Episode 90: How to Evaluate Zoning Reforms with Aaron Barrall (part 2)

Shane Phillips 0:05
Hello, this is the UCLA Housing Voice podcast, and I'm your host, Shane Phillips. This is part two of our conversation with the Lewis Center's Aaron Barrall, covering our own recent analysis of the citywide upzoning adopted by Los Angeles in February of this year. If you haven't listened to that episode yet, I very strongly recommend going back and starting there. With this episode, we're picking up where we left off, talking about how we evaluated the city's performance on Affirmatively Furthering Fair Housing and the single-family neighborhood rezoning options it considered, and some of the big-picture lessons we hope listeners will take from our research. As I said last time, most of those lessons apply just as much outside California as in it. I'll say no more to preview this episode because the last one is basically an hour-long review.

Instead, I just want to make sure you know about Road Scholars, a four-part series coming to this feed in just a couple weeks. The series, as you may have heard in the trailer, is hosted by the Lewis Center's Deputy Director, Madeline Brozin, and our colleague up a flight of stairs and down the hall at the Institute of Transportation Studies, Juan Matute. They're going to be discussing the world of research they know best, transportation and mobility. I'll be away from the podcast for a few months as we prepare for another special series coming out over the summer, but I have no doubt that if you like Housing Voice, you'll enjoy Road Scholars too. In my experience, this housing stuff does not work too well if you can't get people around safely, efficiently, and affordably.

The Housing Voice podcast is a production of the UCLA Lewis Center for Regional Policy Studies with production support from Claudia Bustamante, Irene Marie Cruise, and Tiffany Lieu. Be sure to share the show with your network and send your questions and feedback to shanephilips@ucla.edu. With that, let's get to part two of our conversation with Aaron Barrall.

Okay, we are back with our Lewis Center data analyst, Aaron Barrall, talking about the citywide housing incentive program, or CHIP. Mike Manville co-hosted part one of this interview, and Paavo is joining us for part two. Hey, Pavo.

Paavo Monkkonen 2:30
Hey, Shane. How's it going? I am doing well. I'm ready to CHIP in. Yeah, there we go. You got the spirit like Mike didn't.

Shane Phillips 2:41
So Aaron gave us a tour of San Diego last time, and I'm not going to make him give us another tour a week later when we're recording the second part. So maybe we can have you carry the tour guide flag for us this time, Pavo. I feel like we've heard here and there about Lyon and Paris in bits and drabs, but what are some of the places that have impressed you or grown on you in your almost two years now in France?

Paavo Monkkonen 3:04
Gosh, it's a tough question. I thought a little bit about it. I think the most impressive thing has been the continuous investment in built environment upgrading that I see all around me as I walk and bike around the city. So you just see crews taking away parking spots and turning them into planters and trees and bike lanes, and it's really impressive here. I mean, I think it's concentrated in bigger cities like Paris and Lyon, but it's all over these.

Shane Phillips 3:32
So that's not just a Paris thing with the mayor on Hidalgo?

Paavo Monkkonen 3:37
No, it's happening in Lyon, and Lyon has a stronger metropolitan government, so they have it more coordinated across a larger number of municipalities, I think, on the bike investment, at least the Voix. The Voix Lyonnais. But if you guys came to France, I would take you to a couple of places. I would take you on a tour of social housing over the century, right? I've been trying to hit as many social housing developments as I can, and there's some really cool 1920s ones. Maybe we can put some pictures in the show notes for people, but there's like this neighborhood called Etats-Unis. It's United States in Lyon that's from the 20s, and then all around the periphery of Paris there are these brick social housing projects that they built where the old city wall had been. Then you have the like post-war modernist stuff, like I finally got to see the Corbusier one in Firminy near Saint-Etienne. Those are a little farther out, so I haven't. There's one I think in Haute-Savoie that's like this 500-meter long building, and then another 300-meter long building, like these super long buildings that look really cool from space at least. That's what counts. That's what really matters, the satellite view. These post-modern ones like by Bofill, like the big Camembert looks like a big cheese one that's in Noisy like on the east of Paris. And then you have these contemporary ones with like a lot of balconies and kind of round things that I don't really love, but then I'm like thinking that it's such a luxury to be able to be critical of these new big redevelopment areas. I don't really like this vibe of putting different architectural styles next to each other, but I mean it's still fantastic, right? It's just not my thing.

Shane Phillips 5:12
What are your feelings on that? I've talked about it before, that like cliche, batiolous, batioie, I can't pronounce.

Paavo Monkkonen 5:18
I think one of the things about Paris is its kind of ability to have some homogeneity in design or like consistency in design with variation in a way that really works like 19th century Paris and then that cliche, batioie stuff is just like we're going to have everything be different in this way and I got this tour of it and they're trying to tell me that it works and I'm like, I don't know, I think it's too different.

Shane Phillips 5:43
I really liked it and I probably just forgive a lot when it's all oriented around a giant cool park.

Paavo Monkkonen 5:49
Yeah, sure. It's nice. I think the park's a little big, but then I'll just last thing, I want to take you, if you got one more minute, let's go to the suburbs of Lyon. It's going to segue into today's topic because you know we talked about this French SRU law before on the podcast with Magda Maui and so, I think right now I'm seeing an interesting illustration of the difference between a quota of social housing as the outcome goal in one of these top down kind of fair share systems versus what we have in California which is the outcome goal is a plan which I think is inferior in some ways but it's a plan for growth which I think is superior in some ways, right? Because the French one is you have to have 20% of your housing stock be social housing but you don't have to grow or not, you know, if you don't want to. So you could in theory just convert. Which is what Paris is doing. So Paris is kind of an empty city in some ways actually, you know, they've been losing population and they're doing – they've really bumped up their share of social housing but a lot of that was through conversion rather than new development. I see. That's a disadvantage. But then the place that we're taking in Lyon, I'm going to go with some students next week with a colleague here at the University of Lyon. We're going to take some students to compare two cities which are like at the edge kind of these village-y suburbs but they have a new metro line and they are not up to their quota and one of them is more resistant. We're trying to figure out why one of them got punished by the metropolitan government. It's one of the seven small cities that got their planning permission taken away and now the regional government is doing the planning for these cities and issuing permits and permitting more social housing. So you know, so it's this interesting contrast between like the production goal and the planning goal but also just the history of urbanization in this place is so different from LA where the cities that are doing a bad job in France are usually suburbs that are like actually suburbs in a way that you know, West LA is not really, you know, there's no huge university and job center right next to these places. They're like actually suburban so yeah.

