Is the Housing Shortage on the USA West Coast Really Due to Landlord-Unfriendly Laws?

The claims that the housing shortage on the USA West Coast is primarily due to landlord-unfriendly laws are prevalent, but a closer look at the economic, geographical, and housing market dynamics reveals a more nuanced picture.

Tight Land Availability: A Primordial Factor

One of the critical factors contributing to the housing shortage on the West Coast, including California, is simply the limited availability of land. In much of the region, development is restricted to small-scale, often two-story homes due to environmental and zoning laws. This practice not only limits the number of homes that can be built on any given piece of land but also poses significant challenges for expanding residential areas.

Geographical and Environmental Constraints

California, being home to one in eight people in the United States, has an incredibly dense population. The state's 40 million inhabitants live on just 15% of the land, much of which is either forest or desert. This stark reality underscores why land prices are so high. Additionally, land that is available for development often comes with past legal agreements, such as Spanish Land Grants in Southern California, which specified that the first sale must be made as a whole parcel, effectively limiting the market to large developers. Countering this narrative, it's clear that the high cost of land is a fundamental issue rather than a byproduct of regulation.

Regulatory Framework: A Crucial Component

While regulations are often cited as a reason for the housing shortage, it's important to understand that many of these regulations, especially disaster-related ones, serve a crucial purpose. After major earthquakes like the 1994 Northridge quake and the 1989 Loma Prieta earthquake in the Bay Area, it became imperative to regulate construction to ensure earthquake safety. Regulations that ensure structures are built to withstand seismic activity are critical, particularly in areas prone to such disasters. Thus, while regulations can be viewed as barriers to rapid development, they also protect residents and uphold public safety.

Market Forces and Affordability

The cost of housing in California, and indeed, the West Coast, reflects the simple economic principle that the market will supply what people are willing to pay for. In this case, the willingness to pay is significantly high, fostering a situation where developers can build and sell housing at a premium. Even with the existence of these high prices, developers continue to build, driven by the capitalist imperative. The market here is largely driven by demand and supply dynamics, with a focus on luxury and high-end properties due to the high-paying workforce and real estate investors. By targeting high-value segments, developers can maximize their returns.

Land Use and Urban Sprawl

Another issue is the lack of sufficient land to build more housing. The coastal areas are largely developed, with expansion into the interior regions facing significant obstacles such as long commutes and extreme temperatures, such as in the vicinity of Death Valley. Even if there were more land available, the infrastructure to support additional residents, including water, sewage, and energy systems, would need substantial investment. This sets a practical limit on the rate and scale of new development.

Closing Thoughts: Balancing Development and Quality of Life

The housing shortage is a complex issue, influenced by a multitude of factors, including geographical constraints, regulatory frameworks, and market forces. While landlord-unfriendly laws are often pointed to as a key obstacle, they must be considered within the wider context of a densely populated region with limited available land and stringent safety regulations. A balanced approach that takes into account both development needs and environmental concerns, while also addressing affordability and quality of life, is essential for sustainable solutions.