Back to Basics

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29-04-2025

Happy Tuesday, and welcome to another edition of Rent Free. This week's newsletter takes a look at a few major housing developments in state legislatures. Stories include:
How a California transit-oriented development bill survived a crucial committee hearing, while a missing middle bill wasn't so lucky
Montana lawmakers continue to perform more miracles on zoning reform.
Washington legislators pass statewide rent control.
As the newsletter covered last week, two significant California housing bills, Senate Bill 79 and Senate Bill 677—which would respectively upzone land near transit and liberalize regulations on duplexes and starter homes—faced a make-or-break hearing before the Senate Housing Committee.
One made it, the other broke.
The committee rejected S.B. 677 and approved S.B. 79. The latter bill now heads to the state Senate's Local Government Committee.
The immediate practical implication is that any serious reforms to the state's signature missing middle housing regulations are a dead letter this year, while debates about whether or not to enable more transit-oriented development will continue.
The housing committee hearing itself included some tense, if exceedingly inside-baseball, drama.
S.B. 79 passed over the objection of Senate Housing Committee Chair Aisha Wahab (D–Hayward), who has repeatedly expressed skepticism about the ability of market-rate (i.e. unsubsidized) housing to ease California's housing shortage.
"Rolling the chair," as that is colloquially called, is considered an unusual and confrontational move.
When testifying in favor of S.B. 79, Sen. Scott Wiener (D–San Francisco), the author of that bill and S.B. 677, also spent a considerable amount of time criticizing the unusually negative committee report on S.B. 79.
This was a not-so-veiled swipe at Wahab, whose committee consultants prepared a report that included no recommendations for how to amend or improve S.B. 79, and instead just urged a simple "no" vote.
Wiener compared the report to a line from Marge Simpson's aunt (he meant mother), who says in one episode, "It hurts to talk, so I'll just say one thing: you never do anything right."
Wahab, during her own remarks at the housing committee hearing, spared no criticism of S.B. 79, which she said was unacceptable so long as it didn't include affordable housing mandates.
"Bypassing affordable units perpetuates socioeconomic segregation, which is de facto racial segregation," she said at the hearing.
While California's supply-side housing reformers can be happy that S.B. 79 did survive a hostile committee hearing, the nature of the debate is nevertheless a depressing reminder of just how little progress has been made conceptually on this issue.
In the state with one of the worst housing crises in the country, lawmakers are still having this very rudimentary discussion about whether enabling more housing production generally will lower housing costs.
This should be a no-brainer. Economic theory and real-world results from other, less regulated states make it abundantly clear that when more new housing is built, even when it's expensive "luxury" housing, average prices fall. The people who can't afford the newest, most expensive housing still benefit from falling rents on older, existing units.
The alternative idea that new housing has to be built as money-losing, below-market-rate housing in order for it to improve affordability is not just false, but gallingly so.
It's easy to see the absurdity of that position when it applies to any other good. Imagine a lawmaker arguing in the middle of a famine that new land can't be opened up for farming unless farmers are required to sell their crops at a loss.
That California legislators, let alone the chair of the state Senate's Housing Committee, still don't grok that very obviously true idea is equal parts alarming and sad.
On one of the most important issues facing California, legislators are still fighting over the basics.
The good news is that lawmakers in other states have in fact grokked the basics on housing.
In Montana, lawmakers have built on last session's housing reforms (the so-called "Montana Miracle") with the passage of a slew of bills that pare back local parking minimums and height limits, while capping impact fees charged on new housing developments.
The parking reform bill, House Bill 492 authored by Rep. Katie Zolnikov (R–Billings), prevents city zoning codes from requiring parking for child care facilities, assisted living facilities, affordable housing, and residential units under 1,200 square feet.
A second bill, S.B. 243 authored by Sen. Ellie Boldman (D–Missoula), would prevent local governments from setting height limits of fewer than sixty feet in downtown areas, industrial areas, and commercial clusters.
Those two bills pair well with a law enacted in 2023 that allows mixed-use and multifamily residential buildings in commercial zones.
While that bill ended explicit zoning bans on building apartments in downtown commercial areas, minimum parking requirements and height limits still made residential development practically infeasible.
With S.B. 243, a developer would have every right to convert a centrally located commercial lot into a six-story apartment building. Provided the units are all under 1,200 square feet, H.B. 492 would free them from any obligation to add parking—which is often a development killer on smaller lots.
"It's going to be a big deal. There are a lot of cities in Montana that maintain some pretty severe height limits. We should be building up," says Kendall Cotton, the president of the Frontier Institute, a Montana-based think tank.
Another notable bill, S.B. 133, eliminates local governments' ability to charge impact fees for landscaping and caps increases on impact fees to the producer price index's increase in commodity prices.
Montana's zoning reforms are notable both for their sweep and their simplicity. Contra the typical California zoning reform, Montana's bills are all a few pages long, and refreshingly free from endless carve-outs and caveats about labor standards and affordability mandates.
That leaves less room for local governments to exploit loopholes and makes the bills more intelligible and usable for developers.
State-level zoning preemptions are a pretty recent phenomenon in the Montana Legislature.