Shane Phillips 7:51
And there's probably like some kind of separation between them rather whereas Westwood is just part of LA. It's just further from the core maybe.

Paavo Monkkonen 8:00
Yeah, it's less gratuitous than our situation in California but it's interesting. But yeah, we can put some pictures up on the thing for people.

Shane Phillips 8:07
Cool. Yeah. You're making me realize, well, I was just on a two-week trip and so I don't know how much I can spare on vacation but I feel like I need to go to France before you come back. Wait a minute, Shane. You haven't visited me. Quick. I know. You've been there more than a year and a half. It's about time. Okay. So we're going to get back into CHIP. In part one of this interview, we introduced CHIP which was again this citywide zoning reform sort of citywide which was approved by the Los Angeles City Council in February of this year. We talked about our interest in understanding how big a deal these reforms really were and how we did that by estimating the maximum number of units that you could build on each eligible parcel in the city, 800,000 parcels before and after CHIP was passed. We talked about the importance of figuring out how much of that capacity had any chance of actually turning into real-world development projects and how there are at least two ways of answering that question. One is by looking at realistic development capacity which we mostly assess by looking at physical and regulatory characteristics like the size and type of building on a parcel today and then the largest building that you can build by law again before and after CHIP. The other is feasibility which also incorporates financial characteristics like land and construction costs, interest rates, market rents and so on.

Paavo Monkkonen 9:31
Shane, on that topic, I'm sad to have missed that fascinating conversation because I love talking about this stuff and I wonder if you guys mentioned this development funnel concept.

Shane Phillips 9:39
No, but I think I know where you're going with this. Tell us a little bit more about that.

Paavo Monkkonen 9:44
Yeah, I mean if people are interested, it's in this Lewis Center publication from some years ago called One to Four something, something, something, something with Ian Carlton where we're looking at the potential production outcomes of four-plex legalization and we have this funnel that's like zoning as the big part of the funnel, economic feasibility as it narrows and then transactions and then actual development, right? To just reinforce this idea that we talk about zone capacity but there's no way that that's all going to be built within any kind of short time frame or even long time frame.

Shane Phillips 10:17
Yeah, yeah. That's really interesting. It's actually not where I thought you were going to go. I thought you were maybe going to talk about the phenomenon that we have observed here in Los Angeles where there's been a lot of projects. First you get tens of thousands that are proposed every year. I think we're talking 30, 40, 50,000 units are proposed every year or have been in recent years maybe prior to 2022 or so but then the number that are entitled by the city planning department is quite a bit smaller than that so let's say 30,000 or maybe still more but then the number that actually get a permit and move forward with construction has been well under 20,000 a year on average and there's just many, many projects that were entitled by the planning department that some property owner developer went to all the trouble of getting that project approved. It would have taken months at least if not over a year but then for any number of reasons they just did not move forward with building the thing. They sometimes start the permitting process and you can see in the records it just kind of stalls out and it's been literally years since any progress has been made on that and eventually those entitlements expire and they have to start all over and others just don't even start with the permitting process and there's lots of theories about why that might be. Obviously the changing market conditions maybe just kind of lots of inexperienced people not really knowing what they're doing and thinking they could just entitle something and flip it which used to be a common practice in Los Angeles when it was much harder to entitle projects. You could buy land for $50,000 per buildable unit let's say, entitle it and then sell it for $80,000 or $100,000 per buildable unit because the entitlement process is just so complex and risky that it really was a value add and I'm not sure that's really so true anymore. But yeah, I think your way of thinking about that it really gets especially those last few phases at the difference between the realistic capacity that we talked about just like is what you can build there according to zoning and so forth sufficiently large enough relative to what's there now that there's even a chance it would be redeveloped. You might redevelop a strip mall into a six-story building but not a four-story building into a six-story building.

Paavo Monkkonen 12:29
No, I like the metrics you guys came up with in the study for that. The additional part is then just because it's economically feasible to do something with a parcel doesn't mean it's for sale and so the sales are very infrequent and then just because someone bought it doesn't mean they're going to redevelop it. They might want to keep it the way it is so it just narrows the possibility set.

Shane Phillips 12:50
And that is something that we really did get into I think a little bit talking about Prop 13 in particular where even if you're measuring feasibility if you can get enough information to determine if someone were to build on this project incorporating land costs and everything else they could make a profit probably that doesn't tell you whether the owner wants to do anything with that property or if they're comfortable just leaving it as it is and laws like Prop 13 which keep property taxes low for people who have owned property for a long time create a lot of variation in incentives from parcel to parcel like someone who bought very recently is paying much higher property taxes and has much more incentive to redevelop that property and make some more money on it than someone who's owned it for 50 years and you know is basically paying nothing in property taxes to keep it and just let whatever money's coming in keep rolling in right so yeah back to my monologue here we introduced these ideas of realistic capacity versus financial feasibility and in our report we really focused on the former the realistic capacity and listeners should just go back to the first episode if they want a thorough explanation for why I guess we provided a little bit just now but we were also able to get a proxy for feasibility by looking at the types of neighborhoods where CHIP increased capacity most we estimated capacity across four market tiers in the city that were defined by the consulting firm AECOM and across four resource categories that are defined and designated by a few California state agencies. We'll say more about this later but just to summarize I think we all agree that CHIP increased capacity by a good amount though not nearly enough and that it actually did a surprisingly good job of putting that capacity disproportionately in higher income higher opportunity neighborhoods it's that distribution of new zone capacity that we're going to start our conversation with today then we're going to talk about our analysis of the single-family up zoning options that were considered by City Council and we'll wrap up with some of our big lessons from this whole exercise including the important role for state legislatures in driving local housing reform I wanted Pablo to join us for this part of the interview because we are talking about this idea of affirmatively furthering fair housing as a reminder from last time affirmatively furthering fair housing or AFFH is the really unfulfilled promise of the 1968 Fair Housing Act to undo the patterns of segregation that were intentionally built across many generations and that still largely exists today this subject has been at the core of the Lewis Center's work since before I got here and I want to take a minute to express our thanks to the Robert Wood Johnson Foundation Wells Fargo Foundation and Conrad and Hilton Foundation and of course Randall Lewis the man himself each has supported this work financially most critically if you'd like to join their ranks please give me a ring or email me at shanephillips@ucla.edu but they've also helped as facilitators and as thought partners honoring our independence on this research but also providing valuable feedback and connecting to other institutions and groups who are doing complementary work whether as researchers or practitioners or advocates I promise no one is holding me hostage as I make these statements I am just coming up on my sixth year with the Lewis Center and thinking about what we've accomplished so far has got me feeling a little bit thankful and it seems like a good time in the world to show our appreciation wherever we can so that is what I'm doing as I was saying all these folks can claim a share of the credit for our work on fair housing on specifically affirmatively furthering fair housing and if I could point to just one thing to capture the spirit of that work at the Lewis Center I think it would be the fair housing land use score which Paavo and Aaron both played the largest roles in developing this is the flus f-h-l-u-s Aaron Paavo what is the flus?

