Zoning and Immigration Restrictions

The impact of California’s high housing costs on refugees has rightly gotten some play in the media lately. CALmatters ran an article detailing the challenges faced by people trying to earn a living in a new country with high rents looming over their heads.

The inability of California to welcome more refugees due to high housing costs highlights that the crisis arises not just from inadequate tenant protections, but from a lack of supply. Tenant protections and rent stabilization will help people who already live here, but don’t do anything for people who are trying to escape desperate situations elsewhere.

Many Californians like to think of our state as welcoming to refugees, but we can’t fulfill that ideal unless we build more housing and make the state more affordable. And the local policies that prevent California from being affordable spring from the same poisoned mindset as the Trump Administration’s immigration policies, devised by Steven Miller, a SoCal son we’d all like to disown.

Research by Jessica Trounstine, associate professor of political science at UC Merced, finds that whiter neighborhoods are more supportive of restricting development, and that cities that were whiter in 1970 are more likely to have restrictive land use in 2006. As racial resentment drives whites fearful of demographic change to support Trump’s cruel practices and proposed cuts to immigration at the national level, so it drives the push to restrict development at the local level.

The research concludes that policies restricting development are effective at maintaining segregation. They are, in effect, border walls put up at the edge of neighborhoods. So if we want California to be welcoming to refugees, we need to change the exclusionary land use policies that were enacted to keep people out.

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South Bay Boulevards

Though I live in Glendale now and have written extensively about Palms, one of my favorite parts of LA County is the South Bay. Development and land use patterns in this collection of under the radar cities like Gardena, Torrance, and Lawndale are genius – though perhaps we should say accidental genius.

For readers outside of LA, the South Bay is roughly the area south of the 105 and west of the 110 – though Carson extends east of the 110 and is South Bay in my mind, and the portions of the “beach cities” (El Segundo, Manhattan Beach, Hermosa Beach, and Redondo Beach) west of PCH may or may not be “South Bay” depending on how you conceptualize things.

This area was one of the first prime areas of post-war suburbanization in LA, and has the features you’d expect of such a place: great climate (what people usually think of as SoCal’s climate), and centrally located with great access to both employment and amenities like the beach. In fact, the South Bay is the Boomer-era mythos of SoCal, created and popularized and immortalized by the Beach Boys out of Hawthorne.

So what do I love about the South Bay? Its anonymous and eponymous boulevards, and the surprising amount of low-rise density like dingbats and two-story podiums, that create wonderful diversity and make it possible for many, many different people to live life and pursue their dreams. One theme of this blog has been a celebration of Palms, but much of the South Bay is Palms on a grander scale. And as Palms is one of the most diverse neighborhoods in LA (and especially on the Westside), the South Bay is one of the most diverse parts of LA.

Start at the beach and cruise east on any of the South Bay’s boulevards and just take it all in. The diversity of these cities is reflected in the diversity of business establishments you’ll see as you go. And you can go for miles and miles. I recently got the opportunity to do this on Rosecrans Ave and on Manhattan Beach Blvd, and earlier this year I did it a few times on Artesia Blvd and Western Ave. In the past when I lived in Palms and my partner lived in Torrance, I spent a lot of time on Hawthorne Blvd and Torrance Blvd. But you can picky any of them and have the same wonderful experience. I love how far you can go and go and just keep going, looking at each small business and each apartment building, each one representing a person getting to try to make their own way in Los Angeles.

Naturally, the South Bay is poorly understood, its density overlooked by aesthetic and urbanist observers who focus on its auto-orientation and single-family neighborhoods. To them, I would say, I implore you – look at how many people the South Bay is working for, and ask yourself, what can we do to make more places like the South Bay? And what can we do to make the South Bay work better for more people, and make sure lower income people don’t get priced out?

So why did I call the South Bay accidental genius?

Well, if you go back to the history of housing and development in Los Angeles between 1945 and 1965, it’s pretty clear that they were not trying to create medium-density integrated suburbs. Pretty much the opposite, in fact. They created land use patterns that enabled the South Bay’s diversity by accident, despite their efforts to the contrary, and you could probably interpret some of LA/OC’s suburban fringe development between 1965 and 1990 as an attempt to “fix” what didn’t work about those efforts.

Looking at the South Bay’s land use patterns, what the planning was, what the intent was, and what actually happened can provide good lessons on what we should do with current land use planning. It would not be good to say we want to “go back” to the planning regime that created these land use patterns, because that regime was discriminatory against people of color. But in the post-war era, many schemes were tried to make and keep neighborhoods white, and some of them “worked” much better than others. Very low density schemes produced neighborhoods that today, 70 years later, are much whiter than the high density schemes.

No one should be under the delusion that exclusionary zoning is what caused racism; the causation, of course, runs in the opposite direction.

However, you also should not be under the delusion that undoing the exclusionary zoning policies that most successfully perpetuated racism and segregation would not help, or that it would not be worthwhile on the merits. We have enough history to know which policies keep neighborhoods segregated, and we ought to make those policies nothing but history. The South Bay may not have evolved in a way originally envisioned by post-war suburban planning, but it offers many ideas on land use policies that could be incorporated into a vision for a denser, more progressive, more inclusive Los Angeles.

