The Real Reason California Can’t Build
California knows it needs more housing. The state is the birthplace of the YIMBY movement—“Yes in My Backyard”—and its legislature has been passing laws designed to make housing easier to build for the better part of a decade. These laws are based on a simple theory: Housing is too expensive in large part because of laws that prevent homes from being built. Loosen those laws, and the houses will come.
And yet, in California, even though the laws have been loosened, the houses have not come. Last year, only about 102,000 new units of housing were permitted in a state with nearly 40 million inhabitants, almost the same number as a decade ago. Residents have begun fleeing for lower-cost-of-living states at such a high rate that California is poised to lose Electoral College votes after the next census.
Some observers look at such facts and conclude that the regulatory theory of housing costs was wrong, or at best badly incomplete, all along. “The movement to lift zoning restrictions is still new, but enough time has elapsed to begin to see how well it’s working, and the answer is … a little,” Paul Glastris and Nate Weisberg wrote in Washington Monthly last year. If that’s true, then the YIMBY activists pushing for zoning reforms around the country are making a terrible mistake, dooming themselves to repeating California’s failed experiment.
In reality, the California experience does not disprove the YIMBY theory of the case, but it does provide an important addendum to it. Not all zoning reforms are created equal—as the more successful efforts of other states and cities demonstrate. The problem in California is that the state’s pro-housing laws try to do a whole lot more than just make it easier to build housing: preserve local autonomy, pay high construction wages, guarantee that new units are accessible to low-income renters. In other words, even as they removed some regulatory barriers, they created new ones. In trying to accomplish every objective and accommodate every interest, all at once, California set up its housing agenda to fail.
Senate Bill 9 was supposed to be the big one. Passed in 2021, the legislation, referred to as the “duplex bill,” overrode local laws that prevented landowners from building multiple units on their property. Proponents framed it as a key part of solving the housing shortage in California. Opponents said it would destroy the character of existing neighborhoods. Both sides agreed that the law would be transformative. A conservative analysis estimated that S.B. 9 could lead to about 700,000 additional units in a state that was permitting just 100,000 new housing units each year. A New York Times housing reporter called the law “probably the biggest change in housing in 50 years or more.”
[Reihan Salam: Why YIMBY righteousness backfires]
But cities and towns quickly realized that they still had ways to block development, Sonja Trauss, the executive director of YIMBY Law, a pro-housing nonprofit, told me. According to her organization, local governments issued more than 100 “emergency ordinances” designed to limit S.B. 9’s impact in the 18 months after the law passed. These included imposing fees and parking requirements to make projects financially infeasible, restricting the size of the potential units to make them unlivable, and designating certain areas as historic districts or endangered-species habitats to exempt them altogether. Two years after S.B. 9 came into effect, only about 160 projects had been issued permits.
“Frankly, a lot of us were caught off guard by the lengths that local governments went to stop the law from being effective,” State Senator Scott Wiener, one of the bill’s authors, told me. Wiener crafted a “clean up” bill targeting the most egregious efforts to circumvent S.B. 9. But he soon found that his colleagues had little appetite to hold localities accountable; the new bill failed to even make it out of committee. “Everyone says they want to solve the housing shortage,” Wiener said. “But no one wants to face a bunch of angry homeowners at their next town hall.”
For housing advocates, the lesson of S.B. 9 was clear: To get housing built, YIMBYs would have to find a path that did not run through single-family neighborhoods. So, in 2022, they introduced a bill that would allow apartments to be built on land that had been zoned for office and retail space. The bill would create up to 2.4 million units of housing, according to one analysis, while leaving most existing neighborhoods alone. Assembly Bill 2011 passed the legislature with near universal support. Governor Gavin Newsom called it “a big deal.”
But once again, months and years went by and hardly anyone even tried to build new housing—as if the law didn’t exist. Only 22 projects have applied for the relevant permits since A.B. 2011 went into effect, and even fewer have actually received them, according to an analysis by UC Berkeley’s Terner Center for Housing Innovation. And, once again, California’s YIMBYs were blindsided. “It was a shock, really,” Buffy Wicks, the assembly member who spearheaded A.B. 2011, told me. “Obviously, we didn’t think this bill would single-handedly solve the housing crisis. But we were expecting something like half a million or a million new units. And what we got was almost nothing.”
A.B. 2011 had made building multifamily housing technically legal—but economically impossible. In order to qualify for A.B. 2011, a project had to pay its construction workers “prevailing wages,” based on the relatively high level of compensation that the state’s labor unions had negotiated for public-sector projects. Several developers told me that this provision alone raised the potential cost of a given project by 20 to 25 percent. A.B. 2011 also required projects to reserve about 15 percent of units for low-income residents, reducing the revenue that the developers could expect to earn.
Each of these requirements might sound reasonable on its face. Who’s against high wages and cheap apartments? But when taken together, and combined with California’s already high construction costs, they meant that A.B. 2011 projects would never be financially viable. “It’s already hard enough to make a project pencil out in California,” Bruce Fairty, the chief development officer at Cypress Equity Investments, a national housing developer, told me. “These extra requirements make it basically impossible.”
[Ron Davis: The biggest myth about the YIMBY movement]
The New York Times columnist Ezra Klein has coined the term everything-bagel liberalism to describe Democrats’ tendency to layer bills with so many well-intentioned requirements that they become unworkable. The scholars Christopher Elmendorf and Clayton Nall argue in a 2024 paper that nearly all of the housing bills passed in California over the past decade have been positively covered with what they call “bagel toppings,” including labor and affordability standards. “It’s the same story over and over again,” Elmendorf told me. “A housing bill passes with this fantastic-sounding headline policy. But then you read the fine print and there are so many costly requirements that the actual policy itself is basically guaranteed to fail.”
