HOUSING AND COMMUNITY DEVELOPMENT IN CALIFORNIA
California’s housing crisis is not just one thing. There are myriad crises, and they are
interconnected: housing cost burdens, household instability and homelessness, racial
segregation, economic inequality, health disparities, and climate change are all exacerbated by California’s inability to build sufficient housing (especially for lower-income households) and ensure that new supply is fairly distributed across communities and in ways that
reduce greenhouse gas emissions. Every day, there’s a news story of people leaving the state
for cheaper places, of a renter doing their best to stave off an eviction, or of a community struggling with gentrification and displacement. The politics of housing in the state also sometimes
feel intractable: cities continue to rely on exclusionary zoning tactics to thwart new supply,
while developers, labor unions, NIMBYs, YIMBYs, and tenant advocates all stake out opposing
views of what is needed to solve the crisis. All of this contributes to California’s future housing
trajectory feeling grim.
But it’s not all doom and gloom in the Golden State. There are signs of change—hints of
policy reform that could put California on a different, more progressive and environmentally
sustainable housing trajectory. There’s a growing consensus that solving the crisis will require a
comprehensive strategy that includes the production of new housing, the preservation of units
zmarket. The state legislature has passed major legislation in recent sessions designed to weaken the stranglehold of single-family zoning, streamline the production of affordable housing,
and strengthen oversight and accountability of how jurisdictions plan for new housing supply.
And Governor Newsom (as well as some local city and county leaders) have made unprecedented commitments to funding affordable housing and homeless shelters in the coming years.
Which path will California take? How do stakeholders across envision the future of housing in
California? Is it possible to turn the state’s longstanding housing crisis around? And what will
it take to do so?
Home prices in California are staggeringly high compared to much of the rest of the country.
Statewide, the median home value hit a high of $568,500 in 2019, more than double the median
price in the United States ($240,500). This was not always the case: although California’s house
values have always been somewhat higher than the rest of the United States, it wasn’t until the
1970s that the state’s house prices began to significantly diverge from the rest of the nation.
Housing affordability is a function of both housing costs and household incomes. Although
wages in California are higher than in other states, over the past two decades, home values have
risen much faster than household incomes (Figure 4). Even accounting for home price volatility
related to the foreclosure crisis and Great Recession, between 2000 and 2019, home values
increased by roughly 180 percent. In contrast, median household incomes in California
increased by only 23 percent over the same time period.The implications of this mismatch between housing costs and incomes reverberate across the
state, as many working families see their ability to afford housing slipping away. To provide just
one example, in 2000, a public school teacher with an average salary of $68,000 would have
earned enough to buy a median priced home. Today, that same teacher would have to earn
closer to $115,000 to buy the median priced home in California, but the average teacher salary
has increased to only $78,000. If they worked in Oakland, where teacher salaries are in line with
the statewide average, they would need to earn closer to $170,000 to be able to buy a median
priced house—assuming they could come up with a $200,000 down-payment.
Only 58.8 percent of Californians own their home, the third lowest homeownership rate in the
country (behind only New York and Washington, D.C.). The combination of high home prices
and tightened credit requirements has made it increasingly difficult for first-time homebuyers
to enter the market. In addition, as construction costs have risen, new stock tends to be larger
and sold at higher price points, leading to a dearth of “entry level” homes (Figure 8). The state’s
major metro areas have all seen a decline in the share of for-sale inventory priced at more
affordable levels, and lower-tiered homes (defined as those in the bottom third of sales prices)
have seen prices almost double since the recession (Kneebone & Trainer, 2019).The lack of homeownership access is particularly pronounced for households of color. Approximately 63 percent of non-Hispanic white households in the state own their home,
compared to just 44 percent of Hispanic households and 36 percent of Black households.
AN INCREASING SHARE OF CALIFORNIA HOUSEHOLDS ARE RENTERS, PLACING ADDITIONAL
PRESSURE ON THE EXISTING RENTAL STOCK.
FUNDING FOR HOUSING ASSISTANCE TO HELP
LOWER-INCOME HOUSEHOLDS IS INSUFFICIENT
TO MEET DEMAND.
ALTHOUGH HIGH HOUSING COSTS ARE CONCENTRATED IN THE
STATE’S COASTAL AREAS, CALIFORNIA’S RURAL AND INLAND
COMMUNITIES ALSO EXPERIENCE CHALLENGES RELATED TO
HOUSING AFFORDABILITY, QUALITY, AND INSECURITY.
THESE SHORTFALLS IN HOUSING PRODUCTION LEAD TO A MISMATCH
BETWEEN THE PRICE AND LOCATION OF HOUSING AND THE DIVERSE
NEEDS OF CALIFORNIA’S POPULATION AND LABOR FORCE.
WILDFIRES AND SEA-LEVEL RISE THREATEN
EXISTING HOUSING STOCK IN HIGH-RISK AREAS
THROUGHOUT THE STATE.
CONCLUSION
California’s housing crisis has been decades in the making, and has reached levels that many
believe it now threatens the state’s long term economic vitality. The ongoing housing shortage
continues to push rents and house values upwards, leading to ever larger cost burdens and
displacement pressures. Failing to expand the supply of housing, both income-restricted and
market-rate, also threatens to undermine California’s climate change goals, as families are
forced to move further and further from jobs to find housing they can afford. And racial justice
concerns loom large. The legacy of past discriminatory practices lives on in the racial wealth
and homeownership gap, elevated rates of eviction and homelessness among Black residents
and other people of color, and deeply segregated communities. While racial and ethnic discrimination in the housing market is now formally illegal, it still exists, including housing voucher
discrimination, subprime lending, and the “steering” of certain households toward specific
communities.
There are signs of progress: recent legislation and funding at the state level—as well as a federal
administration that is lifting up housing as a policy priority—promise to improve housing affordability and remove local barriers to increasing supply. But for these efforts to be successful,
there needs to be sustained progress on increasing housing across all of the state’s jurisdictions,
as well as efforts to ensure that the housing that is built meets the needs of all households and
communities, including lower-income people and people of color. Ultimately, California’s housing future will depend on how it meets the twin goals of production and a right to housing.
