Letting homeowners turn to homebuilders

California just gave single-family homeowners more control over their property and, for those in high-demand cities, the potential for a big financial windfall. Eight time zones away in the UK, the Conservative government is revising its planning bill in
ways that could give homeowners a similar boon.
The details and contexts differ, but both approaches recognise a political reality. The way to relieve housing shortages is to build more homes, and it’s easier to legalise construction if existing homeowners realise benefits.
California’s new law is known as SB9, not exactly a catchy title. If California’s legislature were as fond of strained acronyms as Congress, they might have named it something like the Homes Act, for promising Homeowner Money for Expanded Supply. It gives potential Nimby resisters a financial stake in new housing.
With some exceptions, such as historic districts and fire-prone areas, the law allows people who own single-family homes to add a second unit on their property, either by constructing a new building or turning an existing house into a duplex. In addition, they can split a lot in two, with two units permitted on the second lot. In areas where housing is in great demand, that flexibility promises to make the land more valuable.
Most local rules about heights and setbacks would still apply, but the new construction would be exempt from challenges under the California Environmental Quality Act, a favourite tool of housing opponents. The property owner would have to live in one of the units for at least three years after the project was complete.
“Any change in use requires the cooperation of the owner, either to sell the site or to redevelop it themselves,” noted a report from the Terner Center for Housing Innovation at the University of California at Berkeley. In most of the state’s single-family neighbourhoods, individual houses will remain the most profitable use of the land. So those places won’t change.
In job-rich areas of Los Angeles, San Diego and Silicon Valley, however, SB9 enables more housing while still preserving neighbourhoods’ low-rise, leafy feel. Although Southern California is famous for its single-family suburbs, many historic LA neighbourhoods include attractive duplexes and four-plexes dating to the 1920s and 30s. “If more of the city just looked like that we probably wouldn’t have a housing crisis,” said Michael Manville, an urban planning professor at the University of California at Los Angeles. “And those are beautiful buildings.” The Terner Center estimates that about 700,000 new homes would become economically feasible under the law’s provisions, including 126,000 in Los Angeles County.
To see how it might work, consider the post-World War II bungalow whose open house I visited while researching this 2018 column on housing expansion. Dark, rundown and strangely laid out, it sold for $1.52 million. The real estate agent rightly predicted that it would be a complete teardown. The five-bedroom house that replaced it sold for $3.75 million.
Under SB9, the same lot might instead be occupied by four three-bedroom townhouses, selling for $1 million each and sharing a yard. The old house’s sales price would presumably go up accordingly.

—Bloomberg