California's Housing Challenge: Scott Wild on Practical Solutions in a Constrained Market

Written by:

Steve Marcinuk

Date:

19 Mar 2025

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“They’re a solution, and they can definitely help, and they’ve made a big impact in California, but they’re not a one size fits all approach,” says Scott Wild, Senior Vice President of consulting with John Burns Research & Consulting, discussing accessory dwelling units (ADUs) in California. The same, Wild suggests, could be said for virtually every approach to solving the state’s persistent housing affordability crisis.

In Southern California’s complex housing landscape, no single solution will solve the affordability crisis that continues to challenge residents, developers, and policymakers alike. Instead, industry experts are increasingly focusing on a patchwork of partial solutions – from ADUs to lot splits to transit-oriented development – each addressing different facets of the problem.

The ADU Boom: Helpful But Limited

California has seen a significant uptick in ADU construction following state legislation that streamlined the approval process. These backyard units have helped increase housing supply in built-out neighborhoods, but Wild cautions against viewing them as a comprehensive solution.

“The ways that ADUs can really be helpful is that they’re good at unlocking supply in markets that have just been built out for a long time,” Wild explains. “That’s why, when you look at where ADUs have been really popular, it is places like San Diego, Los Angeles, areas that might have had most of the housing stock built 50 to 100 years ago.”

However, scale remains a fundamental limitation. “You’re not going to be able to make up that deficit of thousands of needed housing units per year by doing infill, and you’re not going to make it up by doing ADUs everywhere, because they don’t work for everyone,” Wild notes.

The implementation has also created tension in some communities. In certain San Diego neighborhoods, developers have maximized the ADU opportunity by building multiple units on single lots – a strategy that, while legal, has sparked pushback from existing residents concerned about neighborhood character and parking.

Lot Splits: The Next Frontier?

Lot splitting – dividing existing residential parcels to create additional buildable lots – represents another potential avenue for increasing housing supply. However, Wild points out a crucial difference between lot splits and ADUs: the lack of a strong state mandate.

“The big driver of why ADUs have really taken off is the legislation that’s been passed really provides a state mandate to do it,” Wild says. “If you kind of take the pressure off the local politicians and say, ‘Hey, this is what people are allowed to do by a state mandate,’ it’s your interpretation of some of the finer details. If we get to that point with lot splits, I think that would kind of open up more lot split opportunities.”

The current challenges with lot splits often occur at the municipal level, where local officials may be unfamiliar with state provisions, creating barriers that discourage homeowners from pursuing these opportunities.

Transit-Oriented Development: Finding the Right Balance

Another approach gaining traction is transit-oriented development with reduced or eliminated parking requirements. Recent legislation has allowed developers to build housing near transit hubs without providing on-site parking, potentially lowering construction costs.

Wild sees both promise and limitation in this strategy: “[Building developments without parking]  might be a little extreme in terms of how people actually want to live… I think what people have found out is that it does work for some people. It doesn’t work for everybody broadly yet.”

The real success stories, according to Wild, have come from projects that find a middle ground. “The way developers have taken advantage of and been successful is it allows you to really decrease the required amount of parking,” he explains. “Some people are not relying on a vehicle, you can serve them too. And then you’re not overburdening the development where you have to build this massive parking structure.”

Mall Conversions: A Scalable Opportunity

According to Wild, perhaps the most promising development in Southern California’s housing landscape has been the conversion of struggling retail spaces, particularly malls, into residential communities.

“The biggest opportunities in Southern California recently have been reuse of mall and retail sites,” Wild notes. “Just about every major mall in Southern California has at least a chunk of it that has been carved off and is being repurposed as for-sale or for-rent homes.”

These sites offer several advantages: they’re centrally located, well-served by existing infrastructure, and typically situated near schools and other amenities. “The ability to go in and unlock them and say, ‘okay, we can carve out 1,000 new housing units in these’ – it’s just a no-brainer,” Wild states.

The Fundamental Challenge: Supply vs. Demand

Despite these various approaches, Wild emphasizes that the core issue remains straightforward: “Frankly, no,” he responds when asked if current solutions are enough to make a meaningful dent in California’s housing affordability. “Everything we’ve talked about is a good solution to kind of offset some of the deficit in housing, but the issue in California that really drives affordability is just supply versus demand.”

California’s geography presents inherent constraints – bounded by ocean, deserts, and international borders, with much of the undeveloped land presenting challenges from topography to fire risk. Add to this what Wild describes as a “slow growth mindset” among many communities, and the result is a persistently inadequate housing supply.

“We’re going to build slowly. We have limited opportunities, and the demand hasn’t shifted, so affordability is just going to be a problem unless we start building at a pretty big scale, in a different way,” Wild concludes.

Other Factors: From Tariffs to Mortgage Standards

The affordability equation is further complicated by factors like tariffs, which impact the cost of building materials. “Tariffs and the cost of building housing are going to be linked until that issue is resolved,” Wild points out, noting that many components from lumber to electrical equipment face import challenges.

Mortgage lending standards also play a role, though Wild notes this is less significant in Southern California’s high-priced market. “If you’re buying a million-dollar home, the barrier isn’t that you can’t qualify; it’s not your credit rating or your job history, it’s that you don’t have the money to make the required payments.”

The Path Forward

For real estate professionals navigating California’s housing market, understanding the interplay of these partial solutions – and their limitations – is essential. While ADUs, lot splits, transit-oriented development, and retail conversions each contribute to addressing the housing shortage, the fundamental supply-demand imbalance suggests that affordability will remain a challenge for the foreseeable future.

As Wild puts it clearly: “Demand for housing is really high right now. Supply has not kept up with it, and as long as that’s the case, homes are going to feel unaffordable.”

Successful stakeholders in this market will be those who can effectively leverage these multiple partial solutions while advocating for the larger-scale development that Southern California ultimately needs.