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"Rejtan – The Fall of Poland," by Jan Matejko

In the mid-2000’s, the Los Angeles County Metropolitan Transportation Agency (Metro) developed plans to build a completely affordable housing complex on a vacant lot in the city’s predominately Hispanic Boyle Heights neighborhood.

About a decade later and a few hundred miles north, architect Troy Kashanipour started drafting plans to build a home for himself and his family on another empty patch of land he owned in the San Francisco’s Glen Park neighborhood.

On the surface, these two developments couldn’t be more different, at least as far as housing projects go. One is single-family, the other is multi-family. One is private, one is public. Kashanipour’s is totally zone compliant in a wealthy, quiet neighborhood. Metro is going to need some variances to put up its project in its poorer, busier corner of East L.A.

Despite these differences however, both projects have suffered the same fate at the hands of their cities’ permitting processes, namely years of delays, protests, appeals, and demands for alterations from neighbors hell bent on stopping them from happening.

When it approved Metro’s project, the City of Los Angles was sued by a group of business owners adjacent to that vacant lot who claim that it has done an insufficient job studying the potential environmental impact of building atop what was once a lumber mill that was shut down two decades ago. Mr. Kashanipour meanwhile has been held up by neighbors worried that his development might bury the remnants of a trail once used by 16th-century Spanish explorers.

In this way, they are emblematic of construction across the state of California which has chosen to make development of any kind a lengthy, expensive, torturous process for even the most unobjectionable projects by handing out a liberum veto to even the most remote community “stakeholders.”

The Veto

If you are unfamiliar with the term liberum veto (which I will at times just call “the veto”) you are not alone. Few have reason to recall the constitutional quirks of long-dead republics, and the veto is no exception.

Last employed by the Sejm (parliament) of the once-great Commonwealth of Poland-Lithuania, the veto gave each member the absolute right to kill any legislation or even annul the results of whole parliamentary sessions.

The idea was to check the power of faction and prevent the rise of a despotic monarch. The result was political chaos, as members used the veto to stall reform, often at the behest of intriguing foreign powers looking to keep the Commonwealth weak and divided.

While Poland-Lithuania vanished long ago, its liberum veto has found new life in the urban centers of California. There, an endless array of boards, commissions, associations, agencies, non-profits, unions, individuals, and activists can at little cost stall, shrink, sue, or stop an unfavored development. The results from granting this veto to so many parties is well-known and oft-discussed. Witness the national headlines about the Golden State’s housing shortage and the many absurdities it has produced, from a burned down shack in San Jose selling for nearly $1 million to a man in San Francisco prevented from redeveloping his own laundromat because of its supposed historic significance.

Despite the attention, most commenters fail to give the veto sufficient blame for the destruction it has wrought. Instead, the left chooses to talk about a flood of tech money causing gentrification and displacement as if growing, affordable cities like Dallas, San Antonio, and Atlanta were mere fictions.

The right does a little better with its mocking of California’s byzantine zoning codes and the armies of bureaucrats tasked with enforcing them. Yet even those projects that are code compliant and enthusiastically backed by the planning bureaucracy can get bogged down in the permitting process for years.

The state’s rising YIMBY faction gets the closest with their fierce criticism of the code and the process. They too often miss the mark by pinning the blame on an exclusionary elite trying to protect their racial and class privileges, when in fact the exercisers of the veto hail from all manner of income groups and ethnic backgrounds.

What unites them is the power given to them by the veto, and the recognition that their short-term interests will almost always lie in using it.

The Zero-Sum Politics of Positive-Sum Transactions

That’s because development brings change and disruption that will inevitably make one party or another worse off. Economist Deirdre McCloskey made this point of markets in general in her book Bourgeoise Dignity.

Writes McCloskey, “Each act of buying and selling may have losers. Indeed, unless the item bought has no alternative buyer or employment, or unless the innovation or the new idea puts no one out of work it must.  If I buy a Picasso I am literally taking it from someone. The price the someone faces for substitutes for The Old Guitarist must rise.”

This observation could not be truer of the market for land in a city. The new apartment building on the block means more profit for the developer, and more (possibly cheaper) housing options for residents. It is also more traffic, more shadow, more noise, more disruption, and more change for those who already live there. A win for some, a loss for others.

(In our earlier examples, Mr. Kashanipour’s soon-to-be neighbors fretted about losing an overgrown community garden they had planted on the lot where he plans to build his home. Metro’s litigants worry about excess shadow from an affordable housing complex, not to mention the less than desirable residents it would bring.)

