Key points:
- California faces a severe housing crisis with high rents and low supply.
- State lawmakers have passed reforms to address the housing shortage, but construction has lagged.
- Critics argue that zoning reform alone won’t solve homelessness or poverty.
I will say it once again: California is in a housing crisis. That much is clear to anyone trying to rent an apartment, buy a home, or make sense of the tens of thousands of unhoused people across the state.
For years, lawmakers in Sacramento have passed a suite of reforms intended to address the housing shortage—streamlining approvals, cutting red tape, and overriding exclusionary zoning.
But despite those efforts, new housing construction has lagged, and affordability remains out of reach for many Californians.
A recent editorial from the Orange County Register offers one explanation for this disconnect. The August 5 editorial, “Local housing regulations undermine California’s building efforts,” points to a fundamental tension in California’s housing landscape: even as the state tries to remove obstacles to new development, local governments continue to erect new ones.
In particular, the piece highlights how local regulations—such as inclusionary zoning mandates and development impact fees—have undercut the state’s reform agenda and helped preserve the status quo of housing scarcity.
“Inclusionary zoning” refers to local ordinances that require developers to set aside a portion of newly built housing at below-market prices, or to pay into affordable housing funds. The goal is to promote affordability by ensuring that new development includes homes for low-income residents.
But the Register editorial argues that these mandates often function as a hidden tax on housing construction, raising the cost of building market-rate units, slowing production, and pushing some small developers out of the market entirely.
The editorial frames inclusionary zoning as a “taking”—a government action that diminishes private property rights without proper compensation—and criticizes it as both legally questionable and economically counterproductive.
“These are local rules that require builders to set aside a portion of their new units at below-market prices for buyers who qualify as low income,” the editorial states. “Aside from being ‘takings,’ whereby the government devalues an owner’s property, inclusionary zoning provides myriad practical problems. It raises prices for the remaining units and creates a lottery for people trying to grab one of the under-market units.”
To illustrate the tension between state and local policies, the Register points to the case of Wesley Yu, a homeowner in East Palo Alto.
According to a CalMatters report, Yu sought to build a home and a guest cottage on a parcel of land. Under state law, such projects are exempt from review under the California Environmental Quality Act (CEQA), thanks to housing streamlining legislation passed in recent years.
But the city of East Palo Alto imposed a $54,891 “in-lieu” fee unless Yu agreed to make one of the units permanently affordable under the city’s inclusionary zoning ordinance.
Yu is now suing the city with support from the Pacific Legal Foundation, arguing that the requirement violates his property rights.
“The Supreme Court has repeatedly made it clear that the government can’t force people to give up their property rights in exchange for a permit,” the group said in a public statement. “The Yus’ modest home project doesn’t reduce affordable housing—it increases overall housing supply. Yet the city is holding their permit hostage unless they give up a portion of either their property or their savings.”
The case hinges on a 2023 U.S. Supreme Court ruling that reinforced limits on what cities can demand from developers.
Under that decision, local governments may only impose development fees or requirements that are directly tied to the impact a project has on infrastructure, such as road congestion or water usage. Asking for unrelated concessions—like payments into a general affordable housing fund—could run afoul of the Constitution’s takings clause.
The broader point is that local governments, under the banner of “local control,” continue to impose rules that contradict or neutralize state efforts to expand housing supply.
The Register editorial argues: “So the state reduces regulations with its right hand, but cities then take them away with their left one.”
This push and pull between state reform and local resistance has become the defining challenge in California housing policy.
While Sacramento has passed dozens of laws over the past decade to encourage infill housing, allow duplexes in single-family neighborhoods, and reduce CEQA abuse, many of those reforms haven’t produced the hoped-for wave of construction.
That’s in part because cities still wield enormous discretion over what gets built, where, and at what cost.
Enter California YIMBY, one of the state’s most influential pro-housing advocacy organizations. The group has been at the forefront of efforts to eliminate exclusionary zoning and support policies that allow more homes to be built in high-opportunity areas.
“The only way to make housing broadly affordable is to reform zoning and build a lot more homes in the places people want to live,” California YIMBY stated on X (formerly Twitter).
Their agenda includes legalizing multifamily housing in single-family zones, promoting accessory dwelling units (ADUs), reforming CEQA, and streamlining approvals for projects near transit. They argue that zoning reform is essential not only for affordability, but also for racial and economic equity, climate sustainability, and economic growth.
And the evidence supports them. Restrictive zoning and discretionary review have long been used to block affordable housing in wealthier communities, perpetuating segregation and economic inequality. Easing those restrictions can allow a broader range of housing types—from duplexes to apartments to co-living spaces—to be built where they’re most needed.
But critics of zoning reform raise important concerns.
Some argue that statewide mandates override community input and democratic decision-making.
Others warn that upzoning could lead to gentrification and displacement, particularly in working-class or minority neighborhoods. And there are legitimate questions about infrastructure: if housing is densified without investments in schools, transportation, water, and public safety, the quality of life may decline.
Even proponents of reform concede that zoning reform is necessary but not sufficient. Market-rate development alone won’t solve homelessness or provide housing for the poorest residents. That requires public investment, tenant protections, and policies to prevent displacement.
As Matthew Yglesias has argued, zoning reform unlocks supply—but the government must also ensure that supply is equitably distributed and affordable.
In the end, California’s housing crisis won’t be solved by one policy or one level of government. It will require coordination, investment, and political courage. But until state lawmakers confront the local regulations that undermine reform, even the most ambitious state laws will continue to fall short.
Zoning reform is the key that unlocks the door. If cities keep slamming that door shut with punitive fees and obstructionist rules, we’ll never build our way out of this crisis.
David says: “I will say it once again: California is in a housing crisis. That much is clear to anyone trying to rent an apartment, buy a home, or make sense of the tens of thousands of unhoused people across the state.”
Actually, it’s not clear using those metrics (claims) at all. There’s people buying and renting houses every single day, and prices are dropping.
Also, rent control ensures that renters in places like San Francisco pay far-below market value. I personally knew someone who paid less in rent for an entire flat in the Marina district (with a garage and a rooftop patio) for less than most new homeowners pay in taxes alone.
David says: “In particular, the piece highlights how local regulations—such as inclusionary zoning mandates and development impact fees—have undercut the state’s reform agenda and helped preserve the status quo of housing scarcity.”
How nice it is to see housing advocates argue AGAINST inclusionary (Affordable housing) requirements, not to mention shortchanging cities and existing neighborhoods regarding the costs they generate.
Goes to show “who” is really behind all of this.
More “deregulate please” B.S. I’ll admit zoning is a joke in California, but not because it’s too restrictive. Want to zone hundreds of acres of ag land in floodplain for development? No Problem! (See North Natomas)
As for whether deregulating will actually lower prices. Again: nope!
Here’s where to find the key: https://profstevekeen.substack.com/p/the-housing-market-is-a-rigged-game
Non-conventional economist, Steve Keen (who, unlike the orthodoxy, predicted the subprime/derivatives meltdown) explains that mortgage lending is *the* important driver of higher prices. He’s got the data, too.