Marc Andreessen’s Housing NIMBYism Is Losing Ground

Bloomberg Opinion , August 09, 2022

Venture capitalist Marc Andreessen got caught last week engaging in housing hypocrisy. The author of a 2020 manifesto called “A Time to Build," Andreessen is a vocal opponent of NIMBYism. Yet when it came to his own town of Atherton, California, Andreessen signed a public comment opposing a plan to add 137 units of multifamily housing by rezoning nine lots. (The comment, written in the first-person singular and a style unlike Andreessen’s, seems to have been composed by his wife.)

An anonymous emailer sent links to the relevant documents and local press coverage to me and, apparently, to Jerusalem Demsas of the Atlantic. Her subsequent article concluded that Andreessen’s hypocrisy illustrates why housing reforms have to take place at the state level, where “officials are influenced by NIMBYs, but they have a much larger electorate to worry about and a mandate to address the cost of living and rising home prices, not just respond and implement local desires.”

The incident proves more than that. It demonstrates that California’s state-level housing reforms are working — not as fast as they ideally would, but working nonetheless.

Under a law passed in 1969, two years before Andreessen was born, every eight years California cities have to project the future demand for housing in several income tiers and specify where those homes might be built. The long, complicated and expensive ritual has produced many hearings and documents but not much housing. It offered too many loopholes.

Cities could lowball the numbers. They could identify theoretical sites in their plans but, when later faced with a real development proposal, impose delays and restrictions that required scaling down the project, increasing the sales prices or rents, or abandoning the whole thing.

“Housing element” plans didn’t have to make sure the owners of prospective sites were willing to sell. As long as cities went through the right motions, they faced no consequences for obstructing new housing.

Now they do.

California has toughened its approval process for the housing-element plans, and cities face fines of up to $600,000 a month if they don’t come up with an acceptable plan. The state can review at any time whether the city is complying with its promises. If not, it can require streamlining development permissions to keep those commitments.

Cities that fail to meet their obligations face fines of up to $100,000 a month. They can lose state funding. The state can even suspend their power to regulate land use.

The process is still roundabout. It’s a long way from letting supply meet demand. But as housing advocate Nolan Gray said an email, it’s “a useful kludge for bringing at least a little liberalizing state oversight into a very dysfunctional and restrictive system of local land-use regulation.”

The threat of state punishment gives city officials political cover to loosen housing restrictions — like it or not. "I don't want Atherton to change," city councilwoman Elizabeth Lewis said at a July 21 hearing. "It is just heartbreaking and sickening to think we’re facing this from the state.”

But Atherton has already changed dramatically over the past few decades. The growth of Silicon Valley has made a town just four miles from Stanford University or Facebook headquarters an extremely desirable place to live. The upper-middle-class people who bought houses there decades ago couldn’t afford them today. Loosening housing restrictions would make room for people like them.

That fact seems lost on some longtime residents. Take one couple who filed their objections to allowing local schools to buy adjacent lots and build multiunit housing for their staff members. According to public records, they bought one of the area’s more modest homes, with 1,950 square feet, for $370,000 in 1987. It’s now worth 10 times that much.

Then there’s the woman who wrote that “if the mandate to build 345 units including multi-family low-cost units is implemented, Atherton would be dramatically changed forever.” She bought her place for $255,000 in 1976. Zillow estimates that the 3,820-square-foot house on 1.29 acres would sell for more than $10 million today.

Thanks to Proposition 13, these owners pay about $9,000 a year in property taxes, a fraction of what market-rate assessments would yield. A new $1 million townhouse would yield more property taxes than a single-family home that last sold 40 years ago.

Atherton is “an island of state-enforced mansion zoning in the middle of one of the most productive regions on Earth,” said Gray, who is research director at California YIMBY. “There's enormous demand for housing.” The town is never going to be cheap.

But without zoning, he hypothesized, “you’d likely overwhelmingly get a lot of seven-figure condos. That would be OK — every new unit permitted in a wealthy place like Atherton eases price pressure on housing further down the market.”

In the more constrained reality, California requires Atherton to add 348 new housing units over the next eight years, up from 93 in the current cycle. Between 2015 and 2020, the city gained 90 new units, including 54 inexpensive “accessory dwelling units,” or ADUs, otherwise known as granny flats, guest houses or garage apartments. The town hit its numbers for “very low income” housing but not for any other income category. 1

Atherton has added places for live-in domestic staff, but not for young Stanford professors. If its new plan doesn’t do better, it will face serious penalties. Local officials feel the pressure.

Confronting constituents outraged by the prospect of sharing the neighborhood with townhouse-dwelling riffraff, however, the Atherton city council revised its proposal. It eliminated zones for multiunit housing, including 40 units on a lot whose owner emphatically refuses to sell (shades of the old housing-element flimflam). The new plan still counts on a few multiunit additions on school property.

Mostly, it relies on two recent reforms that encourage single-family homeowners to add to the housing stock. One is the 2016 law requiring cities to approve ADUs, which Atherton says will supply 280 new units. The other is a 2020 law giving single-family homeowners two complementary rights: to build two units on their property and to split the lot in two, for a possible total of four homes. The new construction is exempt from challenges under the California Environmental Quality Act, a tool frequented used to block new housing.

With its large lots, Atherton is well suited to this approach. The plan attributes 96 new units to lot splits, including some already in the works.

In the Atlantic’s version of the story, the NIMBYs won: “As a result of a few hundred ultra-wealthy people, the town will remain exclusively for the elite.” But that’s not exactly the case.

For starters, it’s by no means sure that the state will approve the new plan. It could deem its assumptions unrealistic and require revisions.

More important, Atherton still has to meet the goals. The plan is no longer mere ritual. If the projections don’t line up with reality, the town may have to allow some multiunit developments. When constituents complain, local politicians can blame the state.

And a major zoning transformation has already taken place. Making places like Atherton friendly to ADUs and especially to lot splits is a big deal. City planners identified more than 600 lots larger than an acre where the current house was built before 1970 — the prescription for a teardown. With splits, they could account for more than 1,800 new homes.

In a town with fewer than 7,500 residents, that represents enormous potential. As Gray pointed out about seven-figure condos, even expensive new homes free up supply elsewhere in the region.

California’s modest reforms have already pushed the country’s most expensive town into accepting smaller, cheaper homes. Letting NIMBYs vent is a civic ritual. Once it’s over, it’s time to build.

1. In San Mateo County, which includes Atherton, a family of four with a household income of $149,100, a couple making $119,300 or an individual earning $104,400 qualifies as low income. For very low income, the limits are $93,200, $74,600 and $65,250.