Big Rain, Blame for High House Prices

[drscott]

Pouring rain here for the first time this season; summer is truly gone. But a nice day to snuggle inside, drink coffee/tea, and talk.

Nice essay on the real reason no one can afford to live here. Yes, land is scarce and expensive, but it's getting approvals to build that costs the big bucks, and the reason for that is that every project is opposed, only a few get through, and even those are scaled down. There's always a good reason to block someone else from living near you -- traffic, noise, property values -- but if you look at our overcrowded highways and wonder why, a good part of it is because our collective desire to live in close-in but uncrowded neighborhoods has doomed thousands to travel umpteen extra miles to work.

I'd like to see a super-high-speed transit line built above the Caltrain right-of-way and thousands of highrises next to it. It would easily be self-financed and rein in the inflated prices of housing down here. Yeah, like that'll happen.

Comments

[pklexton.livejournal.com]

I would question the data in that article. Where do they get the figure of $28,000 for a quarter acre of land in LA? That doesn't sound realistic to me. And how do you figure the hypothetical value of the land alone, since by definition the value will be influenced by whether the land is buildable? I think it's a bit of an oversimplification by someone who cooked the data to fit a pre-existing agenda. Of course, there is some truth to the notion that tight land use regulation constrains supply and therefore leads to higher prices. But I suspect it's only one factor among many, including the fact that San Francisco and LA are way, way, way, (did i say way?) more desireable places to live than ... Dallas. Or Atlanta. Demand is not even comparable. And supply is constrained by other things, including geography. In our city, in the one area where there are significant remaining unbuilt lots the terrain is so steep and unstable, and the city's finances so constrained by Prop 13, that if we were to allow new building in these areas the cost to the city of providing services (and the risk of liability from lawsuits by homeowners who sue cities for letting them build in stupid places when the land fails) would far exceed the additional property tax revenue. The city would lose money for every lot it allowed to be built out. So it doesn't happen.

On the other side of the coin, I completely agree with your Caltrain right-of-way high density development idea. In fact, I think you might be surprised that that sort of development is actually an official planning policy of most of the jurisdictions up and down the Peninsula. (The high speed rail line is even under consideration, but you know how difficult it is to get that sort of thing off the ground) Will it ever happen though? I'm as sceptical as the next person. I'll tell you one thing - Atherton and Palo Alto will probably be the last places to see it!

[dr-scott.livejournal.com]

Atherton is a particularly egregious example of zoning by and for the benefit of the wealthiest members of society.

More on this topic when I have some time...

[pklexton.livejournal.com]

I don't know why the author was surprised by the fact that it was harder to build in low density (but already built out) areas - all that proves is that that's where the rich people live. I can guarantee you the same is absolutely true in Dallas and in every other city, just on a different scale.

I just reread the article and how they calculated the value of the extra quarter acre. Knowing what I know about LA, I find it hard to believe that two identical houses, one on a quarter acre and another on a half an acre or land of the same quality would differ in value by only $28,000, even in 1999. In LA, just like in many California urban areas, I suspect that a lot of the built out lower density lots are also in high slope areas (rich folk tend to like living in the hills), where the additional quarter acre may be of little use if it's not really accessible or usable.

[dr-scott.livejournal.com]

I looked for the papers she cited for the figures and the correct one isn't online, it appears. this one from the same authors is interesting.

I agree that the raw land cost seems suspect; given that you won't find ANY houses with half-acre lots in LA proper, i suspect the numbers are derived form some regional statistics including exurbia. But form other studies I buy the point that marginal land attached to a house is worth little in areas where there is little chance you would be allowed to build on that land.

It's interesting to note (and most people aren't aware that) all the hillside houses in Belmont (and most of the hills in SF) could not be built as they are under current law. The streets violate slope guidelines, the water and sewer and costly to provide, and geotechnical studies weren't done.

More on this topic coming up.

Clueless

[foodpoisoningsf.livejournal.com]

Sorry. one of the worst articles I've read about housing costs in a long time. If only because of the attempt to force some kind of macro economic theory on what is fundamentally local.

But she also ignores the concept of planning, instead advocating a kind of freemarket approach to land use. So while the author may cite nimbyism is stopping a developer from building in an LA neighborhood, she ignores the unprecedented mixed-use building boom currently underway in LA, and fails to grasp that living in a free-standing house is increasingly a luxury both financially and environmentally.

