The cost of compliance is really a minor factor here. The problem is that zoning laws simply prohibit building enough hosing to meet demand. The zoning laws in LA, the Bay Area and elsewhere will ensure an ever-worsening and never ending housing shortage for as long as they exist in their current state.

There are many lots that don't get built on because the cost of construction is higher than the value of the home once built. I have done the math on a number of such lots, and the permitting fees have been roughly the amount to tip the scales. Add to that the one year minimum build time due to at least 4-6 months of bureaucratic delays, and it just becomes unfeasible.