Housing Economics in a Nutshell
The Problem: California's Ridiculously High Housing Prices
A Solution:
Change the focus of local housing policy toward units that are affordable by design, without subsidies.
Unit size zoning is easy to implement and will spread easily as the benefit of lower-priced housing improves the quality of life in California communities, especially for the millennial generation. Key factors include:
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Increase housing supply
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Smaller unit sizes
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Limits on local rent seeking
The price level of housing is determined primarily by the cost of producing new housing.
As a commodity, building square footage costs about the same to build in all parts of the U.S .. Building techniques are national, as are building codes. Products like lumber, appliances, and glass are purchased from a national market.
The difference in housing prices between states is primarily from the costs and delays of government entitlements.
Housing prices can be driven down toward the cost of producing those units - to the point of surplus.
Thus, with substantial increases in entitled land (as now required by State Housing Element law), and statutory limitations on local government rent seeking, the housing prices in any California community can be driven down toward the cost of producing those units - to the point of surplus.
We can let the air out of the California housing bubble from the bottom up without causing a housing price crash by allowing and encouraging a surplus of small housing units.