Tuesday, 6 March 2018

California's Love of Cars Is Fueling Its Housing Crisis - allegedly.

Emailed in by Mombers from Bloomberg:

In Los Angeles, it’s perfectly legal to build a new apartment without a refrigerator, a balcony, or air conditioning. But you can’t build one without plenty of parking. In most cases, in fact, you have to build at least two spaces per unit -- and no fudging with tandem or compact spaces. That makes housing much more expensive. Removing parking requirements would be one of the simplest ways to ease California’s housing crisis...

Shoup gives the real-life example of a standard-size L.A. parcel whose zoning allows eight apartments, with required parking of 2.25 spaces each, or 18 total. The lot is only big enough to accommodate 16 spaces on one level of underground parking. Going from seven to eight apartments thus means digging down another level, which is prohibitively expensive. So the builder settles for seven units. The parking requirement costs one more family a home...

Scott Wiener, a San Francisco Democrat, has introduced a bill whose provisions include exempting new residential buildings from parking requirements if they’re within half mile of a major transit station or a quarter mile from a frequent bus stop. The bill would certainly ease California’s housing shortage. But, especially in the era of ride-sharing, there’s no need to tie parking deregulation to transit -- or to wait for the state government to act.

Mombers adds: Question is whether this has any impact on rents – someone without a car will ceteris paribus pay more than someone with one – public transport and/or Uber much cheaper, leaving more income for the landlord/ bank to tuck into. And of course Manhattan has much fewer parking spaces per dwelling and much higher rents...

Ho hum.

1. As we know, construction costs add nothing to the selling price of homes (for a given 'quality') -  that is limited by what people can afford. Higher construction costs just depress residual land values.

2. As we know, any sort of planning regulation (like making each unit have two parking spaces - or indeed not allowing a new block of flats to have parking spaces to encourage people to use public transport) must depress the value of the land. The developer works out what is 'best' by looking at what's sold for how much in the surrounding area and works backwards from that. If the regulations stipulate something different, then the value must be depressed, by definition. You wouldn't need regulations to encourage developers to make the best use of a site.

For example, It might be the case that people like having one parking space but aren't bothered about the second, in which case the second parking space adds nothing to the value or the selling price. Or it might be that they do value the second space, in which the developer would provide it anyway (unless the planning rules limited the number of spaces per unit etc).

3. Using more land for parking reduces the amount available for housing. By and large, denser populations lead to higher prices and hence disproportionately higher land values - see Mombers' Manhattan example. San Francisco has the highest prices and land values in California because it has the highest densities, being squeezed into a small geographically restricted area (like Manhattan). Assuming always that there's more public transport to take up the strain.

4. There is no housing shortage in California and prices are not particularly high, it's only expensive on the coast because continental USA has so little coastline, and even less nice coastline that the coastal premium is gigantic. By definition, there will never be 'enough' homes in the best areas (i.e. near the coast) if you define 'enough' as 'one for every household which would like one'.

So I am not convinced.


Ben Jamin' said...

Good planning regs (or anything) will increase aggregated land rents, even though they might lower the rental income from any given plot.

Minimum size, quality regs etc, can be a good thing if judiciously applied. Bad if they go too far or inappropriate.

It's all about getting the right balance, which can be measured in aggregated land rents.

Shame this isn't appreciated beyond the confines of this blog, as it would cut through a load of bullshit regarding planning, supply and housing issues.

Andrew S. Mooney said...

Housing in California does have additional costs associated with it - Earthquake regulation means a whole series of housing styles have been banned over the years as their problems became evident. Brick structures, for example.

"Using more land for parking reduces the amount available for housing. By and large, denser populations lead to higher prices and hence disproportionately higher land values."

Not entirely true, at least, not in this location.

One style of banned structure was almost unique to California and one of the most popular styles between 1950 and 1970 - It is called a "Dingbat" block. They are a consequence of land price, occupy a entire lot, and feature their car parking *underneath* the structure at street level. Lots of examples to be seen here. I like the "Crapi" apartments part way down:


The reason Dingbats got banned was because they are mostly fabricated from wood with sprayed on stucco exteriors - As cheap and nasty as they sound - But they continue to possess enthusiasts due to the fact that they solve the problem the car parking article outlines.

Land price effectively prompted their construction as they satisfy requirements for both living space and parking in one go. To some extent the regulations therefore elevated land value, through innovation in style/construction, but it also works the other way, in that once you had arrived at this particular solution every other more conventional style, tract homes, tower blocks etc, each of which requires a separate parking lot or underground excavation, all got pushed out in favour of something that you wouldn't think to build anywhere else because you don't need to.

Hence, LA found a way to make mass car ownership and high build density work - Shame they didn't make them out of something more solid.

Mark Wadsworth said...

BJ, as far as planning reg's go i think they should mainly focus on things not obvious or visible to the normal person such as fire, sound and heat insulation, having the wiring run vertically down walls, electrical safety, solid foundations, damp proofing etc. And possibly outward appearance i.e. not too offensive.

People are perfectly capable of judging room sizes with a measuring tape, or how many rooms or parking spaces a home has. But you can't guess what the fire insulation is like without digging open the walls again and nobody wants to find out the hard way.

ASM, good comment, better than my original post. Not sure how to reply to that except to say a brick built ding bat seems to be the best of both worlds. Why didn't they do that?

However, better build quality does not add to land price, how can it? People have a maximum housing budget so if build costs go up and house prices stay the same then by subtraction, the land price must go down.

And density does push up land values. it must do, or else SF and Manhattan would be dirt cheap and a ranch in Wyoming would cost $ millions. It's got to do with agglomeration effects.