Notes From Babel

California’s New “Green” Housing Restrictions

with 2 comments

As California deals with possibly the worst effects of the housing bust and one of the most hostile regulatory regimes in the nation, the legislature nonetheless has seen fit to artificially inflate housing costs even further with new “green” building standards. According to NPR, “[t]he law, which takes effect next year, is the first of its kind in the country.”

Californians already struggle with devastatingly unaffordable housing markets.  The markets in San Francisco, San Jose, San Diego, and Los Angeles/Orange County rank 6th, 12th, 14th and 15th most unaffordable in the world, respectively, according to the 6th Annual Demographia International Housing Affordability Survey.  The reason is land use regulations.  A 2002 paper reported the cost of a buildable quarter-acre lot in San Francisco was $700,000.  The cost of an additional, non-buildable quarter-acre?  A paltry $85,000.  This means that the costs of permitting, fees, and regulatory compliance stacks up well over $600,000Six-hundred grand caused by busy-body lawmakers! One wonders whether they have any idea.

A study of the Seattle market revealed the same trend:  stiff regulations there artificially inflated median inflation-adjusted values by more than $200,000.

How much more will California’s new green laws tack on?

Not to mention—whatever the high-minded intentions are behind the legislation are mooted by the law of unintended consequences.

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Written by Tim Kowal

February 24, 2010 at 12:21 am

Posted in Land Use

2 Responses

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  1. A 2002 paper reported the cost of a buildable quarter-acre lot in San Francisco was $700,000. The cost of an additional, non-buildable quarter-acre? A paltry $85,000. This means that the costs of permitting, fees, and regulatory compliance stacks up well over $600,000.

    Um, wouldn’t demand be signficantly lower for a non-buildable quarter-acre than for a buildable one? I would imagine the price adjusts accordingly.

    Alex Knapp

    March 10, 2010 at 3:34 pm

  2. That’s the point. In the example provided, regulations rendering the quarter-acre non-buildable have the effect of depressing the value by approximately $600,000. Or, you might look at it as artificially inflating the buildable land by $600,000. Or some mix of the two. Either way, regulations are substantially affecting property values in these areas.

    Tim Kowal

    March 10, 2010 at 6:52 pm


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