Monday, January 1, 2018

Housing: Part 272 - California makes housing legal, LA urgently moves to correct.

California passed a law streamlining the process for getting approval to build backyard units ("accessory dwelling units" or ADUs).  Since California cities have been engaged in intensive housing deprivation for years, any freedom to build housing will attract many willing builders.  In this case, the new law has led to thousands of new small rental units.

In response, LA has introduced an ordinance to limit their use, including cutting the maximum size from 1200 square feet to 640 square feet.

The last section of the ordinance, titled, "Urgency Clause" begins:
The City finds and declares that this ordinance is required for the immediate protection of the public peace, health, and safety for the following reasons: The City is currently in the midst of a housing crisis, with the supply of affordable options unable to support the demand for housing in the City. The US Census reports that vacancy rates for housing in the Los Angeles area are currently the lowest of any major city. A housing option that is currently available and affordable for many in the City is Accessory Dwelling Units.
The next paragraph begins:
While Accessory Dwelling Units are assets in mitigating the housing crisis, Los Angeles is a very unique city....
And the rest of the "Urgency Clause" is a list of reasons why LA needs to limit ADUs.

And the tenants' unions will keep complaining that obstructive zoning is necessary because developers only build luxury units.



    The tone of this article could be revamped but some interesting facts

  2. This makes me sad. But thanks for posting on it.

  3. Egads. What does this chart mean?

  4. okay, capital consumption etc. Then see this chart…

    1. I might do a post on that. Ive touched on it in the past. Part of the reason for that is because part of the income on real estate goes to creditors as interest income, which isnt included in this measure. Because of capital repression in mortgage markets, housing yields are high and equity holders are claiming more of it.


    1. That is owner imputed rental income after expenses, capital consumption, and interest. Yields are high and interest is really low. Total income (interest plus rental income) is high, but not nearly as much. Also, keep in mind that interest includes an interest premium, which is also a reason for the 30 year uptrend.

  6. Amazing charts.

    Here is what the BEA says it is measuring:

    So, as you said, the chart includes imputed rent, but "does not include the net income from rental of tenant-occupied housing by corporations (which is included in corporate profits) or by partnerships and sole proprietors (which is included in proprietors’ income)."

    In my little corner of the world, I see a lot of partnerships and corporation buying apartments. Truamerica owns 32,000 units for example.

    I looked briefly at BEA but did not see a way to seg out rental income by corporations, partnerships etc.

    Worth noting:

    "The total value of all homes in the United States is now $31.8 trillion, having risen $2 trillion in 2017, new data shows. Overall, the cumulative value of the nation's housing market grew at its fastest annual pace for four years at 6.5%, according to the latest figures from real estate firm Zillow."

    I like Zillow.

    Rents rising to historical highs….

    I still see no national recognition of the rent picture, and limited academic-blogging-literati-pundit recognition. Worse, I think knowledgeable people are for more housing construction, but no condo towers near their own neighborhood.

    Unzoning property is not a popular idea, and may be least popular among elites. They own property, after all, or have extended loans on property.