Re: Clueless

[dr-scott.livejournal.com]

It's certainly oversimplified. A modern city is a complex organism, and as density increases, the externalities of development on near and far neighbors increase, so a laissez-faire model a la Houston gets more problematic.

But. The sprawl (which you and I don't see much of since we choose to live in more tasteful inner areas) that has developed around the Bay Area -- paving over valleys from Santa Rosa to Livermore, and now moving to the Central Valley -- need not have been so extensive. MIT prof Bernard Frieden wrote a book on what was starting to happen in California in 1981: from the dust jacket blurb: "[California policies] have already discouraged large, planned-unit developments with community open space, driven up the cost of housing, and promoted a return to 1950s-style building practices of expensive freestanding single-family homes, each on its own lot in small, exclusive developments at the urban fringe." 25 years more of that has increased pressure so much that we now see lots of good infill, and the backlash (encouraging density near transit, "smart growth") is too little, way too late.

Zoning is little understood. Historically it began as a reasonable practice for limiting negative impacts on surrounding properties. Enlightened zoning attempted to prevent conflicting uses and limit density, though usually at levels much above what was already built. Over the years it evolved into a tool to provide nearly complete local control over building, to the point where planners by default set zoning at or below the density of what exists so that every development that created more units became subject to a political process. Such processes will *always* take more time and leave out the interests of those not intimately involved, like future residents, regional interests, etc. California is horribly backward, and doesn't know it, in its planning processes, just as it is in tax policy, transportation planning, resource mgmt -- there's a lot of innovation in performance-based land use control completely ignored here, and properly charging new development in accordance with infrastructure needed is still a lost art here. The political use of developers to fund campaigns insures that money-for-permitting will continue.

So it's not that planning and regulation aren't needed; it's that properly designing these processes so they are not purely local and political is necessary to allow an envelope of freedom for developers to work in that will make production of housing easier and cheaper.

Re: Clueless

[foodpoisoningsf.livejournal.com]

Re infill and transit-related density, I don't think what we're seeing is too little and too late. There's never enough, but local governments are making headway in Walnut Creek, Millbrae and S San Francisco. And as painful as the process is, I think planning should remain local. California's too big. But it's still a matter of who's agenda is being served- residents, builders, commuters, endangered frogs.

Re: Clueless

[dr-scott.livejournal.com]

But my point is that there *could* be enough, and that design, transportation planning, and lifestyles could be so much better. Regional mandates ("your town must build this many units...") have proven not to work. Usual knee-jerk reaction is to suppress developments in the fringes as well, but the lower quality-of-life compared to other places for nearly everyone who didn't buy their house before the 80s is so obvious now that politics will start to bend, if it's understood what's happened. We deal with construction quality issues with a code; within the code, your building either does or does not pass by a technical; judgment not requiring a committee to vote, and it can be passed in a day. The opportunities for corruption when any number of players can block you are too great to police. A similar redesign of the process to allow immediate approval based on performance-based impacts (and setting charges by formula for infrastructure) would free up the system and allow a lot more in-city building. Even better, to deal with the problem of holdouts in assembling large parcels, some sort of mechanism for putting larger areas up for redesign proposals would help a lot. This would, of course, be easier if land had been leased by default all along, instead of owned... but the Supreme Court would apparently not stand in the way of that kind of taking.

Re: Clueless

[foodpoisoningsf.livejournal.com]

As a corollary to development on the fringes. While I see where you're going with building codes, you're still ignoring planning and design issues. Funny reference about holdouts, since many of us see the current lockstep between developers and municipalities on eminent domain as the product of decades of corruption.

Re: Clueless

[dr-scott.livejournal.com]

That agrees with what I am hearing -- bottom dropped out of "marginal" areas (either distant or undesirable), no signs of weakness in prime locations.

The inner bay area has 100s of thousands of functionally obsolescent houses on individual lots in locations that would be good for large planned developments near transit. A system that redevelops some of these (compensating the owners with a big premium above market value) would be in everyone's interest. Cities currently take for commercial development, when residential is often the more pressing need.

And I'm not ignoring planning and design issues; I'm saying they can be systematized and integrated to allow the equivalent of an EIP to quantitatively either pass or fail without political determination, just as we say you can build a house by right on a lot with certain setbacks and size, etc.