Missing Middle Musing

I recently had the opportunity to travel to both Philadelphia, a city I don’t know very well, and Boston, a city I lived in for 12 years before moving to LA in 2012. In Philadelphia, I was fortunate enough to have @riccoja show me around Northern Liberties and Fishtown; in Boston, I spent a lot of time walking around the city looking at how things had changed (or not changed) since I left. (I also visited DC, but really just the tourist thing and didn’t get to see much new development.)

I came away from my trip with two main thoughts on housing in Los Angeles:

• We have systematically made it harder and harder to build missing middle (link) housing in LA. This is unfortunate, because I don’t think we can solve the housing crisis without building a lot more of it.
• The homelessness crisis is the most visible and critical facet of the housing crisis. Even being away for just 10 days, it was shocking how bad things are in LA when I came back.

Row Houses and Ridiculously Narrow Streets

For historical reasons I don’t have the time to research or go into here, Philadelphia seems to have a strong development cultural emphasis on single-family housing, regardless of how small the lots or buildings are. Philadelphia is also cool with really narrow streets. This leads to a pattern of narrow streets with narrow two to four story row houses fronting right on the property line.

Unlike other American cities, it’s still possible to do development like this in Philadelphia, and there’s a ton of infill row house development in Northern Liberties and Fishtown. The only other place that allows townhouses like this is Houston, I think, and it’s certainly not on streets this narrow!

My biggest impression from Philadelphia is that LA needs to unleash this type of development. The virtues of small scale development like this are many:

• It doesn’t require lot assembly, so there’s no delay for that and never any need for redevelopment agency shenanigans.
• It’s cheaper per unit to build, because there is less common area and amenity space than a large building.
• It’s cheaper per development to build, which means a larger number of people can build them. This both increases housing supply and increases community input into how development occurs. It also makes it more likely that small local developers, who know the community well, can participate.
• It’s less complicated to build than a large building, which means a larger number of contractors and construction workers can be employed in its construction. This increases employment opportunity and lowers costs.
• It’s faster to build than a large building, which means it can respond to housing needs faster than large developments. This also lowers costs because carrying costs are directly proportional to the time between when the developer buys the lot and when the building opens.
• It creates small retail spaces, which increase the diversity of local business and creates opportunity for a wider range of small entrepreneurs.

All of this means a faster, larger, and cheaper response to the need for new housing. This is both good on the merits and good politics, because slow and expensive responses to the need for housing lead to more widespread disillusionment and agitation for radical action.

New Districts and Static Neighborhoods

In contrast, development in Boston seems to be focused in a handful of new districts: the Seaport, North Point, Harvard’s campus in North Allston, Station Landing, the area near North Station vacated by demolishing the Central Artery, Assembly Square, and Kendall Square. There was a little infill development (a couple buildings in the North End, a house in Brighton Center whose architecture my friends complained about) but it seemed to be the exception.

Now, there’s nothing wrong with replacing parking lots and abandoned rail yards with new neighborhoods. In fact, it’s pretty great. But it almost necessarily involves a lot more central planning from the city, big institutional developers, and big institutional finance. That means projects that move much more slowly, have a higher cost per unit, and are less likely to happen before the next market downturn. North Point is great… but it was one of the first projects I worked on when I lived in Boston after graduating, and it’s just getting built over a decade later. The same could be said for Assembly Square, Station Landing, Harvard’s campus, and the Seaport. These projects will happen when demand is high enough but they take a long, long time.

My friends in Boston are white collar professionals and public employees. They’re not housing insecure by any means. But they didn’t hold new development in Boston in high regard, and it’s somewhat understandable. It’s not really for them; it’s for people just a little higher up the income ladder. Comparing to Philadelphia, I can’t help but think that Boston would be better off if it were also building a crap load of small scale development like townhouses and small apartment buildings in places not quite as central as the new districts but still T-accessible.

Golden State Squalor

Returning to LA, I was more convinced than before that we need to allow more missing middle development here. If it were up to me, I would rezone every RD, R2, and R1 zone in the city to something like an “RD1.2” or “RD1” townhouse zone, with townhouses allowed by right with a minimum lot area of 1,200 SF or 1,000 SF. (I’d also eliminate parking requirements and reduce the impact fees.)

But more immediate, and more appalling, was returning to LA and walking around downtown, bearing renewed witness to the tide of human misery that floods downtown every night, retreating east of the double yellow line on Los Angeles St and south of 3^rd St during the day, a thousand sidewalk washers in its wake.

I didn’t notice the absence of homeless on the east coast, but I noticed the presence when I got back, and it’s a complete embarrassment to LA and California that a state so rich should have so many people living on the streets. The numbers are overwhelming, the state of public health on the streets is atrocious, and yet still, proposals to relieve the situation face NIMBY opposition.

