California Forever: A glance at the underlying economic and policy issues

Print Friendly, PDF & Email

With the housing crisis facing many communities in the western US, who can argue against dense, affordable housing with tree-lined streets and easy access to bike lanes, shops, and schools? It’s a gamble that the investors in California Forever are willing to make. As has been reported widely over the past several months, the company is seeking to build a new city from scratch in Solano County, California. A recent piece in the New York Times paints a vivid picture of one of the main challenges the company has faced in getting the project off the ground: getting farmers to sell the land on which the proposed city will be built.

Acquiring a land base is the obvious first step for the project to proceed. The company’s tactics, which involves offering residing farmland owners lucrative, above-market prices for their land, has been met with some controversy, in no small part because of a lawsuit filed against a group of holdouts which accused them of colluding to drive up the company’s offer prices. Once the land base is acquired, it seems unlikely that it will be smooth sailing for the project to be completed. Building a city from scratch would require a complete upending of existing zoning laws made all the more difficult because the proposed development will border a US Air Force base, which has brought the Department of Defense into the fray. And that’s just to get the permission to build, never mind the actual construction of infrastructure and buildings that would make the city a livable reality.

With all of this said, here are some issues that the California Forever enterprise brings to mind for Oregon and other areas:

  • How should land use be regulated? Overhauling local zoning laws is challenging, to say the least. In Oregon, this issue would be compounded because of our statewide land-use planning program, the cornerstone of which is the establishment of urban growth boundaries, which dictate where new urban development is allowed to occur. In other words, Oregon’s land-use laws would effectively make something like “Oregon Forever” a non-starter. In addition to amending local zoning maps, a proposal like this would require approval from the Land Conservation and Development Commission, a state board that works in concert with the Oregon Department of Land Conservation and Development, to assure local adherence to statewide planning guidelines. Oregon’s land use laws can make hosting weddings on farm properties extremely challenging, never mind building an urban utopia from the ground up. As much as anything, California Forever should be thought of as a backlash against the difficulty of getting new development approved in existing urban areas.
  • Land market fundamentals. Most economists tend to think about farmland markets through the lens of what’s known as the “fundamental value of land”, which states that the value of land should reflect the discounted stream of income accruing to the landowner. When thinking about the role of non-agricultural factors, like development pressure, economists usually assume an orderly pattern of urban expansion where undeveloped land closest to existing urban areas is developed first. For this reason, the price of farmland with the same productivity potential can command widely varying prices depending on its location. If successful and mimicked elsewhere, California Forever’s model of farmland purchases in outlying rural areas has the potential to throw a wrench into the practical usefulness of existing land valuation models.
  • Who is going to live there? If it ends up being another bedroom community for the Bay Area, how will increases in commuting, as well as all of the necessary road and infrastructure construction, eat into the green-minded aspirations of the project developers? The Bay Area is often thought of as an outlier in terms of housing costs and availability, but how much of an effect will it really have on housing costs in the region, especially if it attracts migrants from outside the state? A related factor at play is remote work and whether prospective residents would even need to commute. That also brings up the issue of office-residential conversions, with a recent analysis pointing to the Bay Area as having one of the highest concentrations of candidate buildings for redevelopment.

In a broader sense, innovative ideas to generate rural wealth are often met with support, but how do we think about what this means if rural landowners are simply cut a check to fundamentally alter the character of their community? Despite all of the logistical hurdles that will need to be overcome, the California Forever CEO has a steadfast belief that the project will be completed in years, not decades. Regardless of how realistic that timeline might be, I’ll be interested to watch how this story plays out.

This entry was posted in Farmland, Land use and tagged , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *