Big Wall Street Investment Firms, Big Real Estate, and Big Tech have generated billions in revenue from residential real estate. To capitalize on their residential endeavors, they have successfully championed a self-serving false narrative about the housing crisis. Since these powerful industries shell out millions of dollars for marketing, lobbying, and campaign contributions, they wield great influence over politicians, government agencies, the news media, and the public at large. This influence has resulted in a sea change in residential land use policy and legislation.
This article does the following:
- Demonstrates Big Wall Street Investment Firms’, Big Real Estate’s, and Big Tech’s appetite for residential real estate;
- Describes the “False Housing Crisis Narrative”;
- Reveals the millions of dollars the Big Players are spending to influence political campaigns, legislation, and the press;
- Shows that Big Wall Street Investment Firms’, Big Real Estate’s, and Big Tech’s lobbying efforts have resulted in land use policy and legislation that augment their investments in residential properties;
- Presents a more effective way to address California’s housing affordability challenge.
BIG WALLSTREET INVESTMENT FIRMS’, BIG REAL ESTATE’S, & BIG TECH’S APPETITE FOR RESIDENTIAL REAL ESTATE
Big Wall Street Investment Firms, Big Real Estate, and Big Tech have become increasingly hungry for residential properties.
Rented homes have been a hot trade since investors made lucrative bets on foreclosed houses during the 2008-9 Great Recession. During the COVID-19 crisis, rents collected from commercial real-estate assets such as malls and offices took a hit, whereas most private residential tenants continued to pay up, according to the Wall Street Journal article entitled; “Property Investors Bed Down in the Family Home” .
“Buying up homes solves several headaches for powerful investors. Housing is a large asset class so can mop up a lot of excess cash. The submarket for rented single-family homes alone is worth approximately $3.1 trillion, according to Amherst—40% larger than the value of all U.S. offices and more than triple the value of all the country’s hotels. Renting out homes is also a good hedge against inflation. Over the past four years, rents have increased by 15% on average across Europe, Colliers data shows.” 
Due to this trend, Wall Street investment firms and real estate developers are more eager than ever to buy residential real estate. In June-2021, Blackstone's real-estate investment trust spent $6 billion on Home Partners of America, a company that owns more than 17,000 houses across the U.S. In July-2021, the investment firm bought a portfolio of apartments for $5.1 billion from insurer American International Group. Private-equity giant KKR launched a new division that will buy homes to rent them out, Bloomberg reported.
Meanwhile in Europe, property investors are increasing the share of their portfolios invested in residential real estate, and German landlord Vonovia recently launched an €18 billion, equivalent to $21.2 billion, takeover of competitor Deutsche Wohnen.
Big Tech also reaps millions in revenue from residential real estate investments. In addition, the tech industry benefits from a greater supply of market-rate housing for its well-paid workers.
To maximize profits from their residential property portfolios, the Power Players have sought to change land use policy and regulations. Recently enacted and proposed housing legislation take away local control of residential land use and give it to developers to maximize their return on investment (ROI); lower the cost of residential construction via deregulation and lower developer fees; raise the value of residential properties via up-zoning (increasing density); and increase rental income by promoting market-rate housing over affordable housing. This agenda has been aided and abetted by a finely-tuned “False Housing Crisis Narrative”.
THE FALSE HOUSING CRISIS NARRATIVE
The “False Housing Crisis Narrative” includes both a false problem and a false solution.
The powerful pro-development forces incorrectly define the housing affordability dilemma by over-inflating the projected population and job growth and, therefore, the number of new housing units needed for that growth. Moreover, they erroneously claim that every single community in California has the same housing problem (the “One-Size-Fits-All” syndrome). More recently, their ruse calls single-family zoning racist.
The False Narrative About Population Growth & Housing Need:
California’s population growth rate is at a record low and predicted to remain low.
According to data released on May 7, 2021 by the State Department of Finance, California’s population declined by 182,083 people in 2020. That’s the first time that annual statistic has come with a minus sign since 1900, when the department began collecting estimates. Between 2010 and 2019, more people moved from California to other states than those who moved to the Golden State, with a net loss of about 900,000 during the decade. The previous decade saw an even greater loss to out-migration: About 1.5 million residents left California from 2000-2009.
