When demand exceeds supply, prices increase. To reduce the price of any commodity, including housing, you increase the supply. We have no control over the demand for housing. People will go where they want to go. Pulling up the drawbridge is not a winning strategy.
Government controls the supply of housing. Restrictive zoning is one of the most effective controls in limiting the supply of housing. Some examples:
• Zoning that limits the number of dwellings per acre.
• Minimum lot sizes that limit the number of homes that can be built in an area zoned for large lots.
• Height limits that reduce the number of units that can be built on a parcel.
• Restrictions on second dwelling units.
• Restrictions on building condominiums within certain zones.
• Green lines.
• Denial of mixed-use projects that include a residential component.
These and other examples enable local government to limit the supply of housing, which results in increasing the cost of housing.
Government also increases the cost of housing that is permitted to be developed. Examples include impact fees, inclusionary zoning fees, and building permit fees.
Policies adopted by local government that attempt to create more affordable housing but fail to do so (and actually have the opposite effect) are partly to blame for the lack of affordable housing. One example is inclusionary zoning. It has been tried for nearly 50 years, and has failed to produce any meaningful supply of affordable housing. Palo Alto pioneered that policy in the 1970s. Today Palo Alto finds itself atop the list of the most expensive, least affordable residential communities in the country.
In an article authored by law professor Larry Ellickson entitled "The Irony of Inclusionary Zoning," he demonstrated that inclusionary zoning works like a lottery. New housing developments are required to include an average of 15 percent of the new homes at prices well below the market level. The few people who qualify to purchase the affordable units are able to obtain affordable housing, while the other 85 percent of the market-rate buyers pay more.
Palo Alto is now proposing an impact fee of $50 a square foot, equivalent to $50,000 for one 1,000-square -foot apartment. The theory is that new housing somehow creates a need for affordable housing and therefore new housing should be charged a fee so that the fee can be used to subsidize affordable housing. Common sense tells us that you cannot make something more affordable by starting out to make it more expensive.
The cost of land is a large part of the cost of housing. The greater the number of homes that can be built on a given parcel of land, the lower is the price of the land component for each house. The original project proposed for Maybell was for a 72-unit project including 60 low-income senior apartments and 12 single-family homes. If the value of that property is $18 million, the land component price of each of the 72 homes would be $250,000. After the ballot measure to defeat the project passed, thus killing that project, subsequent proposals included, first, the 30-home project that would have increased the land component per dwelling to $600,000. The next proposal was for 23 homes, which would have increased the land component per dwelling to $782,000; and the final proposal, which is for 16 homes, increases the land component per dwelling to $1,125,000.
Height restrictions also limit the number of homes or apartments that can be built on a parcel of land, and force builders to maximize every square inch of land available, thus reducing opportunities for creating useable open space. Palo Alto is an example of what that leads to: a city that is on the way to becoming a 40-foot-high beige mesa.
Restrictions on building second units on a parcel limit the supply of affordable housing. If the city were to remove restrictions on second dwelling units, the result would be more affordable homes at no expense to taxpayers; and, they would be equally distributed throughout the community rather than being concentrated in a "housing project."
What is the single greatest barrier to achieving a meaningful supply of affordable housing? As the saying goes: "We have met the enemy and it is us." We decry the lack of affordable housing and bemoan the presence of homeless people in our community. But when it comes to affordable housing in our neighborhood, we sing a different tune.
The term "NIMBY" is not a pejorative term, although it is often used that way. It is a descriptive term ("not in my back yard") that expresses the feeling of a significant percentage of residents in any city. The term "NIMBYism" expresses a commonly held desire to protect one's "castle" by resisting any change in our neighborhood that we perceive as being against our interests or a threat to our peace and quiet to the value of our property. This is a natural instinct that many people find hard to resist.
Many folks, when their neighborhood or property is threatened in some way, will react as NIMBYs. Many communities are governed by city councils controlled by a majority of so-called "residentialists," many of whom react as NIMBYs when voting on new residential projects.
The path to affordable housing requires a change in attitude, changes in zoning ordinances, and the adoption of policies that offer incentives for the creation of new housing.