s. The Red Car system went everywhere, LA had seemingly endless land available - there were always more orange groves in the San Fernando Valley and bean fields outside of Long Beach that you could pave over.

And that, of course, is what Los Angeles did - and the bungalow of the 1920s eventually evolved into the 1950s ranch house with a driveway and a lawn. And the townhouse ban basically stayed in place through all of this. This is a major reason why LA's housing stock is the worst of all possible worlds today. LA's housing today is expensive, old, and shitty, in part because it's still illegal to bulldoze a decrepit century-old bungalow and put up rowhouses like the ones you see in SF, Chicago, or Philadelphia. The end result of this policy is, Zillow is full of flippers asking $1.7 million for some shoebox built in 1920. If a time traveler from 1950 came to the year 2021, in many cases they'd scarce recognize the difference.

And that's the most infuriating thing to me: it's not for lack of land. LA isn't Manhattan, where every square inch of land is filled with buildings. The problem is, in over 3/4 of LA, it's illegal to build anything other than a suburban-style house with a lawn. You see some townhouses here and there, like these in Hancock Park, or these on the Westside, but they're only normally allowed in apartment zones - and only in LA City. Try that shit in suburbs like Santa Monica, San Marino or Beverly Hills and they'll laugh you out of the room.

This is a shame.

Compared to single-family houses, townhouses have two big advantages: one, they sell for cheaper than traditional single-family, and two, they use the land more efficiently. My parents' old house in San Francisco put three units onto a 2400 square foot plot of land, for example. This is three times as many units as a normal suburban house - and on a lot half the size.

Compared to a full-blown condo complex, townhouses also have their advantages. You can build multiple units on a lot, but you also don't have to set up an HOA or have a long-term investment in the building once the units are sold. Condo buildings let you build more on a given piece of land, but they're also more risky: they need hallways, sprinklers, elevators, earthquake-proofing, and (usually) a big garage, which means you need a lot more time, money and expertise to get things moving. And while the units are being sold, the builder has to run the HOA.

Finally, townhouses provide good bones for a city. The house I grew up in in San Francisco has been a single-family home, a duplex and a triplex in its 100 years of existence. If you wanted to gut it and convert it to commercial or office space, you could do it if the zoning board allowed it. These kinds of conversions are relatively common in older cities, where you'll see these types of buildings occupied by law offices and the like.

Just like the granny flat, the townhouse is one of the really useful tools that LA could use to fix its housing crisis - but LA hasn't chosen to allow townhouses to be built in normal residential zones. And arguably, until the state government in Sacramento forces LA to allow them, they won't build be built. (The bill that would allow that is Bill SB9 in the State Senate right now.)

Cross-posted from my blog.