Paavo Monkkonen 16:56
And did the world need another acronym?

Shane Phillips 16:58
Well, I think we know the answer to that one?

Paavo Monkkonen 17:01
Yeah, I'll just start off quickly by saying the kind of point funded by the Robert Wood Johnson Foundation. When we started we were inspired by California's law that required cities to firmly further fair housing in their housing elements. And one of the key pieces that we started thinking about early on was the site's inventory and kind of where cities were choosing to plan to allow housing, especially low-income housing, and thinking about how to measure that and measure whether they're doing a good job or a bad job was a core challenge. And you know, so I went around in the literature and couldn't find the right kind of metric that would tell you whether land-use plan was putting more of something in a certain kind of neighborhood than a different land-use plan. And so, you know, I started looking at the Gini coefficient which is the standard measure of income inequality which you know. So the Gini coefficient you rank everybody in a society from poorest to richest, and then you rank the wealth from least to most. And you know, you can look at this distribution of wealth across people or doing come across people and you can compare it to an even distribution which would just be a straight 45-degree line. And so you can see if it's above the line or it's below the line The society is more or less unequal. And so trying to adapt that to space, though it was a challenge because we have information about neighborhoods in a city, not individual parcels in a city, and even parcels have a size, so we needed to insert kind of this spatial component into the into the metric. And so eventually we used it, you know, land area of neighborhoods as kind of a denominator to say whether cities were placing kind of more of their planned new housing in the richer poor neighborhoods of the city. So that's the basic idea, and you know, puts out a number from minus one to one, zero being like a perfectly even distribution of across neighborhoods ranked by income or any other metric, negative plus being bad and a positive plus being good. Aaron, do you want to add more on the spatial component? I guess maybe you could reflect on the challenges of what the state had proposed cities do and how they're inadequate to the task.

Aaron Barrall 19:16
Yeah, I think the one thing that you didn't mention about the fair housing land use score is that it's flexible it's good because it can measure different policies. Can measure park access, you can measure multi family zoning, or in this case, we did housing element sites, but you can also use different measures of opportunity. So we found that using the median income as an index tends to work very well and captures a lot of what we would want overall, but you and I have both used it for environmental quality or transit access, or the percentage that are non-Hispanic white in a neighborhood, so I think those are other important components of the fair housing land use score and why it's a good indicator overall. Going back to your question about state requirements, the state came up with. Some methodologies that were overall very hard to implement for the cities as they were assessing their distribution of housing sites across their city. The state's ideas weren't bad, necessarily, but they weren't exactly complete because they didn't include a spatial denominator. The overall concept that you just highlighted is that when we're trying to balance housing across the city, we need to account for the available area in each neighborhood If the city plans for, say, all of its housing in a neighborhood that's only 1% of the total area, we know that there's an imbalance there. This doesn't mean that we shouldn't plan for new units in places like downtown or near transit stations, but cities like Los Angeles have lots of space outside of downtown to grow to accounting for that space and then the relative opportunity of these neighborhoods is really important to understand how well a city is doing on its fair housing goals. And I think that's really what the fair housing land use score accomplishes.

Paavo Monkkonen 20:54
Yeah, just to build on that, I mean the fact that low density neighborhoods are generally higher opportunity, right? A higher income, higher density neighborhoods are generally lower income, lower opportunity. You know there's this bias towards cities being able to say, "Oh, look, we're putting a big share of our new housing in these high opportunity neighborhoods." You know, if you just use the number of tracks, number of census tracks, as your indicator of how much of the city you're you're addressing, it's going to be biased to show that you're doing more in the higher income tracks, because the higher income tracks are bigger, right? They're just their land areas bigger because tracks, the way they're defined, is to have about 4,000 people in them.

Shane Phillips 21:35
So, so just to put some made-up numbers to this, to illustrate, if I put a hundred units of capacity in low opportunity areas and a hundred in high opportunity areas, you know, you could say I've split things evenly. But if the high opportunity areas account for 90% of the city, then I've actually not done things evenly at all, and I very heavily concentrated things in the low opportunity neighborhoods.

Aaron Barrall 22:01
That's exactly right. Go, me!

Paavo Monkkonen 22:03
Thank you, speechless! Wow!

Shane Phillips 22:10
Yeah. Well, I didn't write this question down, but I have asked this of Aaron before, and I think we've talked about it, just trying to work through how to interpret the fair housing land use score. Paavo, you said it's from negative one, which is sort of the worst possible score, to a positive one, which is the best possible score. And maybe that's not the right way for me to say it, because my question is like, what is a good score? You could say, you know, maybe a zero is the best possible score because it's perfectly even. Well, we live in you know cities and neighborhoods that are already quite segregated and unequal, and so just distributing things evenly might just preserve, you know, where we're at or not do enough to again, reverse these patterns of segregation that already exist. At the same time, putting everything in like the one highest opportunity tract, which would give you, quote-unquote, best positive one score. Doesn't really sound like great planning either, and it just might not be the best place for housing for any number of reasons, or for certainly for all new housing. So, how do we think about, like, where that balance lies and what constitutes a good score?

