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Tuesday, July 16, 2024

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News + PoliticsHousingDoes Scott Wiener understand the basics of the housing market?

Does Scott Wiener understand the basics of the housing market?

Based in his recent comments, apparently not.


Does Scott Wiener, author of some of the most sweeping housing legislation in California history, chair of the State Senate Housing Committee, and one of the “state legislative leaders on housing and affordability” so designated by the White House, understand how the housing market works?

Based on his remarks at a recent public forum in Southern California, the answer is No.

Senator Wiener isn’t listing to his realtor pals—or maybe he is. Wikimedia Images photo.

Wiener’s comments were reported by Tim Campbell in an article posted by CityWatchLA. On October 27, Campbell, a retired public service auditor, and Wiener appeared on a panel hosted by the Valley Industry and Commerce Association’s 2023 Business Forecast event. The topic was “Housing and Homelessness.” Here’s what Campbell wrote:

Senator Wiener said dividing single family lots into multiple units would not increase the cost of housing.  As he explained, if a single family lot is worth $1 million, it may sell for $2 million to a multifamily developer, but that cost would be divided among four or six units. Therefore, the cost of any given unit would be lower than a single home. 

As a realtor acquaintance of mine explained, that is failed logic. Real estate is market-based, and the cost of the land is just one factor.  If those six units are located in a high-demand area, they will indeed sell for $1 million or more each. It is little wonder Senator Wiener is the darling of corporate developer interests in Sacramento.

Wiener’s remarks were so mind-boggling that I was afraid that unless the event had been taped, he would deny that he made them. Campbell kindly sent me a link to the video.

These are the senator’s exact words:

I’m just going to make up some numbers here. Let’s say you have a parcel of land that’s zoned for single-family, and that land is worth one million dollars. And we’ve seen in various parts of the Bay Area, like a small parcel of land with a dilapidated hut on it that’s selling for like millions of dollars…. 

Let’s say we upzone it so you can put six units on there, and let’s say that parcel is now going to sell for $2 million—double the price of it. One million dollars for one home. Two million dollars for six homes. Which is more affordable?

So yes, that property-owner can now reap that extra million dollars, but in the big picture, when you allocate it per unit on that land, it is less expensive. Yes, in the short run, you’re giving someone a financial benefit. There’s no doubt about it. In the long run, you’re creating more zoned housing zoned capacity, so that we can build more homes.

This is the Yimby line: build more housing, and prices will fall. Applied to a high-demand market such as the Bay Area, it flies in the face of reality. Upzoning—allowing more units to be built on a lot—increases the value of the parcel and thus the profit that can be squeezed out of it. The prices of the added houses that are built on that parcel will reflect that increased profitability.

Consider the recent history of 1310 Haskell Street in Berkeley. The Yimbys love to cite 1310 Haskell so they can mock the neighbor who brought a zucchini to a public hearing and complained that the proposed project would block his garden. They don’t talk about how upzoning affected real estate values on the site. As I wrote in 2018:

In 2015 contractor Cristian Szilagy paid $650,000 for a decrepit bungalow at that address. He wanted to replace it with three new housing units. The Planning Commission said okay, but after neighbors objected to parking, congestion, and shadowing, the council reversed the decision.

Recent California laws make it very difficult for a city to reject a housing project that meets the municipality’s objective standards—which the proposed project did. Led by Sonja Trauss, the San Francisco Bay Area Renters Foundation (SFBARF) sued Berkeley twice and in 2017 won the case. Szilagy tore down the old house and built three units in its place, each of which sold for $1.2 million or $1.3 million.

Wiener’s reasoning can’t make sense of 1310 Haskell. 

Given his power, reputation, and political ambition—when Pelosi retires, he’ll run for her seat—his apparent failure to grasp real estate basics is alarming.

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