Tuesday , October 26 2021
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Is California still a trendsetter?

Summary:
When I was young, people used to say that global trends started in America and American trends began in California. One famous example was Proposition 13, which signaled a broader tax cut movement in many other states and countries. California recently passed a couple of bills that may signal the beginning of a major pushback against NIMBYism.  SB-9 allows homeowners to divide lots in two, and then build two housing units on each of those lots.  Of course many lots are too small to do this, and thus the impact on housing construction is likely to be modest: A property must meet certain criteria under SB 9 before it can be developed into multi-family housing. It must be large enough, for example, and the owner must live there for at least three years before

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When I was young, people used to say that global trends started in America and American trends began in California. One famous example was Proposition 13, which signaled a broader tax cut movement in many other states and countries.

California recently passed a couple of bills that may signal the beginning of a major pushback against NIMBYism.  SB-9 allows homeowners to divide lots in two, and then build two housing units on each of those lots.  Of course many lots are too small to do this, and thus the impact on housing construction is likely to be modest:

A property must meet certain criteria under SB 9 before it can be developed into multi-family housing. It must be large enough, for example, and the owner must live there for at least three years before splitting the property. A study by UC Berkeley’s Terner Center for Housing Innovation found that the new law likely would add, at most, fewer than 700,000 housing units across California.

Another bill aims to reduce red tape in new construction:

Newsom on Thursday also signed SB 10, creating a process that lets local governments streamline new multi-family housing projects of up to 10 units built near transit or in urban areas. That new legislation also simplifies zoning requirements under the California Environmental Quality Act, which developers complain can bog down projects for years.

For years, environmental regulations have been used to stop new housing projects, even though adding density to urban areas near transit lines actually helps the environment.  (As an analogy, environmentalists often shut down zero-carbon nuclear power plants, which means more reliance on fossil fuels.)

Housing regulations have dramatically increased the cost of housing in many high productivity regions. As a result, younger adults who grew up in California are often forced to move to other states in order to find affordable housing.  NIMBYism has even spread to formerly “open access” areas of the country, such as Austin, Texas.  Let’s hope that these two California initiatives are a sign that the tide is turning.

Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment". In May 2012, Chicago Fed President Charles L. Evans became the first sitting member of the Federal Open Market Committee (FOMC) to endorse the idea.

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