Despite California’s declining population growth, the State Legislature continues to call for construction of a whopping 3.5 million homes by 2025. This is based on a McKinsey & Company study that erroneously uses New York as a benchmark, even though California’s demographics and household formations are very different than New York’s. 
Another example of the growth hype is the California Department of Housing and Community Development’s (HCD) inflated Regional Housing Needs Allocation (RHNA).
The Department of Housing and Community Development (HCD) assigned the Bay Area region an exorbitant housing need of 441,000 housing units for the upcoming 2023 to 2031 Regional Housing Needs Allocation (RHNA) cycle. This is 2.35 times greater than the regional housing need for the last cycle (2015 to 2023), which was 187,000 units. – Again, despite a low or negative population growth rate in many Bay Area jurisdictions.
The Embarcadero Institute’s report entitled; “Double Counting in the Latest Housing Needs Assessment” proves that the HCD methodology for calculating the California Regional Housing Needs Assessment is indeed defective. The report found that “Use of an incorrect vacancy rate and double counting, inspired by Senate Bill 828, caused HCD to exaggerate by more than 900,000 the units needed in SoCal, the Bay Area, and the Sacramento area.”
It is important to note that Senate Bill 828 was authored by Senator Scott Wiener, who is heavily financed by Big Tech, Big Real Estate, and California YIMBY. 
The False Narrative That Single-Family Zoning Is Racist:
More recently, the false narrative claims that single-family zoning is racist.
It is true that prior to the Civil Rights Act of 1964, CC&Rs (Covenants, conditions, and restrictions), Homeowner Associations, and redlining excluded people based on race, color, creed, nationality, and a host of other criteria from certain single-family, duplex, and multi-family neighborhoods. Prior to 1964, segregation and similar prohibitions certainly existed and applied to all types of housing as well as all types of jobs, places, and opportunities. – not just single-family housing. However, this is no longer the case. Today, such exclusion is illegal.
Moreover, the attack on single-family zoning ignores the fact that homeownership is a crucial tool for communities of color to build wealth.
A 2013 study by researchers at Harvard University’s Joint Center for Housing Studies  lays out several valuable points about homeownership for people of color. First, in real-life practice, homeowners are more likely to accumulate wealth than renters. Also, homeownership has meaningful social benefits in which people feel a sense of success, have control over their living situation, and can put down roots in a community. The Harvard researchers noted, policymakers should help people succeed as homeowners.
The Big Powers wrongly tout that the solution to meet the exaggerated housing requisite, is a troubling “Trickle-Down” housing agenda. This agenda plays out this way: Deregulate land use as much as possible, a market-rate apartment construction boom will follow, and eventually sky-high rents will stabilize and drop since more units have come onto the market. It’s the outdated, supply-and-demand argument.
This solution pushes development of market-rate multi-unit housing because that’s how the Big Players make the profit margins they demand. There isn’t enough profit in affordable housing for them. Recently, the “Trickle Down” agenda has included deregulating single-family zones.
However, this deceptive “Trickle-Down” housing strategy results in very high demand at the low end of the market being met with more supply at the high end and creates an imbalance that only contributes to growing affordability concerns. Moderate and lower-income residents are left behind. They can’t afford market-rate units. The strategy also fuels gentrification in working-class communities, where new, over-priced apartments often replace existing affordable housing.
“Ending single-family zoning invites predatory developers into working-class communities, where properties may be less expensive. Those developers will then construct over-priced apartments, luring more affluent individuals into the neighborhood. Longtime, less affluent residents will then be forced out due to gentrification — they can’t afford rising rents.
In addition, demolishing large swaths of single-family housing for apartments will harm renters’ ability to become homeowners and build wealth since less single-family housing stock will be available.
Perhaps even more alarming, the aggressive push by politicians and the real estate industry to turn individuals, especially people of color, into permanent renters will create a massive transfer of wealth — and with that political power — that benefits those who will own the apartments: corporate landlords and other major real estate companies.”  (LA Progressive article entitled; “Why Do Politicians Want To Take Away Homeownership From Communities Of Color?”)
Moreover, land use deregulation typically includes excessive up-zoning and elimination of development standards (height, parking, set-backs, Floor Area Ratio – FAR, etc.). In addition, deregulation takes away local control, democratic public engagement, and due process, such as public hearings and environmental analysis. No longer does the local city council, with residents’ input, make decisions. Instead, real estate investors and developers determine where and how much housing growth will occur, with no regard for local conditions, capacity, or adverse impacts.