It’s hard to put into words how bad things are in California compared to other US cities, so let me not mince words in my final thoughts. We need to be out there trying to do something every day to fix this problem. And if you oppose new housing, especially permanent supportive housing or temporary shelters for the homeless, you are a bad person, and I hope you feel bad about yourself, because you should. I’m not a religious person but if this crisis doesn’t move you, by god, what would?

Impact Fees Are Bad, Taxes Are Good

One of the more nefarious impediments to housing construction in California, in my opinion, is the proliferation of impact fees on new development. Impact fees first became widespread in the 1980s, a consequence of Prop 13 bankrupting local governments’ ability to pay for public improvements like parks and schools. The state allowed cities and counties to start charging community district fees, also known as Mello-Roos fees, whereby each unit in a new subdivision pays a fixed amount to cover the construction of new public facilities. These fees only apply to new construction in a particular district.

Other development impact fees, charged on all new construction in a city regardless of location, have also been expanding. For example, the City of LA charges a park (or Quimby) fee on all new construction to pay for new parks in the city, and recently enacted an affordable housing linkage fee, where all new construction pays into the city’s affordable housing fund. Impact fees are popular among conservatives and progressives alike, the former because it keeps taxes lower on a majority of voters, and the latter because it symbolically punishes people that progressives don’t like, such as developers and the people who can afford new housing.

Unfortunately, impact fees are bad. They are a regressive and inefficient way of funding improvements, and they unintentionally hurt many people as a result. People who support progressive outcomes should oppose impact fees and support general broad-based taxes instead. Let’s take a closer look at why.

Impact fees often form a large portion of the cost of new housing. For example, a recent study of impact fees found that some cities, such as Irvine and Fremont, have impact fees of over $60,000 per multi-family unit. That translates to about $450/month in higher rent  — just to pay for impact fees.

Progressives tend to not care about this, because they view these taxes as falling on big bad developers and on the people rich enough to afford new housing. However, by raising the price of the cheapest new construction, it enables landlords to raise rents to higher levels without any competition from new construction. Since the vast majority of housing is existing units, and there are relatively new units, impact fees are in effect taxes on renters for the primary benefit of landlords.

Here’s a visualization. Supposed that every year, you have one new housing unit built for every 50 existing units (an optimistic assumption in California). For simplicity’s sake, assume all housing units are equal, and the city has 10,000 housing units. If new construction rents for $2,000/month, prices for existing units will not rise higher than $2,000/month because they will be undercut by new construction. This year, we would expect 200 new housing units to be built.

Now, let’s impose a $20,000/unit affordable housing impact fee on new construction. The cheapest new construction will rent for now is about $2,150/month. That allows landlords to raise the price for existing units to the same level. The net effect is that we raise $4,000,000/year for affordable housing construction (enough for about 8 units at California prices) and we increase landlord profits by $18,000,000/year ($150/month x 10,000 units * 12 months/year). So our “impact fee” is really a 7.5% tax on renters, and we give over 80% of the revenues generated to landlords. Is this really what we wanted to do?

A better approach would be to enact a much smaller tax on everyone that would generate the same amount of revenue. In this example, a 1.67% tax on rent on all units would generate the same amount of money for affordable housing, and none of the money would go to landlords.

Of course, having made it clear that the cost is actually being paid for by renters, the next logical question is why we should be taxing housing in this way at all. Now, this model is clearly an oversimplification; dynamic effects are hard to predict, but it stands to reason that at least some of the cost will effectively be paid for by people selling land, since higher costs of new construction will make people less likely to build new housing, lowering the demand for land. And taxing all units does not lead to the perverse outcome of rewarding landlords for doing nothing.

But it is still logical to conclude that if you increase taxes on new housing, the cost of housing will rise. It is not revolutionary economics to say that if you want more of something, you shouldn’t tax it. Increasing the cost of new housing during a severe housing shortage is just poor policy.

Really, tying taxes or fees for public improvements to new construction in this way is not progressive at all. There’s no reason funding for affordable housing has to come from anything to do with development. The progressive way to do it would be to tax things that are bad and use the revenues to fund things that are good. A carbon tax whose revenues are used to develop affordable housing would be great. So would a congestion tax used to develop affordable housing. A broad property tax that applies to everyone would also be fine. But impact fees should be avoided if possible, unless the goal is increasing landlord profits.

How Downzoning Kills Affordability & Drives Gentrification: Sunset Junction Edition

We often talk about zoning in the abstract, making it hard to understand just how restrictive zoning destroys affordability. We looked once at how downzoning in Venice is resulting in multi-family buildings being converted into single-family homes, causing a decrease in the housing supply and evictions of current residents. Here’s another example, this time near Sunset Junction.

The project in question is a small lot subdivision. While these projects can be a good way to increase the housing supply, this is an example of the policy going wrong. The project would replace 10 existing units (one single-family home, one fourplex, one duplex, and one triplex) with 14 small lot houses. This is a net increase in housing supply, but all of the existing buildings were constructed before 1978, so 9 of the existing units are rent-stabilized. Though it is much less common than people think, this is a pretty clear case where new development is destroying rent-stabilized units and replacing it with new housing that the current residents won’t be able to afford.