Paavo Monkkonen 23:18
Yeah, no, that's an important question, and that's like, where you put your policymaker hat on? Because, you know, at the moment, what, they're in like 80% of California cities have a negative score, yeah. So even getting everybody to zero would be a huge change in our land use planning in the state. And so, I think that, you know, the way that I would do it were I in HCD, would give an expectation that cities rezoning plans are moving them in a positive direction by some amount, right? You can't expect a city that their score is currently for their existing zoning is minus five, you can expect them to get to plus five. It would be too dramatic of a change. Oh yeah, yeah, right. Sorry, point five, yeah. So it's all got to be relative to existing zoning, I think. And you know, in the fhlus report that Aaron and I put out recently, we compare the sites and the housing element and the rezone sites in the housing element to cities existing multifamily zoning. Just to illustrate, you know, whether they're doing a better job in their new plans. Because also, to some extent, city planners are inheriting a city that already exists. And so you can't blame them for, you know what they've got, yeah, but going forward you can hold them accountable to the new plan that's supposed to be changing things, right?

Shane Phillips 24:26
Even if you can start from scratch on zoning, you can't start from scratch on the existing land uses.

Paavo Monkkonen 24:32
Especially the size of parcels that maybe we can get into later we talk about up zoning, single-family neighborhoods.

Aaron Barrall 24:38
And Paavo had a really important nuanced answer. I'll give a very simple answer to just to also illustrate my thoughts on this, which is generally a score that's probably between positive point one and positive point two, five is pretty good, and that's a nice place to shoot for. There's a little nuance there. There's some flexibility. It's important to recognize that not every city is the same and not every place has the same land uses, but generally that would mean that the sites are distributed relatively evenly across the city, but they're more concentrated in relatively high opportunity neighborhoods.

Shane Phillips 25:16
Yeah, and I guess it matters to what you're measuring, because if you're measuring what is the total zoning capacity in the city and how is it distributed, versus if you're doing a rezone and you're just measuring. Where you are increasing capacity, you would, at the very least, I think, want a more positive score for that ladder number, for where you're increasing capacity, then, you know, where it is right now. So to your point about like that's where you really want to see that positive score, especially, and then the overall, will move in that direction as a consequence of that.

Paavo Monkkonen 25:48
Not to dwell here too long, but just to remind people, like, we're talking about the evaluation of the zoning. And, if we think back to that funnel, like, you know, where is the economic feasibility? Well, that's gonna differ based on these same opportunity measures? And so, the developments not necessarily gonna happen where the zoning is, right? You know you're gonna tend to get more development in the higher opportunity areas, right?

Shane Phillips 26:11
Hopefully. Yeah, okay, so we can probably come back to some other elements of the fair housing land use score. I don't mind spending some time on it, in part because we haven't really had an episode on it, and it's like, the core. Somehow, it's never showed up on the podcast and there are other things to talk about. There's, you know, the score you get as a city on median income and where zoning capacity is distributed by that metric versus like transit access can be very different, and a zoning plan that's gonna get you a good score on up zoning your transit might actually score pretty poorly compared to the median income, because transit tends to be concentrated in lower income neighborhoods, and that's not a bad thing. And so you know, you really do have to think about that context, but we can maybe get back to that. Let's move on and really talk about chip and this fair housing measure. How does chip score here? As with earlier parts of the report, Aaron tell us how the city did on the flus before chip and after chip, and help us understand how different elements of the mixed income incentive program, which is the main thing we're looking at in chip how those different elements contributed.

Aaron Barrall 27:24
Okay, I'll start with the net realistic capacity, which, as a reminder, accounts for the existing land uses and the development potential of every parcel. We're filtering out parcels that are exceedingly unlikely to be redeveloped. so before chip Los Angeles had a net realistic capacity of negative point three two and then after chip that improves to negative point two one which is actually a very significant increase interestingly the transit oriented communities and the transit oriented incentive areas get the exact same score which is negative point three five the transit oriented incentive areas provide better bonuses in high opportunity areas but some of the areas that tend to be very wealthy namely the coastal zone and some of the fire hazard areas are excluded from the transit oriented incentive areas so on balance the transit oriented incentive areas didn't actually change the relative distribution of net capacity relative to median income compared to the transit oriented communities on the other hand the opportunity corridors and the opportunity transition areas had positive scores opportunity corridors get a positive point three four and corridor transitions get a positive point two one but both of these have comparably fewer units than the incentive area which makes up the bulk of all net realistic capacity in the city mm-hmm I think to contrast it to what you just said one of the most important things to look at is the new capacity the Delta between the existing and the mixed income policies this is a positive point two nine which shows that the city is changing capacity with chip most dramatically in disproportionately higher income neighborhoods that's great and so while overall capacity is still concentrated in lower income areas the new capacity those 380,000 units that we talked about last time again are in relatively wealthy neighborhoods and from a fair housing perspective I think it's okay to say that the city did a pretty good job they could have added more in high opportunity areas and I don't think they should have excluded the coastal zone for example but some of the structural reasons why the city got a negative fair housing score at least here are very valid like Paavo said planners inherit existing land use patterns it would be a lot for them to completely change everything and in Los Angeles a lot of the multifamily housing capacity is near transit the bulk of the transit oriented communities and transit oriented incentive areas of course are just in lower income neighborhoods and so building on that transit accessibility is still a good thing even if it results in a slightly lower overall score it's still a good thing to up so near transit.

Shane Phillips 30:02
Just to clarify I don't know if this came up in the last episode I think I'm just maybe remembering when we presented this a month or so ago but you've got a negative point three two for the citywide score before chip you've got a positive point two nine for the score of just the up zoning post chip and someone might be hearing that and wondering like how does that get us to a negative point two one for the citywide score you know it's a it's a point one one increase a lot of numbers here I realize but like the reason behind that is just that the total capacity added is not nearly as great as the capacity that already existed and so it's just you have to wait these things and it's just like not enough I think I'm just not going to include this this is this is too far in the weeds

Paavo Monkkonen 30:49
no it's a good point no it's a good point I mean I think it's a good point especially because the existing capacity has already been there for a long time and it's not necessarily getting built out that's why I think the rezoned capacity is much more important for a state government to be evaluating fair housing progress right yeah you're not you're not down zoning hopefully anymore we're not doing that you're just adding new capacity and if it's in places where there is development potential it's gonna actually make a difference yeah the capacity doesn't really matter it's the development and the housing that matters right

Shane Phillips 31:20
but in mid to late 2024 it introduced a bunch of possible single-family rezoning options in parallel with the rest of chip sort of a separate but parallel process the city had heard the anger of homeowner groups before October 2023 but in 2024 they also got an earful from advocates for more affordable diverse geographically distributed housing choices and so that's kind of what led us to where we are we only estimated the impact of a few of these options because I think there were something like seven or eight but Aaron could you just summarize the changes proposed in the top three or at least the number one and number three that we really looked at in most detail and these were also the ones that would have done the most to increase capacity on single family zone parcels

Aaron Barrall 32:39
sure option one would have expanded ship to all single-family zone parcels in high opportunity areas most of the standards in option one were actually very similar to those proposed in chip including unlimited density and 3.0 floor area ratios for these single-family areas within the transit oriented incentive areas really quite a substantial up zone here

Shane Phillips 33:01
we're talking probably you could at least do 15 20 units on a five or six thousand square foot parcel.