The subsequent housing densification, population growth, and revision of development standards increase the risk of adverse impacts on public health and safety, traffic congestion, infrastructure, utilities (water supply), public services (schools), views, sunlight, privacy, neighborhood character, and quality of life.
With no funding for dealing with the above listed impacts, tax paying residents bear the costs of the increased demand and mitigation of environmental impacts.
FOLLOW THE MONEY
Big Real Estate, and Big Tech Spend Millions To Influence California Political Campaigns, Legislation, & The Press
Big Real Estate pumped over $3,980,090 and Big Tech poured over $2,179,000 into California Independent Expenditure Committees in 2020, according to the CalMatters article entitled; “Cash blitz: Who’s spending the most to influence your vote for California’s Legislature?”
California Lobby Search  is an open-source public records tool that connects bills from the California State Legislature with lobbying activity filing from the California Secretary of State Office. According to this search tool, the amount of money that Big Real Estate and Big Tech are spending to influence California housing legislation is HUGE!
Between January 1, 2021 and June 31, 2021, Big Real Estate paid $1,166,595, Facebook (Big Tech) spent $368,894, and California YIMBY, which is backed by both Big Real Estate & Big Tech, dispersed $336,398 for lobbying activity on housing bills. That’s almost $1.9 million for just six months of activity. (Please see the attached spreadsheet.)
These powerhouses are even manipulating what we think is news. The Chan Zuckerberg (CZI) Initiative gave KQED $750,000 to help launch what the NPR station called a “dedicated housing news desk to cover the Bay Area’s housing and affordability crisis”, according to Zelda Bronstein’s investigative report entitled; “Facebook’s Housing Echo Chamber”. Subsequently, many of the articles coming out of the CZI-funded housing news desk mimic the “False Housing Crisis Narrative”, described above.
As a result, many politicians and government agencies have adopted the major players’ housing agenda. Moreover, their “False Housing Crisis Narrative” campaigns have greatly swayed the opinions of many unsuspecting residents.
BIG WALL STREET INVESTMENT FIRMS’, BIG REAL ESTATE’S, & BIG TECH’S INFLUENCE HAS RESULTED IN EXISTING AND PROPOSED LAND USE POLICY & REGULATIONS THAT AUGMENT THEIR INVESTMENTS IN RESIDENTIAL PROPERTIES
Big Wall Street Investment Firms’, Big Real Estate’s, and Big Tech’s influence has resulted in land use policy and legislation that augment their investments in residential properties. Recently enacted and proposed housing legislation take away local control of residential land use and give it to developers to maximize their return on investment (ROI); lower the cost of residential construction via deregulation and lower developer fees; raise the value of residential properties via up-zoning (increasing density); and increase rental income by promoting market-rate housing over affordable housing.
The resulting housing legislation typically does one or more of the following:
- Take Away Local Control - Take away local governments’ control of residential land use and give it to market-rate housing developers. Developers decide where and how much housing to build to maximize their return on investment (ROI);
- Streamline Approvals - Streamline the permit review process for housing, thereby posing a significant threat to democracy, public engagement, and high-quality development;
- Exempt CEQA - Exempt housing projects from thorough review in accordance with the California Environmental Quality Act (CEQA), thereby reducing environmental protections;
- Eliminate Single-Family Zoning – Require local jurisdictions to eliminate single-family zoning and up-zone single-family parcels, whereas single-family neighborhoods should be protected;
- Require Developer Incentives – Require local governments to decrease developer fees, increase housing density, reduce or eliminate parking requirements, increase height limitations, and/or lessen setbacks, which would increase the risk of adverse impacts on the environment, public health and safety, traffic congestion, infrastructure, utilities (water supply), public services, views, sunlight, privacy, neighborhood character, and quality of life;
- Require Objective Design Standards - Require "objective design standards" and disallow discretionary review, which limits local government's ability to best address unique situations and ensure that projects deliver high-quality design, appropriate site planning and amenities, and are compatible with the surroundings.
- Create Unfunded Mandates - Create unfunded mandates that burden local governments and communities. There is no funding for dealing with the above listed impacts and most of the bills provide an official sidestep of addressing this issue.
Moreover, the legislation does little if anything to increase the supply of affordable housing.
Below are examples of existing and proposed legislation that carry out the Big Players’ agenda.