So where does zoning come in to this? The property is currently zoned RD2-1VL, having been downzoned from R4-2 in the first wave of NIMBY downzonings that swept LA in the late 60s and early 70s. This is an 80% downzoning in dwelling units (DU) allowed. The property totals just over 30,000 square feet (SF); here’s what could have been built under each zoning designation, along with what would be possible under R4-2 with a density bonus.

Here’s the result of downzoning in Sunset Junction: the only project that can be built is a project that might displace low-income residents. Under the previous R4 zoning, with a density bonus, a project could have been built that would result in no net loss of rent-stabilized housing – perhaps an agreement could have been negotiated to allow the residents of the 9 existing rent-stabilized units to remain in the new dedicated affordable units at their current rents. The loss of rent-stabilized units and displacement are not an accident, they are exactly what we have stated we want to happen with our current zoning policies. Note also that the project that will be constructed is much more auto-oriented than what would have been built under R4 zoning.

To see how upzoning can help, consider that this property is also in the Transit Oriented Communities (TOC) Tier 1 area. Here’s a comparison of what’s possible under the current zoning and the previous zoning using a TOC bonus.

Using a TOC bonus, even in the lowest tier, would result in enough affordable units to more than replace the existing rent-stabilized units, resulting in an increase in the affordable housing supply.

The people who downzoned LA in the past, and are trying to downzone it again, got what they wanted. They got a city that is more auto-oriented with fewer apartment buildings. They didn’t care about affordability 40 years ago and despite any claims otherwise, they don’t care about it today. No matter who is going to build the housing, overturning the zoning restrictions that the opponents of new housing put in place is a critical first step.

The Same Challenges Face All Solutions to the Housing Crisis

In the wake of the failure of SB 827 to make it out of committee, there has been a lot of discussion of how cities should grow, and a lot of social media ink spilled over who is to blame for the housing crisis, to put it mildly. I think it’s useful to take a step back and remember what the larger state of play for housing in California looks like.

SB 827 Did Not Fail Due to Left Opposition

Like many people in YIMBY groups, I was disappointed that left groups like the Democratic Socialists of America (DSA) chose to not support SB 827, even after it was amended to include many tenant protections that do not exist today. This seemed like a departure from the DSA Los Angeles (DSA-LA) stance on Measure S, which held that they “distinguish between developers and development” and that existing restrictions on apartment construction, which would have been undone by SB 827, were “pushed by wealthy property owners who did not want apartments built in their neighborhoods.”

On the other hand, it perhaps should not be too surprising that socialists would not support a bill that largely depends on private construction. The DSA-LA endorsement of No on S also stated that the housing crisis “must be understood through a critical lens as an outcome of capitalism,” a lens that I certainly disagree with, but would likely lead one to oppose SB 827.

However, the DSA and similar left groups are relatively minor players in state politics. YIMBY groups were the force behind the election of one state politician, Senator Scott Wiener; left groups have elected none. The driving force behind the failure of SB 827 was opposition from the same players that have thwarted both market-rate and public housing construction in middle class and upscale neighborhoods for decades.

Opposition from Entitled Incumbents is Still the Problem

The sniping conversation between YIMBYs and leftists is unproductive, and probably counterproductive, but mainly irrelevant.

The Los Angeles City Council voted to oppose SB 827, and they didn’t do it because they decided they like the People’s Policy Project plan for social housing better. Mayor Garcetti initially said he would support the bill if it included tenant protections and was then forced to flip flop when Senator Wiener added those protections, saying that apartments would look out of place in single-family neighborhoods. The council and the mayor didn’t decide they want social housing in single-family neighborhoods, they decided they want no new housing there.

People from the most insufferably entitled jurisdictions in the state, such as Beverly Hills Vice Mayor John Mirisch and Marin County columnist Dick Spotswood, turned up to oppose SB 827. While they are happy to cloak their opposition in social justice rhetoric, (hopefully) no one is under the delusion that they are going to support a social housing program instead.

Overwhelmingly, the opposition to new housing of all types comes from these well-off communities. They fought public housing in the brief era that the federal government tried to build it, and they fought market-rate housing when the private sector tried to build that. Overcoming this widespread opposition remains the primary challenge in solving the housing crisis, no matter what solution is pursued.

This reality is strangely absent from some takes on the crisis, such as Steve Randy Waldman’s long-standing position that YIMBYs are bad and we should solve the housing crisis with “new towns” such as are built in Singapore (or Hong Kong or other Asian countries). Waldman argues that rather than adding density to existing neighborhoods, we should “[build] out extremely dense but nevertheless green, livable, and attractive ‘new towns’… and when we run out of space for those, new ring cities?”

Leaving aside Singapore’s dual housing market (subsidized for citizens, very high rents for immigrants), where exactly would these new towns be built in California without opposition? Like, name me one site in the Bay Area or LA where this could happen without opposition! In fact, the status quo forces the construction of new towns on the suburban fringe, for example Winchester Ranch or Mountain House or Ontario Ranch. I would love to drop a Hong Kong style new town on top of a greenfield high-speed rail stop in Palmdale. The reason these places are not denser than they are is the same reason that Cheviot Hills doesn’t get denser than it is.