Aaron Barrall 33:07
yeah I think that's pretty reasonable option two is fairly generous but it does not include that oriented incentive program instead opting to limit geographies to the opportunity corridors and the transition areas up to 500 feet from the corridors in single-family areas the densities are also more limited than option one then option three only includes single-family zones in the opportunity corridor tier three which tend to be near rail stations or significant transit stops and then the adjacent transition areas to those neighborhoods so option three is really the most limited of the mixed income options to this report we evaluated option one and option three there are a few others like you mentioned but these two effectively capture the range of the mixed income choices

Shane Phillips 33:58
and how did they perform on both capacity and on the fair housing land use score

Aaron Barrall 34:03
option one as expected would dramatically expand net realistic capacity offering roughly eight hundred and eighty thousand new units of potential above chip this is just in single-family zoned areas so including option one would essentially double the capacity added by chip these units would be universally located in the city's wealthiest neighborhoods particularly on the west side and the South San Fernando Valley the fair housing land use score for option one would be positive point five three and then putting it together with the rest of the capacity we would get a score of 0.05 so this option would actually convert the entire fair housing land use score for net realistic capacity positive right

Shane Phillips 34:48
so the score for just the up zoned parcels for the increase in capacity as a 0.53 which is very high and then it is increasing capacity by enough total that it brings the citywide flus score to or flus to a slightly positive score correct exactly and I want to restate what you said about how much it increases capacity because I don't think we've reminded people in this second part of the interview that the mixed income incentive program which was the focus of our analysis in this report increased net realistic capacity by 380,000 units and this single-family option one increased it by an additional eight hundred and eighty thousand units and so it is more than tripling what the mixed income incentive program does on its own so whereas the mixed income incentive program which applies only to multifamily and commercial parcels increased net realistic capacity by about 30% I think when you add in this single-family rezoning option it increases net realistic capacity citywide by closer to 80%

Aaron Barrall 35:55
yes and again that's only in higher opportunity areas too so it's excluding a lot of the city still right

Paavo Monkkonen 36:01
yeah we have a lot of single-family parcels yes

Shane Phillips 36:04
yes and again that's only in higher opportunity areas too so it's excluding a lot of the city still right

Paavo Monkkonen 36:13
right and yet yeah I mean on that though you would you might expect fewer redevelopment options I mean that would be such a transformation of what you could do with the single-family parcel that I think it's hard to speculate what would happen but I just think can I just say how dumb the whole transition from boulevards to the interior of single-family neighborhoods is please paradigm I just do not get it like having lived in places that are much more car-free more and more like you know the adage that cities aren't noisy cars are noisy really really is just reinforced to me like every day and if you you know actually we should be allowing more people to live in the interior single-family neighborhoods right and you know reduce the car volume on those streets make some intersections like pedestrian only or these like locally routing streets rather than like let's double up the density on corridors thing it's not actually like more accessible to the city in any way to be on one end of a block next to the boulevard then you know on the other end of the block away from the boulevard it just doesn't make any sense.

Shane Phillips 37:16
sense. Yeah, I don't think almost anyone really believes this is like, a smart planning practice. I think maybe people convince themselves of that, but it really is just right. It's not wanting to, yeah, start a fight with a certain population.

Paavo Monkkonen 37:32
I feel like planners should be more honest about that. Yeah, hopefully there's some planners listening that will just go on the record in public meetings and say, you know, there's no actual basis for this in science or anything else. No, it's politics.

Shane Phillips 37:45
I feel very strongly about this, that planners need more I mean, they need to assert more authority themselves, but they also need to be given more freedom and authority by elected officials. And it doesn't even mean saying, you know, we're just going to let planners do what they want, but They at least need to be able to make the case and tell homeowners, tell NIMBYs who argue in favor of these kinds of things. Look, here's what we know based on our experience, our training, our knowledge. And I don't get to make this decision for us, but I'm going to tell you what we know about planning, and I may even tell you what we know about why you're mistaken. It doesn't mean I get to make all the decisions. It's ultimately going to be decided by the council, but like, you need experts to actually be able to share their expertise, and I feel like they're restricted from doing that in many, many jurisdictions. And it seems to me that places that have done the most in recent years, the cities that have gone the furthest, are the ones that, again, they don't have city planning, just like acting completely independently and adopting law by Fiat or something, but they are able to actually, like, take a position, take a principled stand and defend it, and then, you know, the politics go, where the politics go. But I think when they can actually do that kind of thing, that does influence the politics, because there's someone actually defending the position that more density is better, building housing off of the corridors is good, those kinds of things.

Paavo Monkkonen 39:16
And maybe we can. One small contribution is removing the term transition zone. I mean, I feel like those kinds of things make it seem like somehow justified. Oh, yeah, that's just the transition zone. Of course, that's a thing, yeah, but it's not like, it's not actually a thing.

Aaron Barrall 39:31
I'll be honest, though, I think that I don't dislike the transition areas as much as...

Paavo Monkkonen 39:37
Okay, tell me why.

Aaron Barrall 39:41
Well, I think it's good that the city didn't limit multi family to just corridors, right, right? If yes, they're saying, hey, within 750 feet of corridors, we can do sort of lower scale multi family housing that is more of a transition to single family. I agree with you about the transition. I don't care about that. I. Not worried about that really at all. But I do think that it's good that the city said, All right, we're gonna up zone off corridors too. Yeah, they enough. Yeah, they didn't do it enough because of the very limited geographies. And option one would have completely changed that and made planning far more rational, because there's single family homes directly next to a massive transit corridor, which is what we see in the area near UCLA. For people who've never looked at the area near UCLA on Google Maps, look it up as we're seeing Wilshire Boulevard. Yeah. So that area is completely irrational, and it's not planned in a smart way. But I like the idea that the city said, Hey, let's have three story buildings going 500 feet away from right, you know, these massive transit areas.

