U.S. cities spent much of the middle and late 20th century reducing capacity for new housing through extensive downzoning, leading to a shortage of homes and rising prices in high-demand locations. To combat this, many cities and states are now reversing course and upzoning to allow higher-density housing, usually in targeted locations such as individual neighborhoods or corridors. While these targeted upzones have increased housing production in some cases, they have also led to higher land prices that erode the affordability of new homes. In this paper I introduce the concept of the “zoning buffer” — the gap between the existing housing stock and the maximum number of homes allowed by current zoning — and describe how it affects land values and ultimately the production and affordability of housing. When upzoning produces a large zoning buffer, land values should not increase substantially because land with redevelopment potential is no longer scarce; property owners lack the leverage to demand more from a developer than a typical homebuyer. These properties can transact at lower prices, delivering lower-cost housing to residents. When zoning buffers remain small, upzoning will result in land value increases that are largely captured by incumbent property owners. I argue that improved housing affordability at a city-, metro-, or region-wide scale can only be achieved through “broad upzoning,” defined here as zoning changes that allow at least moderate density (roughly 6-10 units) on a large share of parcels (at least 25%-50%). With zoning reform receiving more attention across the country, policymakers should prioritize broad upzoning over other strategies that may be unlikely to improve long-term affordability.

Municipal revenues have been hit hard by the COVID-19-driven economic slowdown, forcing governments to identify new sources of funding or enact steep service cuts. Cuts of approximately $1 billion for Los Angeles County and up to $600 million for the city of Los Angeles are anticipated, with further reductions possible as the economic fallout comes into sharper focus. Even prior to the COVID-19 pandemic, California local governments have been restricted in their options for raising revenue. This has led to an overreliance on regressive sales taxes and an inequitable distribution of property tax burden, among other challenges. Reforms to the real estate transfer tax, which is assessed when properties are sold or otherwise change ownership, are an effective and equitable solution to immediate budget needs, while also supporting important long-term priorities including affordable housing and tenant assistance.

In recent years, vacant homes have increasingly been identified as a potential indicator of speculation or otherwise underutilized housing stock. Recently constructed market-rate and mixed-income housing, in particular, has been cast as villain in this debate, with relatively high vacancy rates taken as a sign that this type of housing isn’t needed. Using Los Angeles as a case study, this working paper explores the nature, extent, and causes of housing vacancy, and draws conclusions about what should be done about vacant homes in high-cost locations like L.A. Analyzing multiple data sources with varying jurisdictional boundaries, I find that Los Angeles vacancy rates rank among the lowest in the nation, and are lower today than they were for most of the past 15 years. The types of vacancies in the city and metro area (“market” and “non-market” vacancies) also appear in similar proportion to other jurisdictions. And, accounting for the lease-up periods of newly constructed buildings, vacancy rates in the booming neighborhood of Downtown Los Angeles are similar to those of the rest of the city. It is suggested that proposals such as vacancy taxes may achieve modest reductions to vacancy, but will do little to address the needs of overcrowded households, super-commuters, or future generations, among others.