EXISTING STATE LAWS
- Permit Streamlining Act (Originally enacted in 1977 and updated later): This Act allows certain development projects to be deemed approved if the local agency does not approve the project within specified time limits.
- State Density Bonus Law (Originally adopted in 1979 and updated in 2019): Under the State Density Bonus Law, developers are entitled to up to an 80% density bonus if certain on-site affordability requirements are met. The law also allows waivers and concessions from development standards that would physically preclude the density permitted or result in identifiable and actual cost reductions.
- Housing Accountability Act (Originally adopted in 1982 and updated in 2017): This Act limits a local government’s ability to deny, make infeasible, or reduce the density of housing development projects, emergency shelters, or farmworker housing that are consistent with objective local development standards.
- Senate Bill 375 (Steinberg) “Sustainable Communities Strategy” (2008): SB-375’s core provision is a requirement for California’s 18 Metropolitan Planning Organizations (MPOs) to develop a “Sustainable Communities Strategy” (SCS), such as Plan Bay Area. Although the purported goal of the law is to reduce greenhouse gas emissions, its main emphasis is on building high-density housing near transit hubs, rather than more effective means to lowering greenhouse gases, such as mandating vehicle emission standards or improving public transportation.
Plan Bay Area (the Bay Area’s SCS) has been largely criticized as a “one size fits all” mandate that takes away local control. Detractors assert that Plan Bay Area’s projections for population, jobs and housing growth are unrealistic. The plan isn’t needed to meet SB 375’s greenhouse gas reduction requirement. Plan Bay Area makes housing less affordable than ever and will result in severe environmental harm. Moreover, the cost effectiveness of the plan is abysmal, with costs of implementing Plan Bay Area far surpassing any benefits achieved.
- Senate Bill 35 (Wiener) (2017) “Planning and zoning: affordable housing: streamlined approval process”: SB-35 requires a streamlined, ministerial approval process for housing projects that meet minimal affordability requirements in cities and counties that are not meeting their Regional Housing Needs Allocation (RHNA) goals.
- Senate Bill 828 (Wiener) “Land use: housing element” (2018): SB-828 revised Housing Element Law and inadvertently contributed to a doubling of the Regional Housing Needs Assessment (RHNA) for the 2023 through 2031 cycle, according to the Embarcadero Institute’s Report entitled; “Double Counting in the Latest Housing Needs Assessment” .
- Senate Bill 330 (Skinner) “Housing Crisis Act of 2019” (2019): Among other things, SB-330 (1) provides a mechanism to vest the ordinances, policies, and standards in effect at the date a complete Preliminary Housing Development Application is submitted, (2) limits the ability of municipalities to downzone certain properties, impose moratoria, or apply new subjective design standards to housing developments, (3) further streamlines approvals, and (4) limits the number of hearings to just five hearings that can be conducted prior to approval of a housing project.
- Accessory Dwelling Unit (ADU) Law (2019): In recent years, there has been a significant amount of legislation regarding Accessory Dwelling Units (ADUs). There are various advantages to adding an Accessory Dwelling Unit or second unit to a home. However, by requiring "ministerial" review and stripping away local control of land use and zoning, local development standards (parking requirements, height limits, setbacks, Floor Area Ratios), community engagement, and environmental review related to second units, the State's new ADU laws went too far.
NEWLY PROPOSED HOUSING LEGISLATION
More than 100 housing bills were introduced during the 2021 legislative season. For a quick overview of the magnitude and breadth of the proposals, please view Alfred Twu’s below diagram entitled; “2021 California Housing Legislation Highlights” . Not all the pending legislation carries out the "Trickle Down" agenda but many bills do.
**To enlarge the below diagram, please click on the image.
- SB-6 (Caballero) “Local planning: housing: commercial zones”: Requires and Streamlines housing in commercial zones and expands the reach of SB-35.
- SB-7 (Atkins) “Environmental quality: Jobs & Economic Improvement Through Environmental Leadership Act of 2021”: Extends and expands the California Environmental Quality Act (CEQA) streamlining provisions of AB-900.
- SB-8 (Skinner) “Housing Crisis Act of 2019”: Extends and expands the “Housing Crisis Act”. Reduces local government review and approval over developments.
- SB-9 (Atkins) “Housing development: approvals”: Requires local governments to ministerially allow lot splits and duplexes in single-family zones and thereby up-zones single-family parcels to 4 units and potentially up to 6 or 8 units, depending on the applicability of the State Accessory Dwelling Unit law.