Paavo Monkkonen 40:47
But, I was thinking, I mean, if you're for the people that are on the blocks behind a boulevard, like, the difference between having some three story buildings near the boulevard or interspersed throughout the block isn't that big of a deal. So I would prefer just like, okay, within, you know, half a mile of the boulevard, we'll have some limit on how many parcels can be converted to three stories. But like, the fact that they need to be near the boulevard doesn't, doesn't really make any sense. I don't know. That's just, uh, yeah.

Shane Phillips 41:15
I mean, a lot of this just comes down to, what are we evaluating the city against? Are we evaluating them against an ideal, or, you know, at least some high expectations of what just could be, or whether they're making progress. And the transition zone is progress, for sure, but, I mean, I 100% agree Paavo and I think, I hope that these transition zones, like lots of you know, local and state policy are sort of the first step, yes, and you know, they're, they're not the end of the conversation, they're not the end of reform, but it's, it's a lot harder to leap from zero to 100 than to kind of take 10 steps at a time or whatever.

Paavo Monkkonen 41:54
And I think that a theme of the city of LA is, like, could be doing so much better, but actually doing pretty good.

Speaker 1 42:00
Yeah, exactly. So we don't, we don't be too critical, because we appreciate the effort, but we do. We do just when you give us something.

Shane Phillips 42:08
We want more, yes, and I think that's the only way you actually ever get progress. So, but we do want to not be entirely critical and recognize that real progress has been changed.

Aaron Barrall 42:20
Yeah, yeah, I didn't explain option three. Option three is much more limited in terms of geography and in terms of density. It would add roughly 83,000 net realistic units. And the Fair Housing land you score is also positive for option three, but the limited edition of these 83,000 units would only increase the overall Fair Housing land use score from negative point two, one to negative point one, nine. You know, basically the change is positive point 02, so just minuscule. That's capturing the fact that 83,000 units is just really a drop in the bucket here.

Shane Phillips 42:54
Yeah, yeah, it's, I mean, it's, it's literally only 10% of what Single Family Option One does in terms of increasing realistic capacity. Okay, moving on from single family. What have we learned from all of this? I think this is the time for lessons. First, Aaron, maybe you could just share your thoughts on where Los Angeles landed on these two goals. First was up zoning for at least 255,000 units. And then second was rezoning in a way that will help undo race and class based segregation, rather than to cement or exacerbate it.

Aaron Barrall 43:33
I know I'll catch a little flack from some my friends and maybe even you two, but I think that Los Angeles did a pretty decent job overall with the CHIP program, we found that there are roughly 380,000 new units that will be unlocked on at least semi realistic sites by the mixed income program. And this is not even including the affordable housing Incentive Program, which is very good in its own right, but was not focus of our analysis. And if you hold Los Angeles to the same standards of basically anywhere else in the state bar may be San Francisco, it clears that bar and exceeds it for sure. I think it's worth noting that the city also updated some community plans, and these can and should count towards their rezone targets too. It's a rare city that truly engage in a comprehensive and mostly citywide up zone that said the majority of the new capacity is coming from what can be called a vertical up zone, adding a little bit of height density or floor area to sites that were probably realistic already under existing policy. I would argue that these changes are not as big changes. There are probably lots of reasons why these parcels that are already considered likely feasible haven't been redeveloped yet, but still. You know, almost half of the capacity comes from effectively unlocking new land, and that is a good step. I'd like to add that the city's reforms of the entitlement process are also quite good, and they really deserve a lot of credit there.

Shane Phillips 44:59
I do want. Jump in here and just note, since we were talking about the single family options, that that's a rezoning that is essentially entirely through this horizontal up zoning of opening up new parcels that wouldn't have been redeveloped before. And so because of that, we might expect more of those parcels to actually transact and redevelop than you would see on parcels that have been zoned for multifamily for decades. And on top of that, the fact that single family option, one in particular, is limited to these higher resource, higher income neighborhoods, is another reason we might expect just greater financial feasibility on those parcels. I just want to like drive home that point, because I think that difference between the vertical up zoning versus horizontal is really important.

Aaron Barrall 45:43
Yeah. And effectively, every single family property, every single family rezone property, would be realistic just due to the number of units that are there the existing floor area compared to their potential. And so choosing any of the single family options the city laid out would add a decent amount of capacity. Our work also shows that the city did very well at the Affirmatively Furthering Fair Housing. It could have done much better by including the Single Family Zone properties, but even so, new capacity is broadly located in wealthier and wider census tracts. Excluding the coastal zone was unnecessary, and I think that the city should not have done it, but broadly, Los Angeles and the planners did a fairly good job here, and this can be considered a positive example in a lot of ways.

Shane Phillips 46:29
So going back to the previous episode, we talked about how this 255,000 unit rezoning goal came about in the first place. The City commissioned an analysis which found that although on paper, it had capacity for millions of units, in reality, it could only expect to build about 230,000 over eight years, less than 10% of capacity or of the parcels with redevelopment potential. That left a big gap to reach its target of building nearly 500,000 new units over eight years from there, I think it's fair to say that if we assume less than 10% of existing capacity is going to be built out in eight years, then we could reasonably assume that the same would hold for new capacity. We found that chip increased net realistic capacity by 380,000 units. But no one really believes that most of that capacity is going to be built out in eight years. We've talked about this a couple times already, but I really don't want to be unfair to the city, because even though state law said cities need to account for development probability in their housing element, plans, to my knowledge, Los Angeles is actually the only jurisdiction that did it for any aspect of its plan update, and it's probably not fair to hold LA to a standard that no other city was held to by the state, having provided that background for listeners, what do you want to add? The purpose of all this planning is not just a plan, and I know Paavo has things to say about this as well, but to actually increase the supply and diversity and affordability of housing. So what do you think this means for actual, real world on the ground, housing production?

