California’s housing crisis is not just one thing. There are myriad crises, and they are interconnected: housing cost burdens, household instability and homelessness, racial segregation, economic inequality, health disparities, and climate change are all exacerbated by California’s inability to build sufficient housing (especially for lower-income households) and ensure that new supply is fairly distributed across communities and in ways that reduce greenhouse gas emissions. Every day, there’s a news story of people leaving the state for cheaper places, of a renter doing their best to stave off an eviction, or of a community struggling with gentrification and displacement. The politics of housing in the state also sometimes feel intractable: cities continue to rely on exclusionary zoning tactics to thwart new supply, while developers, labor unions, NIMBYs, YIMBYs, and tenant advocates all stake out opposing views of what is needed to solve the crisis. All of this contributes to California’s future housing trajectory feeling grim.
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.
