[nevdka]

Zoning can affect how many residences you can build on that block. If the zoning laws say you can only build one on that lot, then the land cost is $400k per residence. But if you're allowed to build a 5 floor building with two apartments per floor, then the land cost is $40k per residence.

[wcummings]

Ding ding ding! Single family zoning is the problem.

[newjersey]

Why can't we just build a little farther? I am not local to the area (as you can probably tell from my name) so I'm not trying to criticize anyone. I am genuinely curious if that is a possibility. Also I've never bought, sold, built a house. Are these single family zoning everywhere?

[throwaway_xx9]

The Silicon Valley area is surrounded by either hills or ocean, so "a little farther" is a difficult commute with varying delays of hours on a couple roads.

Nobody wants to raise a family in Oakland.

Also, my understanding is that the Central Valley is a flood plain.

[irq11]

No it isn't. The land cost goes up, because now it's possible to use it for a much more lucrative purpose. This is called the zoning windfall problem.

At some point, in theory, the greater supply begins to bring down land costs in aggregate, but since real estate pricing is a localized phenomenon, this effect isn't universal.

[VintageCool]

The original owner gets some money from that windfall. The developers make money by selling 10 units on a lot that used to have a single residence. The new tenants get to live closer to jobs and nightlife and possibly pay less in rent. The city makes more money from property taxes.

That seems like a win-win-win-win for everyone directly involved in this growing city.

[AnthonyMouse]

The land value goes up but not by the full amount. If the land was worth $400K before, with less restrictive zoning it's worth maybe $800K, but then you can build ten units there and the per-unit cost of land is $80K instead of $400K.