Building Housing Costs a Lot of Money

Moving past local opposition, another common problem to all types of housing is that it is expensive to build. The cheapest new market-rate construction in California, in places like the Victor Valley and the Central Valley, starts around $200k, and in LA County, it’s around $450k. Non-profit affordable housing builders face similar costs. Building even one unit of housing takes a lot of capital.

Meanwhile, California’s housing shortage, built up over decades, is huge. We need hundreds of thousands of new housing units in LA County alone. At $500k a pop, half a million housing units in LA County would cost $250 billion. If you could lower it to $300k per house, that would be $150b. No matter who is building the housing – public or private sector – that’s a lot of money. Policies that reduce the cost of construction per unit, such as lower impact fees, low or no minimum parking requirements, higher density, and no minimum unit sizes, will help solve the crisis, no matter who builds the housing. In addition, allowing higher density in more places may reduce the cost of land, by increasing the supply of places you can build.

The People’s Policy Project proposal tries to circumvent this problem by suggesting that the first round of social housing be built on land that cities already own, and then use the profits from those buildings to acquire more land and construct more social housing. Lower cost of land would benefit this proposal as well, but the immediate problem is that most cities don’t own enough vacant land in the right places to make this work. The mistake is the assumption that most profits are going to developers, when most likely the profits are going to incumbent land owners.

Amenity Effects are Real

The concerns of neighborhood activists that new construction might displace existing residents are not unreasonable. Amenity effects are real. If a new building with a Whole Foods in it opens up, it is a signal to people that shop at Whole Foods that this is a neighborhood you might want to live in. Things that make a neighborhood a more desirable place to live make more people want to live there. There’s a reason gentrification always seems to keep moving one more neighborhood to the east, from Silver Lake, to Echo Park, to Highland Park, to Lincoln Heights.

At the same time, the status quo is also not working at preventing gentrification. And the challenges there are similar for all types of housing. Lowering the cost of building new housing would decrease the price difference between new housing and existing housing, which should help, and it would help no matter who builds the housing.

Whether it’s market rate or social housing, the amount of new housing built in a neighborhood is likely to be small relative to the amount of existing housing, and the existing housing is where the concern lies. New housing, even under the People’s Policy Project Plan, is likely to have higher rents than existing housing because it hasn’t had time to filter. Either way, the problems experienced by existing low-income tenants in existing housing will need to be addressed with stronger tenant protections.

Agglomeration Effects are Real

Another take that seems to have proliferated recently is that instead of having more people move to California, we should make other places more prosperous. Kevin Drum laid out the case for this in Mother Jones.

As someone with family roots in Appalachia, let me just point out that if making other places more prosperous was as easy saying, “Siri, fix the economy of the coal region,” someone would have done it already. After decades of decline, the I-81 corridor has recently seen some growth due to e-commerce entities like Amazon killing malls and needing huge distribution centers. But it’s certainly not anything that economic planners saw coming.

I will also point out that the people pitching you this idea never think of themselves as the one who is going to have to leave California and move somewhere else, and they’re probably not telling you that you will have to leave either. It’s similar to the “don’t tax you, don’t tax me, tax that guy behind the tree” theory of taxation. It’s worth stating out loud what the actual policy would be here: obtain political power and use it to either force people out of a city or prevent new immigrants from moving in. The people who would lose would be the people with the least political power. We have a status quo very much like that today, and I don’t care to trade it for a similar situation but with different people losing.

Now, there are some things we know are good for your local economy, for example, having a major state university located in your city. Sitting on top of giant oil and gas deposits seems to work pretty well too. But these are obviously not strategies that can be applied to every place. My impression is that it’s hard to know what places are going to grow and what places aren’t, and the right thing to do is create opportunity for everyone in the places that are growing. So no matter who builds the housing, we need to figure out a way to do it in growing cities and make it work for everyone.

Finally, this solution does nothing to address the concerns of gentrification. We already have de facto caps on the population of many cities in California. A growing economy makes people want to move to LA, and all a population cap would do is accelerate the displacement of lower income people.

Conclusion

Even though SB 827 failed to make it out of committee, it helped move the window on housing in California, which is a good thing. However, the political landscape has not changed much. The primary obstacles to new housing are the same as they were, and the bad policies that prevent new housing from being built are the same. Removing those obstacles and changing those policies will help – indeed, is probably prerequisite to – any housing construction program that has a chance of solving CA’s housing crisis. The sooner we can do it, the better off we’ll be.

Las Vegas is Good

Last weekend I ran a Twitter poll asking people if Las Vegas is a good city. The results were more or less what you’d expect from urbanist Twitter, with people saying Las Vegas is bad by a 3:1 margin.

Well, I’m here to tell you that Las Vegas is, in fact, good.

Las Vegas, as a very young American city (population was under 50,000 after World War 2), has a physical form that doesn’t appeal to most urbanists or to many people in planning. Like many newer cities, it actually has fewer freeways than older cities of similar size. Las Vegas essentially has 4 freeways, the 15, the 95/515, the 215, and Summerlin Parkway; compare that to similar size metros like Kansas City, Cincinnati, Cleveland, or Pittsburgh.