The upshot is that tolerating the losers in the short term makes winners of everyone eventually. Voluntary transactions only occur when all parties involved believe they’ll become better off. Multiplied over space and time, these interactions produce incredible wealth for all — even the short-term losers. The massive enrichment stemming from the industrial revolution, even with its long chain of victims, is evidence enough of this.

Yet in the short-term, losers remain. The less they care about progress for everyone eventually, or the less comfortable they are with people making their own decisions for their own reasons, the less willing they will be to tolerate this onslaught of positive-sum disruption.

McCloskey again: “If the someone has no ethical commitment to the outcome of voluntary markets and has a veto on my purchase, he will surely exercise it. Similarly, with innovations. A society in which literally everyone has to agree to such a change in how property rights are allocated between him and me … may have the merit of splendid equality, but it will not be progressive technologically — or artistically or intellectually or spiritually. Markets will be turned into politics.”

Ethical commitments to the outcomes of voluntary markets in land use evaporated long ago. With it went the markets themselves. In their place came plans, permits, and processes all geared toward spreading the veto far and wide. Indeed, the development process in places like Los Angeles and San Francisco usually begins with alerting those who are most apt to exercise their veto.

In San Francisco, that is called a pre-application meeting, where almost every prospective developer must first give notice to the relevant neighborhood groups about their construction plans as well as hold a public hearing where their development is explained. Los Angeles mandates much the same, requiring developers to go before elected neighborhood councils to solicit input on the vast majority of projects not considered “by-right” (i.e. smaller projects where you’re still allowed to use your property as you see fit).

Proving McCloskey right that at least someone is harmed by any new change, these meetings give a platform for obstructionists to air their objections to a project from the get go. It’s here that the drama really starts.

Metro’s community outreach meeting on its affordable housing complex quickly turned into what Streetsblog described as a “two-hour venting session” from neighbors arguing as much with each other as the agency about what they wanted to see done with the site. Kashanipour’s pre-application meeting went little better, devolving quickly into a one-sided shouting match. Sometimes these meetings can get really nasty. When Robert Tillman — owner of that aforementioned “historic laundromat” — presented his plans to build an apartment building at a 2016 neighborhood meeting in San Francisco’s Mission District, one passionate activist wished aloud that his family be killed in a terrorist attack.

Once alerted to some new nuisance that is to go up in their neighborhood, these veto exercisers will begin sharpening their weapon of choice. More often than not the veto is exercised in the form of CEQA.

CEQA — short for the California Environmental Quality Act — requires any government agency put in charge of approving or denying a project to conduct an analysis of its environmental impacts. These impacts can be almost anything, as land use attorney Paul Beard told Reason in April.

Said Beard: “aesthetic impacts — that includes the visual character of the site and of the surroundings. Agricultural resources. Air quality is a big one in California. Biological resources. Geology and soil. I mean the list goes on and on.”

The results of the study in of themselves do not approve or deny a project. However they give an opportunity for any third party that has participated in the approval process — say by going to those public hearings — to claim this or that impact has not been sufficiently studied. Prior to project approval, groups can demand additional review of a project, conducted at the cost of a government agency or project sponsor. Should a project be approved on the grounds of what they consider insufficient review, a lawsuit will likely follow. If a lawsuit prevails, the petitioner can reclaim legal expenses from the government agency that proved too hasty in greenlighting new construction.

When the countless impacts are multiplied by the countless parties who can object, a veto is granted in all but name. The lawsuit against Metro’s Boyle Heights development is being done on CEQA grounds, claiming insufficient study not just of that lumber yard but also an oil well abandoned in the 1940s and the shadow the completed building would cast.

This is hardly the most ridiculous CEQA claim.

Tillman’s historic laundromat is the result of a CEQA appeal claiming the cultural impacts of tearing down his building — which once featured a non-extant Chicano mural and a now-moved unemployment agency — nor the shadow the new building would cast, have not been sufficiently examined. In 2015, the closure of two Southern California elementary schools was halted because of a CEQA lawsuit claiming that the environmental impacts of such a move had not been adequately studied.

When Polish parliamentarians would exercise their liberum veto, it was often at the behest of foreign powers or domestic interests who paid them large bribes to do so. One sees echoes of this in many CEQA lawsuits today, where groups cynically push lawsuits to wring out concessions that have nothing to do with the underlying environmental concerns.

