California Policymakers Will Never Fix The State’s Housing Crisis By Looking Backward

California Policymakers Will Never Fix The State’s Housing Crisis By Looking Backward

Gov. Gavin Newsom and lawmakers have made it clear they believe rent control is one of the solutions to California’s housing shortage. According to the Los Angeles Times, an agreement announced late on the Friday evening before the Labor Day weekend between the governor and legislative leaders “would cap rent increases statewide at 5% plus inflation per year for the next decade.”

“The legislation, Assembly Bill 1482, would also include a provision to prevent some evictions without landlords first providing a reason,” says the Times.

It was finalized after a “series of amendments” had been hashed out. So there’s no doubt there was a lot of back and forth. Ideas floated, some modified, probably quite a few shot down. Yet the principals still settled on a primitive policy that many economists consider counterproductive. They couldn’t come up with anything new. Did they even look at all beyond their narrow worldview for an answer to the state’s housing crisis before finalizing the deal?

The default position for nearly all policymakers and executives, such as mayors, governors, and presidents, is to throw more government at all problems, both the real and the perceived. This is especially so in Blue States such as California, where government continues to crowd out the private sector.

So it’s no surprise at all that Newsom and legislators took the path toward a state rent control regime.

If the negotiators had looked outside of the box they’ve crammed themselves into, they could have easily found a new paper written by John Myers (not to be confused with the LA Times reporter), which would have inspired new thinking.

According to George Mason University economist and Mercatus Center director Tyler Cowen, the paper, produced by London YIMBY, self-described as an organization campaigning “for more homes in London and the rest of the United Kingdom,” offers a “new and very different approach to construction and zoning regulation, and it deserves further attention.”

“I call this idea ‘street-by-street zoning,’ … . The basic idea is simple: Let each street decide on its own how it wants to zone commercial activity, including construction. Of course, in some contexts the deciding entity won’t be a street but rather a block or some other very small neighborhood area.”

Cowen continues in Bloomberg Opinion:

That might sound a little crazy, like a 1960s hippie commune dream. Yet the idea has hidden potential. If streets chose their own zoning, city-level zoning rules could be quite general and open-ended, opening up the possibilities for more construction and also for more mixed-use neighborhoods. With that liberalizing backdrop, residents on any given street always have the option of more restrictive zoning.

The upside is that street-by-street zoning would allow so much room for experimentation. Some zoning reforms might increase home values; a street might decide to allow for multiple dwellings on a lot (an in-law apartment in a backyard barn?), or make it easier to “upzone” by making it easier to rebuild. And what about allowing, say, a small Sichuan restaurant on each residential street — would that boost home values? Maybe not, but at least there’d be a way to find out.

Cowen notes that there is “no commonly known example of street-by-street zoning,” but tells us there are a few places where the concept has been put in practice.

The London YIMBY report is a working paper, and is not to be cited without permission. But we think it’s safe to say Myers references a law in New Zealand, where Cowen says “individual homeowners can waive some rules governing neighboring properties,” and further notes the English system of “neighborhood planning,” in which, says Cowen, “allows for some use of local development plans, backed by local referenda.”

Cowen acknowledges in his Marginal Revolution blog that street-by-street zoning could “lead to more restrictionist outcomes than under the status quo” and “it might well be true that the improvement will be zero.”

But the larger point is that “if new construction already is constrained at zero perhaps matters won’t get much worse.”

Construction isn’t “at zero” in California (though it might seem as if it is). But there can be no better place to see how street-by-street zoning could work than in the Golden State.

Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.