What Las Vegas lacks in freeways, it more than makes up for in medium density auto-oriented suburban development served by very wide arterial roadways. This makes it easy to see the physical form of Las Vegas as a symptom of urban dysfunction, but this is a mistake. Like Los Angeles before it, Las Vegas is a successful city that creates opportunity for many different people, misunderstood because it does not look like older cities.

To start, I think we need to remember what a city is and what it does. A city is a place that attracts many different people of diverse backgrounds because of the economic opportunity created by having lots of people in close proximity. A larger population allows for increased economic specialization, higher incomes and standard of living, and greater freedom to pursue one’s dreams. It also allows for larger communities of immigrants and marginalized groups to form, creating the support networks needed for those groups to thrive and build the social power necessary to combat discrimination.

This has very little to do with urban form, transportation, or walkability. East of the 100^th Meridian, America has lots of places that are pretty walkable with pleasant mixed-use cores. I like to call them… towns. It’s perfectly possible to have a city that is dense and walkable, but failing at being a city because of economic stagnation or decline, and it’s also possible to have small cities and towns that are walkable but not growing very much. This is largely a separate question.

As a simple example of how successful Las Vegas is in allowing economic specialization, consider that Carrot Top has headlined a show at the Luxor since 2005. I submit to you that there is no other city in America, perhaps the world, where this could happen. While Carrot Top is perhaps the silliest example, Las Vegas has created tens of thousands of jobs for artists and entertainers – as of February 2018, almost 22,000 jobs, up 40% from the post-recession low and doubled since 1990. The percentage of jobs in arts and entertainment in Las Vegas is 2.22%, comparable to Los Angeles (2.40%) and about twice that of Houston (1.12%).

So, Las Vegas has created opportunity for thousands of people in that industry, enabling them to settle down in one place, rather than have to travel from city to city to perform. In addition, the hospitality industry accounts for almost 30% of jobs in Las Vegas – almost 300,000. So Las Vegas has created a ton of working class employment as well.

Finally, Las Vegas has remained much more affordable than California, especially coastal Metros. The cheapest new homes in the distant reaches of the Inland Empire like Victorville and San Jacinto are about $250,000, over 60 miles from the city center. In LA/OC excluding the Antelope Valley you’d be lucky to find anything new for under $500,000. Meanwhile in Las Vegas you can get new construction much closer to the city center, about 10-12 miles out, for $200,000.

Given all of that, it’s no surprise that Las Vegas is a major destination for domestic migration out of southern California. Let’s look at some domestic migration data for SoCal to Las Vegas, and also to Phoenix, another major destination for domestic migration. Here’s net migration to Clark County (Las Vegas) and Maricopa County (Phoenix). All data is based on the 2011-2015 ACS.

Los Angeles County provides a disproportionately large amount of SoCal’s net migration to Las Vegas, perhaps due to the synergy between the entertainment industry in the two counties. On the other hand, Orange County is a disproportionate amount of SoCal’s net migration to Phoenix.

Let’s dig a little further into the migration data by age and by race, which I think helps make the case that Las Vegas is good.

Here’s four graphs, showing migration by age for each of the four SoCal counties (sorry, San Diego, get your own blogger) to Clark County.

Los Angeles County loses population to Clark County for every age group except 18-19, probably representing college students. The biggest age cohorts that move from LA to Las Vegas are 5-17 year olds, 25-29 year olds, 45-49 year olds, and 20-24 year olds. This overwhelmingly represents young people and families that cannot afford to live in Southern California, and are finding opportunity in Las Vegas instead. For Orange County, it’s people in their 20s and their 50s moving to Las Vegas. For the Inland Empire, migration is much more balanced due to the lower cost of housing in the IE, with Riverside County actually gaining children and more or less breaking even overall. San Bernardino County loses children and young people at almost the same rate as LA County, but gains people in their 30s.

For comparison, here are the same graphs for Maricopa County.

Again, LA loses many children, 20-somethings, and 30-somethings to Phoenix, while gaining a few college students. Like with Clark County, the IE sees more balanced migration but still overall loses population to Phoenix.

While trends may seem broadly similar based on age, Clark County appears to be doing a better job of creating opportunity for a more diverse group of people. Here’s migration by race from LA County to Clark County and Maricopa County.

Net white migration and net black migration from LA County to Clark County was practically the same, just over 2,000 each, despite whites being 52.4% of LA County’s population and blacks being only 8.6%, with each group making up roughly 30% of LA County’s net migration to Clark County. Asians, who are 13.8% of LA County, account for 20%, with other or 2+ race people making up the remaining 20%.

Meanwhile, whites made up almost 75% of LA County’s net migration to Maricopa County, with blacks being 18% and Asians 12%. Maricopa County actually lost other race and 2+ race people to Los Angeles County.

