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How an Oil Spill Backlash Caused High Housing Prices – and More Oil Consumption

December 21, 2023

Following a catastrophic oil spill off the coast of Santa Barbara in 1969, in 1972, California voters passed Proposition 20, the “Save Our Coast” ballot initiative. The initiative rode a wave of voter anger over the horrific damage done by offshore oil development. It led to the creation of the California Coastal Commission (CCC), tasked with protecting and preserving the coast and its sensitive ecosystems for future generations of Californians, while maintaining public access to the beaches, bluffs, forests, and cliffs that define the coastline. 

Included in that original mandate for the CCC was regulatory authority over not just the waters 3 miles out into the ocean, but also, all of the lands along the coast of California, from one thousand yards to as far as five miles inland. This is known as the “Coastal Zone” (CZ), and includes vast swaths of existing urban lands in coastal cities like Los Angeles, San Diego, Santa Cruz, and Santa Barbara (San Francisco has its own coastal conservation authority). This authority to regulate land use near the coast created a unique opportunity to study the effects of the CCC’s impact on coastal housing markets, which Matthew E. Kahn, Ryan Vaughn, and Jonathan Zasloff undertake in their paper “The housing market effects of discrete land use regulations: Evidence from the California coastal boundary zone.

Key Takeaways

  • Home prices within the coastal zone have risen faster than home prices outside the coastal zone.
  • “The Coastal Act’s framers recognized that limiting development could lead to higher housing prices.” 
  • “In the Los Angeles area in 1970, there was no statistically significant difference in household incomes or home prices in coastal tracts relative to the control tracts. By the year 2000, home prices and household incomes have increased by much more inside the coastal zone than outside.”

To conduct their study, authors draw upon two sources of data: tract-level census data from 1970 to 2000, and a Los Angeles home sales transaction database from 2008. They then ran statistical models to discern the Coastal Act’s effect on prices and population density.

The models reveal several ways in which the Coastal Commission’s control over coastal land use – and specifically, housing development – have made areas within the CZ considerably wealthier and lower-density.

In the year 2000, population density was much higher just outside the CZ boundary than inside the boundary; people seeking housing near the coast – including, in some cases, 5 miles away from it – came up against the invisible “wall” of restrictions on coastal housing growth.

Moving to the 2008 sales data, they find that the average home in the CZ costs roughly twice as much as the average home outside of it – including homes that abut the coastal zone itself. Controlling for zip code and distance from the coast, they find that homes within the coastal zone sell for a 20% price premium.

Broadly, the study confirms what reasonable people would expect: Prohibiting or severely restricting housing growth along the coast has led to a dramatic divergence in home prices within the coastal zone – a divergence that did not exist prior to the adoption of the Coastal Act.

To the extent that these restrictions on housing near the coast result in forcing more Californians to drive their cars to reach coastal amenities like parks and beaches (the Coastal Commission also often requires the development of coastal parking lots), the ironic circle is complete: What began as an effort to restrict oil development has ended up forcing Californians to consume more oil.