Aaron Barrall 48:05
This is a tough question to answer. I think that there's little questions that the chip will improve housing production relative to the status quo, but it's hard to say exactly how much. I think directly, you could assume that a 30% increase in mixed income capacity will turn into a 30% boost in production, holding all else equal. But the city significantly changed its entitlement process, and we know that that's going to result in speedier and more predictable approvals too, which should increase production. We saw this happen with executive directive, one, which is the mayor's initiative to streamline affordable housing, and I see no reason to expect that some of those effects won't happen with mixed income projects. There's a good paper by Stuart Gabriel at the Anderson School of Business here at UCLA that estimated a 25% reduction in timeline could result in an almost equivalent increase in production. And some of your previous research found that buy right process projects were permitted 28% faster through the TOC program. So I think it's totally reasonable to think that the chip kind of a best case scenario could result in something on the order of a 50 to 60% increase in production, which is huge. Actually, we didn't include this in the paper because it is really quite speculative, and it's a fairly optimistic viewpoint, but a 50 to 60% increase in production would be massive. The problem with Chip is that that 50 or 60% increase in production is just not going to be enough. There's a report from Hill guard analytics that found that the city permitted just under 9000 units in 2024 excluding ADUs. And so if you prorate the city's overall goal, we need to be building roughly 57,000 units annually. Wow. So you know, you imagine that the chip the community plans double housing production. That's great, right? But we're still gonna be far short of its goal. Doubling 9000 is not anywhere close to 57,000 1000 that we need. And last year was particularly bad. But even our recent highest year, which was 2022 we only had 15,000 units. So doubling 15,000 gives us 30 and that still just puts us just over halfway to our annual production target. And so evaluating success here is challenging, because even if chip results in this massive increase, percentage wise, the absolute number is just not going to get close.

Shane Phillips 50:25
We don't get into this in our report, and I didn't even really think about it a lot while we were working on it. But last year, I think we permitted somewhere around 9000 multi family units in the city, and that was actually the first year in our history where we permitted more ADUs accessory dwelling units than multi family units. And those ADUs have nothing to do with multi family zoning or zoning reform. That increase is due to state law, and its mostly happening on non multi family parcels anyway. And so, as Aaron said, If we only apply this percentage increase to the multi family housing production share, which is like half of units being produced or less actually in the city right now, it doesn't look so great. If you go from 9000 to 15,000 you're still very, very far from where you need to be. And actually that's only a little bit better than our peak multi family production year from a couple years ago, which was around 14,000 which again, way less than we need, but a lot better than where we're at today.

Paavo Monkkonen 51:27
Yeah, and I'll just, you know, going back to the pipeline you mentioned earlier, Shane, of entitlement to permitting, to actually building, I think that you know, part of the issue is this time frame of how long that takes, and uncertainty about it. I mean, you had some ideas about why projects might not go through with it, but I think also, you know, the efforts to reduce uncertainty and discretion in this process may reduce that time and like, lead to more projects actually getting built. But it does seem to me like I haven't followed this at all. But I wonder if the city is also doubling the number of reviewers in Building and Safety and planning. I mean, it seems like to some extent, you know, I don't want to say they drag their feet taking this long to do this, rezoning programs, you know, it's very complicated process, so you got to follow the legal requirements and everything. But it does seem like if you were really passionately wanting to double production or quadruple production, you would be doing many things in addition to changing the zoning rules, but maybe with the fallout from the fires, maybe that will be happening.

Aaron Barrall 52:31
Yeah, and I think that's a good point too. There are some factors that are beyond city plannings control here that are certainly going to affect production in the coming years. So first off, the fires, the lack of construction labor availability, and new tariffs on materials and things like that, are probably going to work in the opposite direction. And so it will be hard to isolate the effects from chip to all the housing production in the city going forward.

Shane Phillips 52:58
So this report was written up in the LA Times and in some other outlets. It was shouted out by one of our city council members at the chip hearing back in December. And I know plenty of pro housing advocates and organizations who used it in their work. That's all great. And I think really one of the coolest parts of our job is when we can have that kind of direct impact on policy and the conversation around policy. My other favorite part of this work, though, and the reason I do this podcast, is we can also help people understand a lot of the fundamental concepts in housing and land use that can lead to better policy making. If there's a message that I want people to take away from this study, it's to take feasibility seriously. All zoning capacity is not created equal. Holding things like neighborhood opposition constant, 500 units of capacity in a wealthy neighborhood will generally produce more homes than the same amount of capacity on the same amount of land in a poorer neighborhood, and those homes will provide, of course, better access to good schools and jobs, to open space and safe streets, cleaner air and so on. We have to also consider what already exists in the places we rezone. If you've got a parcel zone for up to four stories today, and you up zone it to six, but it's already got a six story building from the 1930s built on it, then nothing is going to change on that parcel. If the existing building is three stories, it's less likely to be redeveloped than if the existing building were two stories or one, as we talked about with Anthony Orlando in Episode 78, more height isn't even always helpful. If a parcel already permits up to eight stories up, zoning it to allow 10 almost certainly does not help, because that 10 story building requires a completely different and much more expensive construction type. I don't expect planning departments or anyone else really to evaluate feasibility to this degree, parcel by parcel. It is time consuming, and part of why I'm going on about this is so that others can hopefully internalize some of these lessons without having to duplicate the entire analysis. For their jurisdiction or at a different time, but these are the kinds of issues that I think need to be on the minds of policy makers and planners when they're changing zoning, and they're the kinds of questions that community members and regulators should be asking of them. So if someone had asked me for it, which no one did, that would be my big lesson. The thing that I want people to take away from this research and our very long conversation about it, Aaron chip became the law of the land here in LA as of February 2025, and unfortunately, only the parts affecting parcels zoned for multifamily and commercial moved forward. The Council punted on rezoning any parcel in any single family neighborhood. Damn. But we have talked about this on a few different occasions. Five out of 15 council members did vote in favor of that most ambitious single family zoning reform option one. How are you thinking about that outcome? And do you have any other big lessons from this whole exercise?

Aaron Barrall 56:01
The fact that five out of 15 or a third of the Council voted to massively up zone single family homes in Los Angeles is a huge win in a lot of ways. It's not the outcome that I would have hoped for in terms of housing capacity, at least. But if you told me five years ago, even two years ago, that that would have happened, I probably wouldn't have believed you. So I think it's a testament to some of the advocacy of our friends at places like abundant housing LA and inner city law center that have made that change possible and have given council members the confidence to vote for changing zoning in single family areas, I think that there is some potential this could still happen. So five out of 15, there are a few other council members who, even during the hearing, expressed some openness to different versions of this than were proposed. And so I know that there are some organizations working on talking to those and coming up with a new proposal to potentially touch some single family zones, maybe in a more limited fashion than what was proposed by the city planning department there. But I think that there's a real possibility this comes back within one or two years.

