California-style zoning

Michael Barone on recent demographic trends: 

This is something few would have predicted 20 years ago. Americans are now moving out of, not into, coastal California and South Florida, and in very large numbers they're moving out of our largest metro areas. They're fleeing hip Boston and San Francisco, and after eight decades of moving to Washington they're moving out. The domestic outflow from these metro areas is 3.9 million people, 650,000 a year. High housing costs, high taxes, a distaste in some cases for the burgeoning immigrant populations--these are driving many Americans elsewhere.

The result is that these Coastal Megalopolises are increasingly a two-tiered society, with large affluent populations happily contemplating (at least until recently) their rapidly rising housing values, and a large, mostly immigrant working class working at low wages and struggling to move up the economic ladder. The economic divide in New York and Los Angeles is starting to look like the economic divide in Mexico City and São Paulo.

As I've pointed out before, California-style zoning is a bad, bad thing to imitate.  Incumbent homeowners, through strategic NIMBYism, strangle the supply of new housing.  The high-income types bid up the price of the existing stock.  Skyrocketing prices push out the middle- and low-income classes.  The incumbents, professing alarm over rising inequality, push new regulations (inclusionary zoning, for example) that burden new development, further dampening supply.  Prices predictably continue to rise until enough people decide the city's amenities just aren't worth the price.  (The initial price peak is probably not an equilibrium since housing demand is inelastic in the short run but elastic in the long run; i.e., people won't abandon the city immediately in response to high prices.  This may partly explain the housing bubble in California and the East coast.) 

If you think that places like San Francisco and LA are already "built out" and simply can't do anything to increase the supply of housing, you're wrong.  Here's a recent example via the San Francisco Chronicle:  A developer wanted to convert an abandoned hospital just inside the Presidio National Park into 350 apartments.  The developer did not even propose expanding the building; it just wanted to subdivide the existing structure into apartments.  Thanks to the opposition of local neighborhood groups, the project has been scaled down to 186 apartments.  As part of the agreement, the developer will demolish two wings of the building.  The justification for the neighbors' demand?  These wings were "architectural blunders."  That these "blunders" have been in place since 1952 apparently was irrelevant.

Now repeat the same story twenty or fifty or a hundred times.  That's a lot of housing lost to incumbent protectionism.   

Comments

[DSK]

"The economic divide in New York and Los Angeles is starting to look like the economic divide in Mexico City and São Paulo."

That sums it up all too well, alas. At least in the cases of LA and the bay area. I'm not sure I'd put the NYC metro area in that boat.

[AC]

Bloomberg is doing what he can, but Manhattan is pretty bad. Neighborhood groups routinely fight extra height, which is the only way to add density there. (Hard to believe, but Manhattan's not nearly tall enough.)