Bottom line, up front: the quota system has been as toothless as the old quota system, and more aggressive measures are needed to build more housing.
A few years ago, I was hopeful that the new state housing quota system would get LA's cities to get off their tuchuses and build more housing. I'm sad to say that I was wrong.
Let's go back a few years to 2021, where the state established that Greater LA needed 1.35 million new units between 2021 and 2029. The grand total permitted, halfway through this eight-year cycle, is 132,839, less than 10% of the need. Now, the quota system has separate tiers for rent-stabilized housing, and it's pretty damned dire - 5.6% of the quota has been met for low-income housing, and 2.6% for moderate-income, and 2.5% for very-low-income housing. The bulk of new construction has been market-rate, and there's nowhere near enough of it.
There are a few cities making good faith efforts to actually fix the crisis. Santa Ana, for example, gets a gold star for doing its part. But most cities, for better or for worse, have decided that that they continue with business as usual. West Hollywood has met 17% of its market-rate quota, and less than 1% of its new rent-controlled quota. Beverly Hills has made 15% of its market rate quota, and built exactly two new rent-controlled units in this time. Manhattan Beach has met its market rate quota, but they've built exactly zero new rent-controlled apartments.
The root causes have already been discussed at length on this blog - over-strict zoning regulations, city planning and building departments that make it virtually impossible to build anything new, chickenshit Sacramento politicians who aren't willing to actually enforce the law and crack down on cities that refuse to build housing, and so on. And, of course, there's the underlying issue of LA continuing to add new jobs far faster than it adds new housing - it's been a well-known fact since at least 2001. All those workers have to live somewhere.
So, let's talk about what reforms that have actually worked, and what we can extrapolate from this. The ADU one is the biggest one, and the reason the ADU reforms have worked is that they're bureaucratically simple. If you own a house, you can build an ADU there, full stop. The laws are relatively uniform statewide, and the laws are relatively simple to comply with, so you don't need an army of lawyers to navigate the bureaucracy. This is actually how apartment construction used to be - it's how LA got the cheap, adequate dingbat apartment that's practically everywhere in SoCal built in bulk. And that's the key - straightforward regulations that allow people to do copy-paste urban housing like we did in the old days.
Will the cities do this? I doubt it, because there have been no political consequences for violating the law. Technically, the State can void the zoning of cities that aren't pulling their weight. Which means that the Legislature is going to have to pass new laws to strip local control. There's SB79, which would directly rezone land located near train stations and other transit to allow apartment buildings, so you don't end up with crazy stuff like the Westwood-Rancho Park station on the Expo Line. There's AB609, which would exempt new urban apartments from the California Environmental Quality Act. (For those of you who aren't aware, lawsuits under CEQA, which is meant to protect the environment, is routinely used to block new apartments and transit - half of all new housing faced CEQA threats.) Then there's AB253, which would accelerate building permit issuance. LA DBS and other city buildings departments are notoriously slow and corrupt, and AB253 would fix it.
So there is hope, but there's going to need to be a lot more reform in order to get us out of this mess.
Ever since Prop 13 capped property taxes, creating a tax shelter in the form of homeownership, it misaligned the goals of homeowners with the goals of the rest of the community.
Have a huge asset that grows in value without having to pay taxes on it incentivizes homeowners into (rationally) fighting to limit housing stock and, as you mentioned, draw in businesses and jobs, which increases the value of their homes without actually making the neighborhood more livable. So housing prices balloon, and we wonder why LA becomes such a hotbed for homelessness.
As long as Prop 13 exists in its current form, it encourages the worst possible outcome of a community – the hoarding of land by the wealthy few. This guarantees that housing reform will be a Sisyphean task.
Obviously you can’t just repeal Prop 13 – there’s 50 years of momentum behind it, with people (irrationally) putting their entire retirement/savings into their housing. But there are ways to chip away at it.
Maybe the easiest first step is to remove Prop 13 protections from any residential property that isn’t your primary property. I would think this would hit the corporate landowners the hardest and allow small businesses or even moms and pops to compete more in the housing market – maybe West LA will see more than just Wiseman properties go up for rent throughout the neighborhood.
The most ideal situation, though, would be to actually remove all property taxes and tax the land only. Property taxes are a bad tax in general – they discourage something that we want to encourage, namely the development of more property, so I understand where the desire for Prop 13 comes from, it’s just executed poorly. Instead, if you tax only the land, you’re discouraging something that we do, in fact, want to discourage – the hoarding of land.
If you own land, and you’re paying, say, a 1% tax on it, now you’re incentivized to develop it in order to pay that tax. Whoever owns those surface parking lots in downtown is now encouraged to build an apartment building on it. Whoever owns those single family homes near the new UCLA Research Park at Westwood and Pico is now encouraged to add an ADU or turn their homes into denser townhomes. And the greatest thing is, those landowners can reap all the profit without having to pay more in property taxes!
But you can’t just suddenly implement an LVT after 50 years of momentum behind single families owning homes. To protect families, especially grandma, from being priced out of her home (maybe she doesn’t have the capital to add an ADU), an LVT of, say, 1%, would come with a standard deduction of, say, $10,000. This is a pretty generous deduction, meaning that anyone with a home worth $1 million or under would essentially pay no taxes, but corporations with land values at, say, $10 million, would pretty much pay the entire 1% tax.