Shane Phillips 57:12
I think the last thing I want to talk about is the role the state legislature played in this whole up zoning process. Credit to the city. Where do it arguably did more than what was required of it, but even so, it is very hard for me to imagine la passing something like chip, if not for a whole raft of reforms adopted by the state legislature in the past decade. For one bit of evidence in favor of that view, the city had a three year window after its housing element deadline to complete this rezoning and Chip was approved by council just a few days before those three years were up. So Aaron, which state laws do you think deserve the most credit for CHIP, and where do we need to make more improvements before the seventh cycle of these eight year housing element plans starts in 2029.

Aaron Barrall 57:59
So, as we discussed in the last episode, the first and most important bill would be Senate Bill 828, which just increased the housing allocations for each region by a massive amount. And you know, this resulted in LA having a much, much higher target that it had to account for before also the fair housing law, which really codified something that cities should have been doing already, that they need to reduce segregation, they need to increase opportunity, they need to invest in neighborhoods that have been excluded historically. This fair housing law was really quite important, and I think deserves a lot of credit for Los Angeles progress here too. The third was Assembly Bill 1397, and this increased the evidence necessary to include particular sites in the housing element. And the city did a pretty good job at least trying to account for that in coming up with its rezone target through its development probability model. But to not completely rehash what we said in the last episode, there was one other law, Assembly Bill 1287, that was passed after the city adopted its housing element, but before the rezone, and this is a new density bonus. This density bonus was actually higher than what the city had initially proposed for its rezone, and it raised the floor of basically all of the rezone programs quite substantially. So previously, Los Angeles had a 35% density bonus, it was actually grandfathered in. Passed some other state laws. Assembly Bill 1287, got rid of that grandfathering for the city of Los Angeles, and then raised the floor to a 100% density bonus. So that meant that the city needed to exceed state law in basically every case. And I think it's a good example of where state law resulted in a much better rezone than otherwise would have happened.

Paavo Monkkonen 59:49
How about you? Pavo, yeah, I mean, you could take a good cop or a bad cop approach to this. I think the good cop approach would think about tinkering with the details of. The state mandated housing planning process. You know, we could move timelines up dramatically. We could remove CEQA from the housing element. We could do a bunch of different things so that, you know, when a city adopts its plan, developers can start applying for entitlement the next day, right? I mean, I think that it's kind of crazy that we go through this whole process to adopt a housing element, and then you have three more years to actually make it stick through rezoning.

Shane Phillips 1:00:27
Yeah. Why these are not the same process does? Makes no sense.

Paavo Monkkonen 1:00:30
It's an eight year planning period. In theory, you're increasing your housing production dramatically, and the way, like the realistic timeline here, you know that maybe housing will start to be built in year six, right? So that's ridiculous. So, I mean, the so the good cop would say, okay, that's not working. We need to change all the timelines such that, you know, you can start building housing in the first day of your or start, you know, getting a permit, you know, within a six months of the first day of the new plan. I'm leaning more towards the bad cop these days, I feel like, and, you know, bad poverty, if we had just done, SB 827, or SB 50, you know, years ago, and the state should just say within certain neighborhoods, you can build certain kinds of buildings that are, you know, not violating health and safety goals. And, you know, cities laws don't apply. I think that if the state were serious about a housing crisis, they would be taking much more dramatic action and some senators and assembly people have tried to do this in the past and not been able to, but I think, you know, a state direct preemption into local zoning regulations would be much more effective at this point than a goal guided process that cities are allowed. I mean, in cities, you know, in the last time around those debates of SB, 50 and 827, cities were saying, no, no, we can do it, if you just give us the tools and yeah, we'll take care of it. And this is the result. It's just not, not happening, yeah.

Aaron Barrall 1:01:55
And to that point, Paavo, the example of direct state preemption in California, 80 years.

Aaron Barrall 1:02:03
Most effective law that we have around housing talking

Shane Phillips 1:02:06
about how we build more 80 years than anything else in Los Angeles now, and we build fewer than 100 per year prior to 2017.

Paavo Monkkonen 1:02:13
It's too bad, because you would like to imagine that there's a world where you know, cities do know their context better, and maybe they can create something that's gonna result in a better housing product for their residents, but it just seems like that's not what's happening. What is the SB, 50 part 379, Senate Bill 79?

Aaron Barrall 1:02:32
Okay, so Senate Bill 79 hope it makes it through. And there's another bill that was, I think, announced yesterday, that allows eight units on any residential lot in the state, with a couple of exceptions for environmental areas. So interesting, that's a huge law.

Shane Phillips 1:02:49
If it passed, I think that's a B or SB, 647.

Paavo Monkkonen 1:02:51
And, this is, I mean, it connects directly to something Aaron and I have been talking about, which is the challenge of getting a positive fluff given the requirement for low income housing site to be half an acre larger. So there's some intricate details I don't think we'll get into at this point. But you know, we need to really rethink how if we want to achieve fair housing goals, we really need to rethink some of the rules of housing element process.

Aaron Barrall 1:03:17
Yeah, so Paavo, you mentioned a lot of those details. You and I explained that in pretty detailed detail. Yeah, detailed detail, detail. We provide some additional details about those specifics you just mentioned in a report that we published where we look at the Fair Housing land use score for 199 cities in California. You can check that out on the Lewis Center website.

Shane Phillips 1:03:40
All right? Well, we have spent two and a half hours talking about one of our reports, and we just closed out by referencing another quite long report. So it's all about the Lewis Center these days. Aaron, thank you for joining us for a two parter. I know this was a lot of preparation, but we really appreciate you joining us and being part of this team.

Paavo Monkkonen 1:04:01
Yeah, thanks for having me. Yeah, thanks Aaron, and thanks for having me. Congrats guys.

Shane Phillips 1:04:10
You can find links to all the Lewis Center's work on our website. Lewis.ucla.edu show notes and a transcript of the interview are there too. The UCLA Lewis Center is on the socials. I'm on blue sky @ShaneDPhillips and Paavo is there @ElPaavo. Thanks for listening. We'll see you next time you.