Apr 26, 2019

Legalizing Duplex Conversions Would Have Some Predictable, and Some Unintended, Effects

Salim Furth Senior Research Fellow

California’s most ambitious housing reform, the MoreHOMES Act, became more nuanced and further-reaching in an agreement reached by State Senator Scott Wiener (D-San Francisco) and State Senator Mike McGuire (D-Healdsburg) on April 24th. The MoreHOMES Act, or Senate Bill 50, would preempt some local regulations on the height and bulk of residential buildings in California counties with populations above 600,000. It would have modest effects, per the new agreement, in smaller counties.

The new agreement, however, broadened the reach of the MoreHOMES Act in one key provision, according to a preliminary summary posted by Los Angeles Times reporter Liam Dillon. It would preempt local regulations and allow:

1. Subdivision of existing houses into a maximum of four units, and

2. Construction of four-unit buildings on vacant land in any area that a municipality zones for residential use.

The provision would not allow tear-down and replacement of existing homes.

The first provision mirrors the way that American cities traditionally transitioned from town to city density. As rent rises, homes shift from occupancy by individual families with one or two incomes to multi-income group homes or to multi-family use. California already allows group homes, so large houses in high-priced areas are frequently occupied by several unrelated adults. But few municipalities allow the division of existing houses into multi-unit buildings, so the existing housing stock serves families poorly. Not surprisingly, the San Francisco metro area has one of the nation’s lowest shares of children.

Although the law allows conversions into fourplexes, the majority of conversions are likely to be from single-unit to duplex, since few homes are large enough to offer three or four units each with its own bathroom, kitchen, and bedroom.

Of course, most single-family neighborhoods will be unaffected by the policy change. Where houses are small or prices are modest, subdivision is uneconomical. The map below shows which California areas have single-family homes that are large and expensive.

Several areas jump out as the prime candidates for conversions: all of Orange County and much of San Diego County have relatively large, high-priced homes. The affluent edges of Los Angeles County, in areas like Diamond Bar and Palos Verdes, are similar. In Northern California, the South Bay and the inland parts of Contra Costa County are candidates for conversions.

Unaffordable Consequences

Unlike the first part of the new provision, the second is likely to backfire and lead to substantially less residential construction, the opposite of the intended effect. California municipalities have long had the choice of zoning to allow no residential use, single-family residential use, or dense residential use. The provision would remove the middle option while still ceding to municipalities the authority to decide whether residential zoning should be enacted at all.

A few California municipalities have embraced dense construction on vacant land. For example Dublin, California, has new Italianate mansion apartment buildings. But most municipalities are stingy with residential zoning at any density, and the new provision would give them an incentive to rezone vacant land from residential to commercial or other use.

Even with the new provision, municipalities could still achieve their goals of attracting only high-priced, low-density residences by funneling growth through “planned unit development” (PUD) processes, which are negotiations between planners and developers. PUD and similar discretionary processes are slower and more expensive than by-right development, and are only economical for large-scale builders.

Thinking Ahead

As California’s Senate continues to refine the MoreHOMES Act, they should revise the second part of this provision to avoid creating an anti-residential backlash in local zoning. That part could be narrowed to cover only ‘infill parcels’ in areas that are already firmly zoned for residential use or dropped entirely.

In the future, California legislators should consider a return to “additive zoning,” which would allow residential construction in commercially-zoned areas, but not vice-versa. Additive zoning was common in the US in the first half of the 20th century and is still practiced in Japan. It allows cities to evolve with the continually-changing modern economy and would return many low-value or vacant commercial sites to high-value residential use.

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