i have nothing to say about our current horrific national crisis that hasn't already been said. this post, about a dying shopping center, is my attempt to get my mind off it.
There's actually two real estate crises going on at once in California. There's the housing shortage, which everyone's painfully aware of - with homeless on the streets, and million-dollar houses in East Los Angeles. But there's also a the parallel crisis that's been festering with commercial real estate.
But first, let's talk about zoning law a little bit. Every last square inch of land in any California city is designated with a particular zoning type, which says what you can build on that land. If you've ever played SimCity, you know the most common divisions: houses in residential zones, offices/shops in commercial zones, factories and warehouses in industrial zones.
Some places, like Los Angeles, allow housing to be built in commercial zones, which is why the entire length of Wilshire Boulevard in LA has both apartment buildings and office buildings. But a lot of places don't allow residential buildings to be built in commercial zones at all. This rigidity has made a couple bad situations worse. By artificially limiting where where new housing can be built, it makes the housing crisis worse; it also means that dead shopping centers just sit there since the land can't be put to other purposes.
Commercial real estate was already in trouble pre-virus, because shoppers were switching to the Internet, and coronavirus only accelerated the process. If you drive down any major shopping street you'll see ghost towns as the shops and restaurants have slowly succumbed. Commercial offices have the same problem.
I'm going to use Woodland, CA as an example, a working-class suburb of Sacramento and my old high school rival. Like the rest of California, Woodland has a housing shortage. The average Woodland family makes $64,000 a year, but to afford a house you have to make $140,000.
Let's zoom in on the Woodland Crossroads shopping center. Woodland Crossroads is a classic example of an aging, dying strip mall. It was built in the mid-1980s, and even before the epidemic, the shopping center was struggling. The K-Mart and other major national retailers are long-gone, replaced with discount grocer Grocery Outlet and no less than three hardware stores. (When the shopping center got new owners three years ago, they advertised how the tenants were "online-resistant.") It sits on a 16-acre site - 5 acres of buildings, and 11 acres of parking lots.
The parking lot is generally pretty empty, because the shopping center is designed to handle a Black Friday crush at a K-Mart that no longer exists. This means there's a lot of land there that's just empty asphalt.
Let's say you keep the shopping center in place, and replace the parking lot with the kinds of small apartment buildings that are common in Midtown Sacramento, or Silver Lake in Los Angeles. At a standard density of 30 units per acre, that's 330 apartments - homes for 500 people - on the parking lot without touching the shopping center at all. Or, if you want to tear down the shopping center entirely, there's enough space for 480 units - enough to house 650 people.
There's only one problem with this: it's totally illegal. The area is zoned "community commercial," and it's illegal to build apartments there even though the shopping center is on its way out and the parking lot is sitting there, only mostly dead.
Because of the zoning, you're looking at a 2-3 year fight with the neighbors and the city council to get any apartments built on the site, which is an expensive and high-risk proposition. One shopping center's worth of apartments isn't that much in a vacuum - but when it's a process that repeats itself in every city in California, pretty soon you have the kind of generational housing crisis that we see today.
Fighting these battles block-by-block is a practical impossibility, so it's going to require changes at the state level. (Yes, there's a bill for that and it's called SB6.) In the real world, there's no real problem with allowing people to live near stores, or, heaven forbid, on top of stores, like people have done since time immemorial.