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From Malls to Homes

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From Malls to Homes

An obscure new law may help alleviate California’s housing shortage. October 14, 2021
California
Economy, finance, and budgets
Politics and law

California officials have taken some small but important steps to rein in the state’s extraordinarily high housing prices and break down barriers to building. While legislation to bar single-family zoning has garnered the most headlines, its importance may be more symbolic than practical. A more obscure change could have a greater impact on housing in the Golden State: enabling the conversion of shopping malls and business parks into large-scale new developments that could combine new homes with the streets and stores that make for new communities.

It’s not surprising that the end of single-family zoning as the default for a residential lot in California would get a lot of attention. The single-family ranch house or split-level is quintessential postwar California. San Jose, for instance, the country’s tenth-largest city, is effectively a giant suburb; 94 percent of its real estate has been zoned single-family. Historically, it has seen more commuters leave the city each morning than enter it. So the modest step of permitting single-family homeowners with a large enough lot to build up to two duplex homes reflects an understanding that the state’s high housing prices are inextricably linked to constrained supply, and that many households need rental units as a stepping stone to homeownership.

The bill’s sponsor, State Senator Toni Atkins, who represents a San Diego district that includes the tony La Jolla neighborhood, says it will “give Californians the chance to pursue their version of the American Dream.” Atkins observed that a duplex structure could provide “a new source of income” for first-time homebuyers, an important acknowledgement that the state needs a full spectrum of housing types to thrive.

As symbolically important as the bill is, however, it won’t likely lead to significant new building. While house lots can be subdivided to make way for a duplex, the new lots must still be at least 1,240 square feet, and each housing unit must be at least 800 square feet. That’s still larger than the 750-square-foot homes of the original Levittown, the quintessential postwar suburb. And while new construction will not be subject to the famously draconian California Environmental Quality Act (CEQA), it will be prohibited if it causes an “adverse impact on health and safety or the physical environment.”

Jennifer Hernandez, one of California’s top housing-development lawyers, believes that this condition will invite legislation in high-end suburbs, as well as litigation over issues such as tree removal. She expects the legislation to result in the subdivision of “long skinny lots” in areas where land costs are lower—notably historically black Compton and Inglewood, near Los Angeles. She worries about gentrification, though one might just as easily see that as a collateral benefit.

But another bill may do more to breach the regulatory dam holding back housing construction in California. Richard Bloom, a state assemblyman from Santa Monica, sponsored a law that has mainly received attention because it enables developers to strip old racial covenants and deed restrictions from real-estate titles. At first glance, this seems like a symbolic gesture, as Supreme Court rulings and the 1968 Fair Housing Law long ago superseded such restrictions. But the law quietly went further—potentially affecting shopping centers, strip malls, and business parks. These properties often have their own “community conditions and restrictions” meant to ensure that all subdivisions were used for similar purposes—in other words, no Airbnb rentals in an industrial park.

Bloom’s law opens a big exception, making it possible for these commercial properties to be converted to residential use, so long as the housing is “affordable.” It’s an unfortunate condition, requiring the state’s taxpayers to provide subsidies needed only because regulation has pushed up the cost of construction so much. Still, the change it facilitates could be more significant than a few duplexes here and there. Making it easy to set aside those deed restrictions could yield a wave of commercial conversions.

The Covid-19 pandemic, which ushered in the work-from-home revolution, may have also brought malls and business parks to the end of their usefulness. In a 2020 report, “Residential Redevelopment of Commercially Zoned Land in California,” UC Berkeley’s Turner Center for Housing Innovation notes the scale of opportunity involved: “California’s four largest metros—Los Angeles, San Francisco Bay Area, San Diego, and Sacramento—have an abundance of land zoned for commercial uses, and allowing residential development in these areas could introduce new housing in virtually every neighborhood.”

For the imaginative developer and planner, the full-scale conversion of commercial real estate suggests the possibility not only of affordable apartment buildings but also of homes, stores, and businesses—walkable communities of the sort buyers now crave. Not just new housing, but new neighborhoods; not a few homes, but many thousands. Add to that vision an Uberized transportation system in which fewer Californians will need to own cars to get to work—if they need to leave home for work at all. Indeed, state officials are already taking note of the reduced need for car ownership; the duplex bill requires only limited new parking space.

This mall-to-housing movement won’t happen overnight—and restrictions such as “100 percent affordability” aren’t helping bring it about, either. Even if the law allows the voiding of deed restrictions, local communities will still have to change zoning from commercial to residential or mixed-use. But resistance is less likely for new developments that aren’t next door to anyone.

Economist Herbert Stein famously observed that if something can’t go on forever, it will stop. Time will tell whether that truism applies to California’s housing shortage.

Photo by Justin Sullivan/Getty Images

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