SAN FRANCISCO – Changes to California's zoning laws could reduce the state's affordable housing gap, according to a report from a global consulting firm that specializes in developing policy for the evolving business and economic landscape.

In a 2014 McKinsey Global Institute report titled A Blueprint for Addressing the Global Affordable Housing Challenge by Jonathan Woetzel, Sangeeth Ram, Jan Mischke, Nicklas Garemo and Shirish Sankhe, the authors argue that states such as California could change their zoning laws to increase the supply of available land. This would in turn increase the number of building projects being developed and improve the availability of affordable housing.

The McKinsey Global Institute report explains how land costs are often the biggest stumbling block preventing affordable housing projects from succeeding, but that many urban areas are rife with locations that could developed or rehabilitated into affordable housing if communities were willing to change zoning laws to make building legal.

This strategy is endorsed by Richard Lyon, senior vice president of Public Policy, California Building Industry Association (CBIA). Lyon explained that finding a solution to the kinds of zoning challenges that leave a great deal of potential affordable housing undeveloped is just the latest chapter in the ongoing struggle to meet the demands of California's ever growing housing market.

“When we look at our forecasts, we expect that the state is going to have over five million new home owners in the near future,” Lyon told the Northern California Record. “And we see Millennials and post-Millennials reaching a point where they are ready to raise families and purchase their own homes, but the supply is just not there.”

Lyon went on to confirm there are many urban areas in California featuring plenty of locations that would make for viable housing developments if they were properly re-zoned.

“I think opening up the number of available plots of land is a key factor in creating more affordable housing, in urbanized areas the number of vacant and underutilized areas that could be used for housing is very large,” he added. “To address this shortage, we have to identify more sites and get them zoned for housing.”

Despite his support for the report's overall message, Lyon did note that there are challenges to expanding the affordable housing market that will not be solved simply by changing the existing zoning laws.

“The state has not taken the proper action necessary to develop the kind of fiscal tools needed to implement important infrastructure upgrades these neighborhoods require before they can grow the number of housing options available,” he said. “That's the bad news. The good news is that if the state takes proper action, re-zoning much of the urban areas of the city could fill as much as 25 percent of California's housing needs.”

In the end, whether these reforms take place will inevitably come down to whether or not the political willpower exists to enact them. According to Lyon, Gov. Jerry Brown was working to increase the number of areas in California that were zoned for housing, but those efforts stalled out in the legislature.

“I cannot say there is a clear pathway to resolving this issue but I think with strong executive leadership we can get there,” he said.

Want to get notified whenever we write about McKinsey Global Institute - San Francisco Office ?
Next time we write about McKinsey Global Institute - San Francisco Office, we'll email you a link to the story. You may edit your settings or unsubscribe at any time.

Organizations in this Story

McKinsey Global Institute - San Francisco Office
315 Montgomery Street
San Francisco, CA 94104

More News