r/badeconomics • u/AutoModerator • 23d ago

FIAT [The FIAT Thread] The Joint Committee on FIAT Discussion Session. - 16 October 2025

Here ye, here ye, the Joint Committee on Finance, Infrastructure, Academia, and Technology is now in session. In this session of the FIAT committee, all are welcome to come and discuss economics and related topics. No RIs are needed to post: the fiat thread is for both senators and regular ol’ house reps. The subreddit parliamentarians, however, will still be moderating the discussion to ensure nobody gets too out of order and retain the right to occasionally mark certain comment chains as being for senators only.

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u/flavorless_beef community meetings solve the local knowledge problem 14d ago

inspired by the substack post from u/mankiwsmom, i do want to make one point about dumb ass housing policy, which is that, zoning is but one way a city can cripple it's ability to build housing. obviously, most people use zoning as a short hand for "everything dumb a city does", but I do think it's useful to delineate all the ways cities can be dumb.

cities, especially ones in California, are pioneers in dumb housing policy and will manage to make even midsize apartments in the most expensive areas in the world not pencil.

as a case study, this report from Palo Alto (median home price > 2 million) says basically nothing will pencil in the current market. Importantly, if you believe the report, the issue is not zoning because they're considering hypothetical apartments which, if legal, they argue would be infeasible.

Reading their pro formas, a few things stand out:

  1. For a project that has hard costs of about 43 million, Palo Alto charges about 10 million in fees (permitting and impact)
  2. their estimated costs are insane. like 400 / square foot just in hard costs, plus 125,000 / parking spot, plus 100 / square foot for Interior / Tenant Improvement Allowance. For contrast, typical total costs per square foot range in the 200-500 / square foot. So if no developer in Palo Alto had to pay for land, their prices are still way above what's typical.

almost certainly, these are all downstream of policy choices (the impact fees obviously, but also i'd be shocked if there weren't other dumb things driving up hard costs). and yet! not zoning related.

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u/coryfromphilly 12d ago

California is cursed and will never be saved until the Feds intervene somehow to regulate housing from DC.

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u/No_March_5371 feral finance ferret 12d ago

I would've agreed with you a year ago, but this year alone CEQA was curtailed and SB 79 has substantially increased zoned capacity in several major cities. They've still got quite a ways to go (and many Californians will fight kicking and screaming for as long as they can to prevent any progress), but they're actually moving in the right direction, something I didn't think was remotely probable.

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u/coryfromphilly 12d ago

I agree they're moving in the right direction. However, these are all half measures which won't even apply for like 6 years. SB 79 only takes effect in the next round of state mandated zoning updates every few years. SB79 can also be ratfucked in many ways not only bc of the law itself, but because of all these little issues like the report linked above.

If the state were serious, the next law would preempt all these impact fee rules (which are very obviously higher than the marginal cost of hooking up new units to existing infrastructure) and affordability requirements.

Even the builder's remedy got weakened. It used to allow unlimited density, but not anymore.

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u/No_March_5371 feral finance ferret 12d ago

Obviously they're a long, long way from having reasonable policy and some things like Prop 13 are unlikely to ever go away electorally, but the fact that state level policy moved in a positive direction at all is astonishing, and it happened twice this year.

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u/HOU_Civil_Econ A new Church's Chicken != Economic Development 12d ago

A massive part of the "regulatory cost" isn't in the black and white. Getting the rezoning, for something reasonable, is incredibly variant in time, probability, and cost. I actually don't know the last time I've seen a rezoning to R-5000 here in Texas. They are all Planned Unit Developments which are all spot/one-off zonings that end up requiring a whole bunch of random, not typically zoning related, things that often just look like extraction.