- SB-10 (Wiener) “Planning and zoning: housing development: density”: Permits a local government to pass an ordinance, which is not subject to CEQA, to zone any parcel (including those in single-family zones) up to 10 units of residential density per parcel, at a height specified by the local government in the ordinance, if the parcel is located in a transit-rich area, a jobs-rich area, or an urban infill site, as specified. "
- SB-290 (Skinner) “Density Bonus Law: qualifications for incentives or concessions: student housing: moderate-income families: local government constraints”: Increases Density Bonus while lowering affordable housing threshold.
- SB-478 (Wiener) “Planning & Zoning Law: housing development projects”: housing development projects”: Prohibits local governments from setting Floor Area Ratio less than 1.5 (1 and ½ times the size of the lot). Limits the Floor Area Ratio and minimum lot sizes that cities can impose on projects with ten or fewer units.
- AB-115 (Bloom) “Planning & zoning: commercial zoning: housing development”: Requires cities and counties to allow housing in commercial zones and dramatically increase height, density, and Floor Area Ratio (FAR) maximums of such housing, ministerially without any CEQA review, provided the development reserves 20% of the units for affordable housing.
- AB-215 (Chiu) "Housing element: regional housing need: relative progress determination": An intent bill to strengthen the CA Department of Housing and Community Development's (HCD's) housing law enforcement authority. The bill requires cities/counties to undertake a mid-cycle housing element consultation to check the jurisdiction's progress toward fulfilling their housing quotas (including market-rate housing allocations). Jurisdictions that fall behind must attain a "pro-housing" designation by adopting housing policies that facilitate planning, approval or construction of housing, such as offering local financial incentives, lowering parking requirements, and streamlining the permit process with by-right approvals.
- AB-345 (Quirk-Silva) "Accessory dwelling units: separate conveyance": Requires, rather than authorizes, a local government to allow an ADU to be sold separately from the primary residence, if the ADU meets specified conditions.
- AB-721 "Covenants and restrictions: affordable housing": Makes restrictions on the number or size of residences unenforceable against affordable housing developers, as defined.
- AB-916 (Salas) "Zoning: accessory dwelling units (ADUs): bedroom addition": Prohibits hearings for room additions to single-family homes and expands allowable ADU height to 20 feet.
- AB-1277 (Rubio) "California Environmental Quality Act (CEQA): student housing development projects: expedited judicial review": Streamlines the California Environmental Quality Act review for student housing projects.
- AB-1401 (Friedman) “Residential & commercial development: parking requirements”: Eliminates parking requirements within ½ mile of public transit.
A BETTER WAY
A “One-Size-Fits-All” approach, generated by those whose primary purpose is financial gain, is fundamentally suspect.
A more effective way to address California’s housing affordability dilemma is to analyze and identify what the problems are in each individual community and then find appropriate solutions that are tailored to that community. This is best accomplished by local County Boards of Supervisors and City Councils with thorough democratic due process, including extensive environmental analysis and strong public engagement.
The impacts of land use decisions differ depending on the jurisdiction and the infrastructure required to maintain appropriate levels of public services (including police and fire services, parklands and public open spaces, transportation, schools, and sewers) varies greatly across the state from locality to locality. Complex housing decisions should be made at the local level to ensure that the specific, unique characteristics, constraints and needs of those communities are properly analyzed and addressed.
Local solutions, which address housing affordability, may include preservation of existing affordable housing, new development of affordable housing at the scale and locations that are appropriate for local conditions, conversion of market-rate housing to affordable housing, conversion of commercial properties to affordable housing (provided a thorough environmental review is completed & adverse impacts are mitigated), and implementation of other affordable housing programs (housing vouchers, encouraging living wages, affordable home loans, preventing developers from being able to pay in-lieu fees instead of actually building affordable units, etc.).
What is needed from the State are funds and subsidies for the local solutions to affordable housing. In addition, funding/subsidies are required to mitigate the adverse impacts that increased housing would create.
Regarding the jobs/housing imbalance created by large corporations, the State should incentivize corporations to open offices in less populated areas of California that are jobs poor and housing rich, where the cost of land and housing are much less expensive. In addition, the State should incentivize cities and counties to make commercial development approval contingent on adequate housing.