When Danny Tenenbaum, a former Democratic legislator from Missoula, introduced a fourplex bill in the 2021 session, it didn't make it out of committee.
But that defeat was followed by Gov. Greg Gianforte assembling a bipartisan task force in 2022 to look at ways to increase housing supply in the state.
A number of recommendations from that task force, including preemption of local restrictions on duplexes and accessory dwelling units, managed to pass with the governor's backing in 2023.
Now that lawmakers are more used to the idea of state-level preemption, it's easier to build support for subsequent bills, says Tenenbaum.
"Once we passed a few bills and got people used to voting yes to putting some sideboards on what regulations local governments can impose, that made it a lot easier to bring other bills that set further limits on what red tape cities can use to slow down and block housing development," he tells Reason.
Having passed the Legislature, Montana's housing reforms go to the governor for a signature. Once transmitted to his desk, Gianforte will have 10 days to sign them.
Tenenbaum wrote a comprehensive rundown of all the bills that have passed the Montana Legislature this session for the Sightline Institute. Read Reason's interview with Gianforte about housing reform here.
The slow, steady rehabilitation of rent control continued this past week, with the Washington Legislature giving final approval to a bill that caps annual rent increases to the lesser of 7 percent plus inflation or 10 percent.
As Oregon Public Broadcasting reports, the bill faced opposition from both the legislature's Republican minority and some moderate Democrats who expressed credible fears that capping rents would reduce home construction.
Those moderates briefly succeeded in raising the rent increase cap to 10 percent plus inflation. But this was then cut back down to 7 percent. The bill passed on the last day of the state's legislative session.
Washington follows the example of its southern neighbor, Oregon, which in 2019 passed the country's first state-level rent control law. California followed suit later that year.
Washington's bill includes a number of moderating provisions, including an exemption for buildings that were built in the last 12 years and two-, three-, and four-unit buildings when the owner lives on site. The bill also allows vacancy decontrol, meaning landlords can raise rents an unlimited amount on vacant units.
This makes Washington's bill relatively more modest than some legacy local rent control policies as exist in San Francisco, Los Angeles, and New York, where rent increases are typically capped at one or two percent a year.
That's not to say that it's costless. Economic theory and academic research are clear that to the degree that rent control suppresses rents, it will also suppress housing construction and/or housing quality.
Today's moderate rent control policy can also become tomorrow's strict rent control policy.
In 2019, New York drastically tightened longstanding rent stabilization policies covering New York City. The policy has certainly helped to suppress rents.
New data from the New York Apartment Association, an advocacy group for property owners, show continually falling rental incomes, falling maintenance spending, and a sharp increase in financially distressed properties following the 2019 reforms.
California is currently considering a bill to slash its own state-wide rent cap from 5 percent plus inflation to 2 percent plus inflation, and expand controls to many single-family homes and condominiums.
Like dozens of states around the country, Washington had sworn off rent control. There were no state-level controls, and state law prohibited localities from adopting their own policy—always a sore spot for Seattle socialists.
Washington's rent control bill leaves the prohibition on local rent control laws in place. Provided Gov. Bob Ferguson signs it, it'll join the movement to rehabilitate a once radioactive policy.
Over at Commentary, Seth Mandel covers a contentious zoning fight in Linden, New Jersey, where the town's Orthodox Jewish community is objecting to new rules limiting the size of homes on smaller lots.
The town's Jewish residents argue that limiting the size of homes is a ban on the kinds of large family-sized homes that Orthodox Jews with large families require.
Mandel's article details additional zoning restrictions seemingly aimed at the Jewish community, including Linden continually expanding minimum lot sizes for houses of worship until none could be built in the town.
That latter restriction would seem to be an easy target for a lawsuit under the Religious Land Use and Institutionalized Persons Act (RLUIPA), a federal law that protects religious land uses from local and state land use regulations.
Other Orthodox communities in New Jersey, with the aid of the U.S. Justice Department, have filed successful RLUIPA lawsuits against their towns' zoning restrictions.
What stands out in the Linden case is that the zoning restrictions being deployed to allegedly exclude the Jewish community are hardly unique. Towns and cities across the country maintain egregious minimum lot size requirements, excessive regulations on small lot development, and more.
Historically, zoning laws were used to exclude certain types of people. Today, their aim is a more general exclusion of people and businesses. That's a little less noxious than outright racial or religious discrimination. It's hardly inclusive.
Read Reason's voluminous past coverage of zoning laws tripping up religious land uses.
The U.S. Supreme Court mulls taking up a challenge to Los Angeles' COVID-era eviction restrictions.
Over at City Journal, the Cicero Institute's Devon Kurtz argues that the Trump administration was right to shutter the U.S. Interagency Council on Homelessness.
New York's mayoral candidates are warming to freezing rents at rent-stabilized buildings, reports Politico.
Bay Area homeowners sue the city of Belvedere, saying the city has fined them $250,000 over permitting violations they claim were in fact the city bureaucracy's fault, reports the San Francisco Chronicle.
Ned Resnikoff in The Nation on how YIMBYs are the real class warriors
The post Back to Basics appeared first on Reason.com.