Outlawing Zoning Isn't Saving California

A sweeping law isn't meeting the soaring expectations of expanding housing supply.

In 2021, California passed a law known as SB 9, effectively ending single-family-home-only zoning. The effort was a bold move meant to address the daunting challenge of housing affordability in California. The argument was simple enough: California towns and cities impose zoning restrictions that make building homes either difficult or illegal. Single-family homes sit atop much of the valuable land that could be used to allow for more housing. Increase supply, and housing prices fall. Build enough supply, and California can dig its way out of a very deep housing shortage. To do that requires targeting single-family zoning, pro-development activists argue.

In 2021, the Terner Center for Housing Innovation conducted a study six months before the law took effect. While it’s estimated to potentially create about 700,000 new homes, the study says this increase is modest compared to the state’s vast housing needs, which run in the millions. Crucially, it indicates that much of this development would occur on parcels already viable under existing laws, such as those permitting accessory dwelling units (ADUs), meaning SB 9 might not significantly expand housing opportunities. Of course, SB 9 advocates argue that restrictive zoning laws drive high housing costs by limiting supply, but the study indicates that housing affordability is influenced by multiple factors, not just zoning.

Additionally, there were concerns that SB 9 could lead to overdevelopment, congestion, and primarily benefit developers rather than average Californians. The study points out that most new housing would be concentrated in high-cost areas because these locations already have high property values, making development financially viable. This means new units would likely be priced similarly to existing homes, failing to provide affordable options for lower-income individuals and potentially exacerbating existing housing inequalities rather than alleviating them.

In early 2023, a year after the law took effect, the Terner Center returned to assess its impact on boosting the state’s housing supply. Despite hopes that SB 9 would boost small-scale homebuilding, the report finds its impact has been limited. Data from thirteen jurisdictions show few applications for lot splits or new units, even in areas where such projects are financially feasible.

The report identifies several barriers to SB 9’s uptake, including high construction costs, lack of homeowner expertise, and restrictive local regulations like unit size and height limits. Additionally, many homeowners prefer building ADUs, which face fewer restrictions and offer more incentives than splitting their lot. Interviews with planners suggest SB 9 works better on larger lots. To improve SB 9’s effectiveness, the report recommends revising policies to make these projects more feasible and appealing.

The temperament of pro-development advocates ranges on a spectrum, but it’s hard not to observe the extent zoning has been cited disproportionately across economic journalism as the primary culprit of housing shortages and rising costs. Stories and commentary have proliferated in major publications about how incumbent homeowners are holding up progress. In some cases, they are, and these people need to learn how to adapt to the inevitability of changing cities. But now we have the largest case study of anti-zoning reform in the most populous state in the union. It reveals that the share of blame placed on existing zoning laws is misplaced. Earlier this year, more legislation was introduced to loosen environmental restrictions on new housing.

Why does this matter so much from a decentralist perspective? As I wrote in my recent opinion article in the Wall Street Journal, we’re in a populist era where the national parties, particularly the Democrats, are becoming ever-reliant on existential narratives to federalize more policymaking, including intimate local issues like land use. Cases like those in California can act — and almost certainly have indirectly acted — as a catalyst in shaping federal policy ideation. California will have to address the myriad of other factors that impede new housing, such as a shortage of construction workers and incentives for homeowners to cram more people onto their lot. While the authority California can wield over its local communities is far more in keeping with the spirit of democratic federalism than the federal government’s authority over the states, the ongoing story of SB 9 does speak to a clash between democracy and technocracy. For advocates of policy that bulldoze local governing boundaries, reflection prompted after flawed or underwhelming policies are implemented has more to do with tinkering the policy or even doubling down at the most detached level of government, rather than considering how that seizure of policymaking direction may have been counterproductive or not worth aggravating the state-local power balance.

In April, a Los Angeles Superior Court judge found the California law to be unconstitutional. “Because the provisions of SB 9 are not reasonably related and sufficiently narrowly tailored to the explicitly stated purpose of that legislation — namely, to ensure access to affordable housing — SB 9 cannot stand.” Judge Curtis Kin went on to write: “In order to justify SB 9’s interference with the municipal concerns of land use and zoning regulations, the Legislature cannot rely on a potential, eventual decrease in prices resulting from increased housing supply to demonstrate that SB 9 would increase the supply of affordable (i.e., below market-rate) housing.” The decision voids the law in five California cities and opens the door to further local challenges. However, the California legislature could simply amend the law to mandate low-income housing to address Kin’s criticism and almost certainly will.

It wouldn’t be correct to call SB 9 a failure. After all, the law has only been on the books for two and a half years. Perhaps there are many California homeowners unaware they can seize the opportunity to make money by building in their backyards. But all of this does raise a larger question: If a law doesn’t achieve its intended ends nor has the disruptive impact that its critics contend, does the existence of the law matter?

Symbolically, laws, despite their efficacy of impact, reflect societal values or government priorities. They might represent an opportunity cost, diverting resources from potentially more effective solutions. An ineffective law can also erode public confidence in government, shaping perceptions of competence. However, they may also serve as a precedent or framework for future actions that have unintended consequences.

For Californians, none of that may matter. In many respects, the beauty of democratic federalism is that it doesn’t need to, as Californians have 49 other options from which to choose.

In a political media dominated by national narratives, That Patchwork is the only newsletter about democracy from a decentralist angle. To preserve democratic pluralism means challenging the primacy of national narratives that presume central power knows best.