In 2009 the New York Times covered the case of the labor-backed group California Unions for Reliable Energy suing one solar plant project for failing to sufficiently study its impact on a local population of kangaroo rats. As the Times reported however the same group urged regulators to approve an even larger solar project that would destroy the habitat of an endangered tortoise. The difference was the latter project agreed to hire only union workers. The former did not.

Affordable housing groups play this game as well. Sometimes their tool is CEQA. Often it is another form of the liberum veto: discretionary review.

Even when projects are totally complaint with the city’s laborious zoning and building regulations, they can still be held up by the filing of a discretionary review, basically a request that the city’s Planning Commission — responsible for approving all projects — impose additional conditions and requirements on development.

Discretionary review is what held up Kashanipour’s otherwise code-compliant home, as neighbors requested he shave off the top floor, get rid of the garage, install light wells, and adopt other petty alterations.

Often affordable housing groups will use this tool to hammer developers of unfavored projects.

Take two separate developments on San Francisco’s Mission Street, both with the goal of turning auto body shops into market rate apartment buildings.  Local affordable housing group the Mission Economic Development Agency (MEDA) filed discretionary reviews for both projects, demanding that the Planning Commission mandate the city’s continued use as repair shops.

As the head of MEDA, Karoleen Feng, told the San Francisco Business Times, the idea of using discretionary review was not so much to actually preserve the body shops, but rather to serve notice to all those trying to build in her neck of the woods.

Wrote the Business Times: “Feng said that filing a request discretionary review doesn’t mean MEDA opposes a project, but is instead providing input and giving developers context about the neighborhood. ‘It’s realizing that the Mission is not just an open playing field for high-end development,’ Feng said.”

To be sure many of the projects mentioned are either still up in the air or have been able to go forward with significant alterations, and after years of delays and thousands in extra costs. In this sense the liberum veto wielded on these projects is a partial one. As Feng’s comments make clear however the idea is not to stop every project but to act as a deterrent for developers to even try. Only the most projects with the most profitable potential will move forward, running the risk of discretionary reviews and CEQA lawsuits. Most others will not even be proposed.

What’s interesting about the use affordable housing groups and unions wielding the veto is that they are in the long-run groups have an interest in looser development laws, at least as far as their own projects are concerned.

Yet holding onto the veto in whatever form it takes has perversely become the most valuable resource one have. When markets become politics, power, not profit, becomes the goal. As such these groups have often stymied attempts at housing reform that might help their constituents but reduce their veto powers.

Take for example the attempt by California Gov. Jerry Brown in 2016 to allow for by-right development of housing projects that reserved 5 percent of their units as below-market rate. The bill would have in effect revoked the veto granted to any number of parties to oppose housing development by eliminating the need to go through CEQA or discretionary review. Predictably it went down in flames, with the consensus being that opposition from the state’s collection of building trade unions served as the crushing blow.

Liam Dillion — the housing reporter for the Los Angeles Times — explained on a recent podcast that the unions’ opposition to Brown’s efforts as such: “Through the discretionary review process they can work to negotiate union wage rules and union hiring standards, and so if that is taken away then their lever also goes away.”

A similar fate met this year’s attempt at housing reform, SB 827. The bill, sponsored by Sen. Scott Wiener (D – San Francisco), would have upzoned residential areas near transit stops, essentially opening up large swaths of California’s cities to denser development.

This bill would have only nibbled around the edges of the veto powers that be. It would not have touched CEQA. It would not have touched discretionary review. Nevertheless it attracted a fierce opposition from the trade unions and low income housing groups for fear that it would open up too much development too fast, eliminating the ability of these same groups to concentrate their opposition on those few projects that current zoning rules even allow to go forward.

A number of post-mortems on SB 827 zeroed in on a particularly heated rally in San Francisco where pro-development demonstrators shouted over anti-gentrification activists opposing the bill in front of city hall.

Everyone from Dillion at the Los Angeles Times to the socialist In These Times gushed about this scene as emblematic of character of SB 827, mostly white privileged demonstrators shouting over people of color desperately trying to hold the destructive forces of development at bay.

But the fight over who can build what and where in California is not so monolithic, and it grafts poorly onto traditional leftist dichotomies of privilege and marginalization.

There was little wealth disparity between Troy Kashanipour and the neighbors trying to stop him constructing a home in their neighborhood. Instead that conflict played about almost entirely between white, middle class landowners whose only defining political difference was whether they were in favor of this particular development or not.