I’ll leave the reader to speculate why Phoenix attracts less diverse migration than Las Vegas, but it certainly appears, abstractly anyway, that Las Vegas is doing better at creating opportunity for more people. Note: I certainly do not intend any of this to gloss over or ignore the fact that African-Americans in LA County have paid the worst price for the loss of working class jobs and rising rents in low-income communities. The intent here is to compare places that people are moving to.

Here are the same graphs for the other three SoCal counties.

Las Vegas is, without question, very auto-oriented. Its one attempt at fixed guideway transit, the monorail, did not exactly deliver inspiring results. Its pedestrian infrastructure is savagely minimal off the Strip, while the Strip itself is a mix of throngs of pedestrians violating punishingly long light cycles and traffic engineering dystopia where all pedestrians are forced to cross on bridges. Its downtown revitalization project is single-handedly run by a tech mogul with some unusual business practices. No one is looking to Las Vegas for urban design ideas.

And yet, Las Vegas is pretty clearly succeeding as a city. California cities would do well to start measuring their success by how many people they create opportunity for, rather than how high they can drive housing prices.

Company Towns Are Bad

This is one of those things that should be surprising to even have to mention, but the concept of company towns pops up from time to time in discussions on California’s housing crisis, so here’s a summary of why they are bad.

The specific proposal often takes different forms, but they are all variations of Gilded Age company towns (or Communist countries with internal movement controls if you like):

• Workforce housing: because California’s housing crisis is so bad it’s impacting middle class professionals like teachers, some liberal communities have begun to feel embarrassed that people with “respectable” jobs can’t afford to live in the city where thy work. This generosity rarely extends to people who do things like work at 7-11, who are expected to have to endure long commutes as the price of their insistence on working in the service industry.
• Company housing: misdirected anger at the tech companies that are a big part of California’s economy results in calls for these firms, which certainly have the profits to do so, to build housing for their employees to take pressure off the local housing stock.
• Tying new office development to new residential development: this is a proposal to force cities to permit enough housing to accommodate the employees in new office space that they permit.

The first two proposals are similar enough to discuss as one, with the main difference being that in the first the government provides housing for its employees, while in the second the private sector provides housing for its employees.

These proposals are bad because they demote the employees to second class citizenship, where the ability to secure housing is contingent on employment with a single employer. It is not hard to see how this will easily lead to employees surrendering their rights and not speaking out against institutional problems, because of the fear of losing their housing. It also implicitly creates a third class citizenship, occupied by the elderly, the unemployed, government employees whose jobs are not deemed important enough to get them housing, and people employed by businesses that do not have the huge profit margin needed to provide subsidized housing.

Simply put, people’s ability to find housing should not be dependent on them staying at the same employer.

The third proposal may seem appealing because it targets recalcitrant municipalities like certain Silicon Valley cities that permit new office space and see a large amount of job creation, but allow almost zero new housing to be built. The idea here is to force these cities to build more housing, to relieve pressure on the housing stock in nearby cities that have not had the same amount of job growth.

The unintended consequences of such a policy are likely to be bad. The recalcitrant cities are just as likely, if not more likely, to respond by stopping or slowing office development. This will lead the high-profit industries to outbid small businesses and lower margin industries for office space, hurting the region’s economy and the people who work for those smaller or less profitable places. If we want to make cities that don’t build enough housing build more, we should just do that and not make it any more complicated than it needs to be.

History suggests that jobs-housing balance can only be achieved on a regional level. While coastal communities like Santa Monica and Venice complain about too much job growth (oh, the entitlement!), cities towards the edge, like Santa Clarita, Palmdale, and Moreno Valley worry about a jobs-housing imbalance in the opposite direction – too many houses and too few jobs. Employment always seems to like to concentrate to a greater extent than housing, perhaps because the efficiencies achieved are greater. It seems likely that we will always have more jobs than housing near the employment centers and more housing than jobs on the edges. In addition, policies to try to achieve jobs-housing balance at a local level ignore the fact that people changes jobs from time to time, and many households have more than one income earner.

There are a few places where company towns or workforce housing make sense. These are generally isolated towns where the economy is dependent on one enormous employer or one dominant sector. Examples are mountain resort towns, island resorts, and remote mining towns. Resort towns often feature a large number of second homes, owned by people with much greater means than local service industry workers. They may also face serious natural or imposed constraints on development, such as very limited space suitable for building, limited water, or business development plans that place a high priority on keeping the town to a small size or maintaining the appearance of natural surroundings.

These unusual circumstances certainly do not apply to any city in California (except maybe Avalon due to water availability, a desalination plant would be expensive for a city so small). People in California already face precarious housing situations due to the high cost of owning and renting; many would have a hard time keeping their housing upon loss of a job. The solution is to make housing cheaper for everyone in California and reduce people’s dependence on any particular employer for housing, not increase it.

Zoning Capacity Needs to Be Much, Much Higher

If you follow on Twitter, you’ve probably seen the graph below showing how much building capacity was lost due to downzoning in Los Angeles. The number of people that could be reasonably accommodated was reduced by more than half.

When pro-housing advocates talk about the need to upzone, one common response from opponents of development is that there already are underutilized parcels that have fewer housing units than permitted by zoning. Why, they ask, is upzoning needed if developers aren’t even using existing parcels to their full potential.

