For cities with a housing shortage, a modest — and cheap — remedy

Soaring home prices in Silicon Valley have taken the region’s housing stock beyond the financial reach of most local residents, fueling homelessness and generating resentment toward tech industry workers. In Palo Alto, California, for example, one modest 2-bedroom cottage recently sold for a whopping $2.6 million

Now San Jose officials are moving to alleviate the problem by scrapping rules that bar homeowners from building rental units on their properties. The goal: Help people draw more income from their homes — by far the largest investment for most Americans — while increasing the supply of available housing. 

Specifically, the city council is easing restrictions on where additional housing units, such as “in law” apartments, may be built, including allowing living areas on smaller lots where they were once banned. Two bedrooms will also be permitted on some larger lots where previously only one-bedroom units were allowed.  

“Instead of handing out more fines and giving tickets, we want to look for opportunities to legalize those units,” San Jose Mayor Sam Liccardo told KPIX.  

San Jose isn’t alone in looking for solutions to the shortage of affordable housing in many cities, especially high-cost metros such as Boston, New York and Washington. Cities around the U.S. are looking for ways to eliminate prohibitive regulations that often result in a decrease in the availability of housing, with zoning a major contributor. 

“In areas with high-cost housing such as California, zoning and other land-use controls contribute significantly to recent sharp cost increases, reflecting the increasing difficulty of obtaining regulatory approval for building new homes,” according to a 2016 White House report.

David Garcia, policy director at UC Berkeley’s Terner Center for Housing Innovation, said modest steps of the kind San Jose is taking to provide more housing can be effective. 

“We often think of building new housing as big, new shiny buildings, when in reality there needs to be an acknowledgment that smaller housing types are just as critical,” he said in an interview, pointing to Minneapolis and Portland as two cities that have changed zoning laws to increase their housing stock. “Things like duplexes and small apartment buildings are going to be critical.”

A problem many cities face is what is being built–think about those shiny luxury high rises whose rents are unattainable for many typical residents. 

That means building out the housing stock takes an innovative policy approach, like taking advantage of updated transportation networks or offering amnesty to owners with previously illegal units. 

In San Jose, if the unit is near public transportation, the city is dropping parking requirements. And if you had an illegal unit, take note — the city is now offering amnesty for owners willing to bring the units up to code.

–CBS News’ Jillian Harding contributed reporting

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