In Tillman’s case his development is being hounded by in part by anti-gentrification activists fearful that a market-rate units will bring wealthier, whiter people who will then upset the slowly vanishing working class, predominantly Hispanic character of the current neighborhood.

In Los Angeles by contrast predominately Hispanic neighbors are opposing Metro’s affordable housing development out of concerned that it will bring poorer, insufficiently Latin residents to the neighborhood.

What unites these examples is not some narrative about class or race, but rather opponents of change using the powers afforded them by the state and their city’s development process to veto those projects that have earned their displeasure.

How does it end? 

This situation and the housing shortage it has created will not change until that liberum veto is abolished. How exactly that can happen when so many incumbent forces cling to the veto power so strongly is difficult to say. At some level it is going to have to start with people abandoning the underlying logic of that makes the exercise of the modern day liberum veto acceptable to the public writ large, namely that it is ethical to prevent people to use their property they see fit.

That is not likely to happen anytime soon. Indeed, no one is really advocating that.

Even the YIMBYs — as right as they are on the policy — have embraced political rhetoric that is all about one greater good or another. They talk at length about how zoning negatively affects workers and minorities, how government-created urban sprawl exacerbates climate change, and how wealthy suburban homeowners use the process to maintain their privilege.

Whatever the truth of these claims, framing arguments in this way only pits one vision of the greater good against another — a tactic that will only shatter upon contact with the status quo.

Why, say the NIMBYs in the city, should fighting climate change come at the expense of our majority-minority neighborhoods? Why, say the NIMBYs in the suburbs, should we sacrifice quiet, tree-lined streets for greedy, capitalistic, techies?

What does this mean for the future of California?

For the moment, the answer — to borrow some Marxist phrasing — will be a heightening of contradictions. Rents will continue to increase, those market rate developments that do manage to get approved will naturally be targeted toward the wealthiest renters and buyers, while more and more working and middle class people will be shuffled into what little affordable housing public funding makes possible. The working poor, students, and others with meager or unstable incomes will be priced out cities and suburbs, and in the most extreme cases onto the streets.

Continually worsening conditions will only breed more dysfunctional politics as interest groups — feeling less and less secure by changing social conditions, and recognizing that the positive effects of land use liberalization (if they can recognize them at all) will take a long time to come into effect — will seek to preserve their veto instead of working for real change.

For the Polish Commonwealth, this recipe eventually meant destruction as conniving foreign powers eventually consumed the country.

California — for all its troubles — does not face such a hostile environment. Instead it is likely that more of its people, talent, and vitality will be sapped away by competing metro-areas in more functional states.

Indeed, even as rents continue to go up in Los Angeles and San Francisco, other west coast cities are starting to see rents go down, thanks to marginally more liberal land use policies.

In Seattle — which has embraced some tepid upzoning in and around its downtown — has seen rents fall city-wide by 1.6 percent in 2017, according to company Apartment List. It’s a similar story in Portland, which has seen a boom in multifamily construction, and as a result a 1 percent decline in rents.

When nearly half of Bay Area residents say they are likely to emigrate in the next few years, according to one survey, these cities, with similar amenities and cultural values — all undergoing their own version of the tech boom — may serve as siphons for young people, firms, and capital. Workers in Southern California, or even young professionals looking for greener pastures to raise a family, meanwhile can set their sites on places like Dallas, Phoenix, and Las Vegas.

Indeed, though the populations of California’s biggest cities are still ticking up, the state on the whole is shedding residents. From 2007 to 2016, the state lost on net roughly 1 million residents, with the three most popular destinations for Golden State emigrants being Texas, Arizona, and Nevada.

There’s now even a real estate company that caters to people looking to leave the Bay Area.

An optimistic take would be that people fleeing high cost cities might arrest the growth in rents and home prices, lowering the political temperature enough to make serious reform of California’s land use policies more likely to succeed. Any sort of brain drain may also galvanize those pro-growth elements of California’s politics — likely tech companies and developers — to more aggressively push for policies that will allow for more housing construction.

A less optimistic take is that Californian cities and politicians supplement their current vetoes with other destructive policies like rent control or public land banks — versions of both policies will go before voters next week — thus kicking the can on reform, while exacerbating its current problems.

I don’t know what will happen. It is safe to say however that the tighter California’s cities clutch their liberum vetoes, the more they risk strangling the economic growth and innovation that has long been a hallmark of the state.

Christian Britschgi is an assistant editor at Reason. Follow him on Twitter.