Would you like extra residing area? Prohibit New Retail Growth – Orange County Register

  • A dumpster stands in front of the former Nordstrom store on Montclair Place in Montclair Monday, July 20, 2020. Sears, another retailer in the mall, closed earlier this year. The city plans to raise VAT in November to compensate for the loss of income. (Photo by Will Lester, Inland Valley Daily Bulletin / SCNG)

  • Fry’s customers arrive unaware that the Burbank, CA store, along with all of Frys electronics stores across the country, has been permanently closed. Wednesday, Burbank, CA. February 24, 2021. (Photo by Gene Blevins / Contributing Photographer)

  • Restore Kitchen at 1711 W. Lugonia Ave. and Restore Kitchen on State at 615 W. State Street are both permanently closed. (Photo by John Valenzuela / Redlands Daily Facts / SCNG)

If California is serious about building homes, it should impose a moratorium on new business building.

The pandemic boldly exposed the vast oversupply of California shopping malls. New consumer habits and online shopping have reduced the need for stores.

Think how much more empty retail space Californians could expect this year of recovery, according to real estate agency Marcus & Millichap predictions: Orange County’s vacancy rate will rise from 4.8% to 5.5%; San Francisco 5.9% from 4.9%; San Diego 6.4% from 5.1%; Los Angeles 6.6% from 5.8%; and the Inland Empire 9.9% from 9.2%.

Until we transform cities and counties from retail developers to broader housing administrators, California’s sky-high cost of living will not be blunted.

You see, it’s way too easy for municipalities to build retail spaces. Remember that the main source of income they control is sales tax. Hence, they are paid by law to build businesses.

This helps explain why the above five California markets are projected to receive 3.3 million square feet of new retail space this year – a development roughly the size of three giant shopping malls.

Now stopping new retail space is an extreme measure. But after decades of California struggling to build an adequate supply of housing for its residents, it is evident that the playing field needs to be tilted in favor of housing.

Nevertheless, at best we see pavement for the housing shortage. State legislators are considering bills to make it easier for shopping center owners to convert their space into living space. The governor’s new budget also raises a few billion dollars on the challenge. Let’s not forget that there are also new government “targets” for every city and county to approve more land for new housing.

So when are we going to see even bolder action?

Cutting off bad habits

My proposed retail development ban could simply stop plans for new builds from a certain date for a defined period of time.

Of course, “simply” is politically impossible. So there should be some allowance to reassure cities and developers – not to mention citizens who may see a need for more shopping.

Maybe a carrot? The intensity of a municipality’s retail trade ban could be linked to the fulfillment of certain residential construction targets.

Or a hat? Cities cannot exceed their current supply of retail space. However, if a mall owner wants to convert shopping spaces as long as they are the same size, that’s fine.

Maybe there is leeway. If a developer wants to demolish their retail property, another purchasing project in another location in the city could be approved – as long as the city stays under the allotted retail space.

We could even get really innovative: allow municipalities to swap their retail space with each other. This would help new and / or growing communities that legitimately need more retail. Also, shrinking cities with too many stores could get value from their oversupply.

Yeah, that sounds a little crazy. But also the many obstacles in building new homes for Californians.

Not a perfect solution

I admit my idea has a few flaws.

Retailers may not like limiting the choices they have when looking for a new business. That would likely drive up shop rents.

A government-induced deficit could also drive up the prices of the currently depressed retail property values.

Is such a quasi-rescuing of shopping centers fair? Worse, would these retail reviews deter some developers from swapping shopping malls for apartments?

The bottom line is that community executives need to be incentivized to build houses, and limiting their ability to build more shopping would require a serious rethink.

California could change the financial structure of cities to make them more tied to property taxes. You can bet that homes will be built faster. Then of course we have to talk about the reform of Proposition 13 so that the cities can raise even more property taxes. Yeah, I know this is a political non-starter.

Or we could allow cities to levy income taxes. That would clearly motivate the municipalities to fight for jobs and more housing for the labor force. But would an increase in income tax be supported?

Unfortunately, I fear that we will simply keep trying to gradually change housing policy.

But keeping cities struggling for additional sales tax dollars is a zero-sum game with no profit to the state economy.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at [email protected]