Mckinsey folks estimate it at 2 million. Pointer from Alex Tabarrok.
The market clears, of course, but at a price point that is very high relative to income.
Presumably, this is a supply problem. You do not cure a supply problem with mortgage subsidies or rent controls.
They have several suggestions for how to fix it. First,
In California cities with populations of more than 100,000 people, we conservatively estimate that there is capacity to build 103,000 to 225,000 housing units on vacant land that has already cleared the multifamily zoning hurdle (Exhibit 8). One-third of this opportunity is in Los Angeles County. This estimate applies only to vacant and already-zoned urban land capacity and does not account for whether it is economically feasible to build housing onthis land.
Los Angeles County is a big place, and the vacant parcels seem to be all over the map. That leads me to worry about transportation issues. And it leads to their second recommendation.
We estimate that by increasing housing density around high-frequency public transit stations, California could build 1.2 million to 3 million units within a half-mile radius of transit. . . in our “high case,” 34 percent, or one million units, would be in the Bay Area; 8 percent, or 245,000 units, in the Sacramento area; and 30 percent, or 903,000 units, in the Los Angeles area.
An interesting paragraph about the disincentive to approve new housing appears in a footnote:
One reason for this is the small share of property tax that is allocated to the city from a residential development. The city must provide municipal services for the development, yet a large share of the development’s property taxes flows to non-city entities such as the county, the school district, and special-purpose districts such as fire and water districts. In addition, affordable units built by non-profit organizations are exempt from property tax, since such units qualify for the “welfare exemption” outlined in the state constitution. For a given parcel, local governments would often rather approve developments that generate more revenue, such as retail projects, than housing. This “land-use fiscalization” is commonly cited as a barrier to residential development in California.
On the permitting process in general, there is this:
California stakeholders could study other systems to get a fact-based view of “what good looks like”—for example, a robust, participatory, and transparent land-use process where outcomes are measured in days or weeks, rather than years or decades.
The report strikes me as very good.
Along similar lines, see Richard Epstein.
Another piece, recommended by Steve Teles, is David Schleicher’s City Unplanning.
Each time a community board approves a new development, the city could provide a time-limited property tax rebate to residents in the board’s district equal to a percentage of the “tax increment” created by the development (the tax increment is the increase in tax revenues caused by increasing property values18). The payments would head off local opposition to new development
Good recommendations, but don’t hold your breath.
Given the reality of 2016 Election, I would warn everybody your vote counts less than real Americans in Presidential elections. (And there is less empty spaces than you think out here.)
Otherwise, a tax rebate makes sense but my guess is the city does not have the funds today to pay an immediate rebate for increased taxes in 2 years.
I’m skeptical about the transportation infrastructure claims. It seems very native to think that millions of extra LA area residents will mostly use public transport for most of their needs. Anyone who has lived in LA will tell you it’s too decentralized and dispersed and it’s not really feasible to make a good mass transit system there. Meanwhile, the auto infrastructure is infamously stretched far past capacity (at least, for reasonable levels of commuting pain).
I don’t know about the water situation there, but the papers say it’s already tight given existing rules.
Probably better to start new cities from scratch, designed to keep congestion and transit times low, and otherwise with Texas zoning policies.
It isn’t like these are low density areas. The largest problem I see is greater densities will require much more public services including transport but those that want higher densities are least likely to support more public services and those that oppose higher densities do so because of impact to public services that won’t fall on the marginal buyer.
I say start new cities from scratch…or invest to help “Tier 3” cities have a better chance of becoming Tier 1 & 2.
In addition to the valid objections already mentioned, I think most Californians would tell you that immigrants, often without jobs, are first in line to get new housin. I think most Californians suspect that building additional housing is pointless, given it would only result in more Chinese or Russians parked here. And of course, even low-income housing would go to immigrants, often illegal.
So Californians would have ever worse traffic, more water restrictions, without tremendous assurance that there’d be more available housing.
That’s a good point, and brings up a more general problem with a common style of libertarian argumentation: even when some proposed change seems to be a step in the ‘right’ direction, partial reforms don’t necessarily make things better in the new equilibrium.
The political distortions which remain offer policy makers enough room for maneuver to ensure that any hypothetical gains in social welfare are distributed to their own clients, even at a net cost to others.
Libertarians often mistake opposition to these proposals as forms of error or rent-seeking, but they often overlook the fact that many opponents have a good instinct for how things would actually play out on the ground in the real world, which won’t at all resemble some theoretical rosy scenario.
Footnote 23 quoted above (I admit to not reading the entire report) makes no mention of Mello-Roos, which here in California allows special districts to be formed for the payment of parcel taxes to fund community facilities. Where I live (in Orange County), this basically amounts to a developer building schools, roads, sewer, etc. in a neighborhood or development in parallel with housing and the residents paying down the bill over 10-20 years along with their property taxes. For me personally, this is about 10% of my basic property tax. This being California, of course, my neighbors who bought only a few years earlier than me (in 2004) pay far less in basic levy so their Mello-Roos is commensurately higher as a proportion of their overall assessment. I suspect that those most acutely affected by housing shortage are less able to pay parcel taxes (note the property tax exemption for affordable housing).