This raises a question: Why would legislators keep making the same mistake? When it comes to prevailing wages, the answer is interest-group politics. “Every California politician knows that if you want to pass anything on housing, you need to get organized labor on board,” Brian Hanlon, the president of the housing-advocacy group California YIMBY, told me. “It’s that simple.”
The story of affordability requirements is more complicated. Some progressive organizations reliably threaten to oppose housing bills unless they include significant affordability requirements and tenant protections—but, unlike unions, these small nonprofits hardly have the political muscle to overpower legislators. Instead, these requirements may stem from an actual conviction that they’re useful. The view that new housing should be made available to the less fortunate is widely held among voters and progressive politicians. If a developer is going to profit off a project, then why shouldn’t they have to ensure some units are accessible to middle- and low-income households? “A lot of legislators just genuinely believe that the way you make housing more affordable is to force developers to provide affordable units,” Elmendorf said.
Of course, an apartment building that never gets built isn’t going to employ any construction workers at all, let alone at high wages, and it isn’t going to deliver any affordable units. “Look, I get why a 20 or 30 or 50 percent affordability requirement sounds great—I want low-income people to be able to afford housing too,” Wiener told me. “But no one benefits if nothing gets built. Fifty percent of zero is still zero.”
After the coronavirus pandemic, the housing shortage went national. And in the past few years, some states and cities have managed to avoid repeating California’s mistakes. In 2021, Raleigh, North Carolina, responded to a wave of new residents by relaxing its zoning laws for multifamily housing. Over the next three years, the city built 60 percent more housing units annually and experienced half of the rental-cost growth than it had during the previous five years, according to data gathered by Alex Horowitz, a project director for housing policy at the Pew Charitable Trusts. In recent years, similar stories have played out in places as diverse as Austin, Minneapolis, and New Rochelle, New York. What these cities have in common is that their new pro-housing laws came with less restrictive labor and affordability requirements—if any—and, because they were passed at the city level, didn’t encounter resistance from local governments. True YIMBYism has been tried, and it works.
Perhaps the most illuminating example of how not to be California comes, naturally enough, from Florida. In 2023, Florida’s legislature passed the Live Local Act, which changed the state’s zoning laws to allow apartments to be built in commercial, industrial, and mixed-use areas without needing local zoning-board approval. This was almost identical to California’s A.B. 2011, but with a key difference: Florida’s version had no prevailing-wage provision and only a modest affordability requirement that was offset by a large tax break for developers. According to estimates from the Florida Housing Coalition, a YIMBY-aligned nonprofit, the law has led to permits for at least 55,000 units of new housing even as the country has experienced a combination of high interest rates, soaring costs for building materials, and construction-labor shortages. “In a lot of ways, this bill was passed at the worst possible moment for new housing development,” Kody Glazer, the director of the Florida Housing Coalition, told me. “So the fact we’re already seeing such a huge response is really encouraging.”
[Derek Thompson: America’s magical thinking about housing]
In fact, California itself has experience with the benefits of the plain-bagel approach to housing. Its one big success story came in 2016, when the state legislature began passing a series of new laws allowing residents to build so-called accessory dwelling units on their property, stripping away legal barriers that had prevented building for decades. Since then, ADU growth has taken off. The number of permitted units jumped from just over 1,000 in 2016 to more than 28,000 in 2023 (the last year for which we have comprehensive data), accounting for nearly 20 percent of the total housing growth in the state. But California will never guesthouse its way out of the shortage.
The 2024 election marked a turning point in California housing politics. The crisis became a symbol of the kind of failed blue-state governance that had broken the Democratic coalition. In response, more lawmakers came around to the idea of bold reform. Last year, the California legislature, under pressure from Newsom, passed two bills that had long been considered the holy grail of housing reform. The first, A.B. 130, exempts most new urban construction from the state’s famously onerous environmental-review process. The second, S.B. 79, relaxes the state’s zoning laws to make building multifamily housing near public transit far easier. Versions of both bills had previously failed to pass; this time, they sailed through the legislature.
Crucially, S.B. 79 includes far less strict labor and affordability standards than previous bills, and A.B. 130 doesn’t include any such requirements for most projects. For this reason, some housing advocates believe that a new era has begun. “We think these bills will come to be seen as some of the most important pieces of legislation in modern California history,” Nolan Gray, the senior director of legislation and research at California YIMBY, told me.
We have, of course, heard that before. The success of these laws will hinge on whether California has actually learned the lessons of its past failures. With months to go before S.B. 79 takes effect, several localities are lobbying for carve-outs and exemptions, threatening lawsuits, and pushing to delay implementation until the 2030s. In January, the transportation agency of Los Angeles, the most populous county in America, claimed that it should be exempt from the law altogether. Already, the legislators behind S.B. 79, including Wiener, are being forced to draft a “clean-up bill” to prevent localities from exploiting ambiguities in the law’s wording. That effort might not have the political support needed to pass, let alone the two-thirds majority required for it to take effect this calendar year.
California’s leaders have, at long last, passed legislation free of the requirements that rendered previous bills unworkable. As a result, they are under intense pressure to add requirements back in or to let localities do the same. After a decade of failing to solve the housing crisis by saying yes to everyone and everything, the question now is: Will they finally be willing to say no?