It’s not hard to understand why upzoning is still necessary on a technical level. The microeconomic decisions of many actors will mean that a city is always below its zoned housing capacity. In many instances, owners are satisfied with the buildings already on their property, and don’t want to rebuild. In many other instances, there may be available zoning capacity, but not enough to make it profitable to reconstruct. For example, a lot might have 4 units on it and be zoned for up to 5 units. That property will not be redeveloped until prices get extremely high. Similarly, LA has many one-story retail buildings on C2 commercial zones, that could be redeveloped to R4 density (1 unit per 400 SF lot area) but with a max FAR of 1.5. It’s not worth it to demolish a rent-paying commercial structure for so meager a residential FAR.

Applying this logic to other common human necessities reveals on a much more fundamental level how weak the arguments against upzoning due to available capacity are.

For example, when you go to the supermarket looking for bananas, you don’t expect to be told that they have plenty of canned soup and won’t be ordering any more food until those are used up. People like to cook and eat many different things, and reasonably expect the supermarket to offer a wide variety of things to buy. How dull a culinary world would it be if we produced just enough food for people to survive and nothing more? If a farmer goes to plant kale, we don’t stop them from doing it because we’ve already got plenty of soybeans.

When you go to buy clothes, you don’t expect the retailer to have only one outfit, and told to take it or leave it. People like to wear lots of different kinds of clothes. How dull would the world be if everyone had to wear the same thing? Or consider a bookstore. Would you be satisfied if you went to Amazon and they only had 100 books, and weren’t planning to order any more until those were gone?

Likewise, people need a huge variety of buildings in cities to thrive. Providing people with more options creates greater opportunity for them to live their lives and pursue their dreams. A city that is zoned to allow barely enough housing is going to forfeit an enormous amount of human spirit and dynamism, in addition to burdening many of its residents with high housing costs. Zoning needs to allow people the flexibility to grow and try new ideas. In SoCal that means we need our zoning capacity to be much higher than it is today.

Are Suburbs Triumphant?

In a recent post, I speculated that suburban development in the IE might be on the rebound after a decade of slow housing construction. Other cities, especially in the Sunbelt & Texas, have reached their pre-crisis housing output.

After the financial crisis, there was a moment when urban counties were growing faster than suburbs, and pop wisdom held that suburbs were dead and people were returning to cities. This was always suspect, because severe zoning restrictions were clearly going to make it difficult for many people to do so. Now, though, with suburban construction picking up and surveys consistently showing that most people want to own their own single-family home, it feels like the pendulum of pop wisdom has swung too far in the direction of suburban triumphalism. So let’s look at a few ways that post-crisis suburbanization is different than the pattern that had held since World War 2.

Suburbs Are Back, But They’re Not the Same

Like an athlete returning to play after a serious injury, the suburbs don’t have the same range of skills they once did.

One of the most obvious ways suburban development is different is a lack of golf course development. When I worked in highway design, we did a fair amount of land development work for new residential projects, including communities centered around golf courses. Nobody is building golf course development now; the number of courses in the US has been slowly declining. The decline has created a desire for infill development in some places; for example, Rancho Cucamonga is allowing housing to be constructed on a former course.

Another obvious difference is the lack of new commercial construction. Whether it’s due to oversupply from before the crash or the increasing impact of online retail, as of a few years ago, no new enclosed malls had been built since before the financial crisis. (I tried to find updated info but couldn’t.) Mall vacancy was very slow decline after the recession and has actually ticked up the last couple months. Since many suburbs depend on sales and property taxes generated by commercial development, the lack of growth in retail space strains municipal budgets.

Meanwhile, while some cities have recovered, national housing production remains at historically low levels, including for single-family housing. Some fast growing cities, like Atlanta and Phoenix, are still not producing as much housing as they once were, despite increasing prices. As Calculated Risk frequently notes, suburban builders are not producing entry-level homes they way they once did.

The Desire for Cities is Real

While the increase in desire to live in cities, or at least walkable neighborhoods and older suburbs close to cities, may have been overstated, it is nevertheless very real. On a recent walking tour of neighborhoods in East Hollywood, Silver Lake, and Los Feliz, someone mentioned this to me as one of the primary differences between now and the 1980s, and I think they’re right.

In the past, except for a few enclaves like Beverly Hills, Bel Air, and Hancock Park, people with the means to move to new development in the suburbs generally did so. For whatever reason, some people with money have decided they want to live closer to the city, and they are outbidding lower income people. Jed Kolko did an analysis in 2016 and found that people aren’t urbanizing, but money is. The result is that the people moving to new suburbs aren’t the wealthier people, at the same time that suburbs are not producing entry-level housing and are being squeezed by lackluster commercial growth.

We Still Need to Upzone Cities

A lot of new housing is going to be produced in suburbs, and we need to look at the reasons why it’s not as affordable as it once was. But that still won’t solve the problems in cities outlined above. People want to live closer to cities, and if we don’t build enough housing, somebody will lose out.