Wide and deep California housing crisis


In summary

The California housing crisis is a hot topic of the day but it has been developing for decades and there are no magic solutions to fix it.

Californians – especially politicians and us in the media – talk a lot about the housing crisis in the state and how it could be resolved.

Simply put, we haven’t built enough to meet demand, even though the state’s once robust population growth has all but slowed, and the mismatch between supply and demand is pushing up costs both. for tenants and future owners.

High housing costs are the main reason California has the highest functional poverty rate in the country and the second lowest homeownership rate, just in front of New York.

On the contrary, the pandemic has exacerbated the crisis. The plight of tenants, many of whom have suffered job losses, has increased as house prices have risen dramatically, with a second median after Hawaii.

Although the housing shortage has received a lot of media and political attention in recent years, it has actually been growing for decades, despite periodic production surges, such as a new report of the Public Policy Institute of California points out.

Citing data from the 2020 census, researchers at PPIC calculated that “the state has added 3.2 times more people than housing units in the past 10 years. There are now 2.93 Californians for every housing unit occupied, behind only Utah (3.09) and Hawaii (2.93) and well above the average for all other states (2.53) .

“Although coastal housing is the most expensive, the biggest percentage change in housing values ​​has actually occurred in inland areas,” continues PPIC. “To avoid higher coastal prices, many residents moved to the Central Valley, east of the Bay Area, and the Inland Empire east of Los Angeles. In the process, they also jacked up prices in their new neighborhoods. “

The PPIC report quotes a 2015 study by the Office of the Legislative Analyst who looked into the underlying reasons for the housing crisis. The LAO said that to avoid extreme cost increases, the state would have had to build at least 70,000 more units per year, and possibly up to 110,000, from 1980 to 2010. It estimates the shortfall. over this 30-year period to around 3.5 million units.

Gavin Newsom cited the figure when he ran for governor in 2018 and promised the gap would be closed by 2025. It was a fancy promise, requiring construction of about quintuple to half a million dollars. units per year, but if something has remained static or even declined.

“Average annual production has actually slowed down from 147,000 per year in the first decade of the century to only 71,000 per year since,” notes PPIC. “Construction fell almost everywhere, but the drop was larger outside of the expensive coastal counties (Los Angeles, Orange and San Diego, as well as the Bay Area). And while the pace has picked up recently, it is not enough to overcome the years of lag. “

The state’s official target for housing production is 180,000 units per year and the Department of Housing and Community Development imposes digital quotas on regions, which then become quotas for local governments, in order to zone enough land for their projected needs.

The department recently obtained new powers to enforce its quotas and prevent cities from complying with local opposition to specific developments. The current state budget also boasts of spending $ 10 billion to boost housing for low-income families and an additional $ 7 billion to tackle homelessness.

“These changes signal a more favorable position for housing, but it remains to be seen whether they are sufficient to increase production to levels that many deem necessary,” concludes PPIC.

There are no magic solutions. Given the scale of the crisis and decades of construction shortages, making even marginal progress would be nothing short of miraculous.


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