Browse
Log in / Register
Share
California's new upzoning laws were designed to accelerate housing construction, but pervasive bureaucratic delays and unexpected infrastructure costs are preventing projects from breaking ground. For many developers, the financial math no longer works, threatening the state's goal of easing its housing crisis. This analysis, based on a developer's firsthand account and industry data, examines the systemic hurdles—from utility relocation fees to prolonged permitting—that are stalling construction and driving up costs for future renters.
While rising lumber and labor expenses are well-known, hidden development costs are creating insurmountable barriers. For a Los Angeles contractor building a multi-family infill project—a type of construction where vacant land within an existing urban area is developed—the city required upgrades to public infrastructure at the developer's expense. These mandates included new gas, sewer, and water lines, a relocated fire hydrant, and additional street lighting, all situated on city property. This practice, often called "impact fees," transfers the cost of public infrastructure improvements to the developer. According to the contractor, Gary Mkrtichyan, these unbudgeted expenses are eroding already thin profit margins. In Los Angeles, new apartments now require monthly rents between $4,000 and $5,000 just to break even, a price point that is often unsustainable for the local market.
Bureaucratic fragmentation and communication failures can delay a project for months, accruing significant carrying costs. Mkrtichyan’s experience with a gas line illustrates this problem. After discovering a line feeding a neighbor’s home on the property, he was billed $70,000 to move it and then waited months without a response due to incorrect contact information. It took eight months and a direct message via LinkedIn to a regional supervisor to get any traction. Similar delays occurred with other agencies for a fire hydrant relocation and a mandated storm drain, which required a specific city-approved product with a six-to-eight-month backorder. During this time, the property sat idle, with the client paying $20,000 to $30,000 monthly in interest and overhead, plus thousands more for security after break-ins.
Revisions to zoning laws are only one step in a broader policy agenda. While California's laws, like SB 79, aim to fast-track high-density development near transit centers, the systems for permitting, utility work, and inspections were built for a different era and are now under immense strain. As noted by the Brookings Institution, local governments must also rethink discretionary review processes, building codes, and impact fees to boost housing supply effectively. The City of Los Angeles’ own housing plan acknowledges that existing zoning capacity is insufficient to meet its goal of 456,643 new units, necessitating significant rezoning. This systemic mismatch means that even with legal permission to build, practical execution is often blocked.
The challenges in Los Angeles serve as a critical case study for dozens of states and cities that have embraced similar "missing middle" reforms, including Portland, Denver, and Austin. The universal logic—that building more homes will stabilize prices—remains sound. However, California's experience demonstrates that successful upzoning requires modernizing the entire support infrastructure. If one of the nation's largest housing markets cannot efficiently implement these reforms, it signals a need for other regions to proactively address bureaucratic inefficiencies and construction costs before they derail their own housing goals.
For policymakers and developers, the key takeaway is that legalizing density is not enough.
The path to more housing requires not just changing zoning codes but building a modern, efficient development ecosystem capable of turning policy promises into reality.
