California has a serious housing shortage. California’s housing costs, consequently, have been rising rapidly for decades. These high housing costs make it difficult for many Californians to find housing that is affordable and that meets their needs, forcing them to make serious trade–offs in order to live in California. The state’s housing crisis is one of the most difficult issues facing state policy makers.
Below is a collection of publications from our office which discuss various aspects of California’s housing crisis.
These materials were prepared for an informational hearing about housing challenges and their impact on the well-being of children by the Senate Select Committee on the Social Determinants of Children’s Well-Being.
In this report, we describe the Governor’s proposed $1.75 billion appropriation for various programs aimed at improving the affordability of housing in the state. Specifically, the Governor proposes (1) providing planning and production grants to local governments, (2) expanding the state Low-Income Housing Tax Credit program, (3) establishing a new state housing tax credit program targeting relatively higher-income households, and (4) expanding a loan program for middle-income housing production.
As part of the 2019‑20 Governor’s Budget, the administration proposes changing state oversight of local housing decisions and proposes offering rewards to cities and counties to encourage them to plan for and approve housing. To help the Legislature in its consideration of the Governor’s proposals, this report: (1) explains the existing process through which local communities plan for housing, as well as its limitations and shortfalls; (2) describes the Governor’s proposal; (3) provides recommendations on the parts of the proposal aimed at increasing home building in the short term; and (4) offers a package of changes to improve the state’s existing long‑term planning process for housing.
A lack of home building, particularly in coastal urban areas, is the fundamental cause of California’s housing crisis. Many factors contribute to this lack of building, chief among them local community resistance to new housing. The high cost and limited availability of housing in California forces many households to make serious tradeoffs in order to live here.
Housing affordability challenges are particularly acute for low-income Californians. Over 1.5 million low-income renters spend more than half of their income on housing. Government programs play an important part in helping some low-income households afford housing, but even if these programs were expanded it is unlikely they could help all Californians in need of assistance because such a large expansion would be extremely challenging and prohibitively expensive. Encouraging additional private housing construction can help the many low–income Californians who do not receive assistance.
Housing element law requires cities and counties to develop a plan that demonstrates how their planning and zoning rules will accommodate future home building. Our review of available evidence suggests that housing elements fall well short of their goal. Communities’ zoning rules often are out of sync with the types of projects developers desire to build and households desire to live in. There are no easy solutions to this problem. Any major changes in how communities plan for housing will require their active participation and a shift in how local residents view new housing.
As part of the 2016-17 May Revision, the Governor proposed changes to how cities and counties approve multifamily housing. Although the proposal was not adopted, it identified a central issue at the heart of California’s housing crisis. California’s local communities often fail to fully recognize the benefits of new housing. Because of this, they have and likely will continue to approve less housing than is ideal from a regional or statewide perspective. To avoid this, state policy makers would need to make major changes to how cities and counties plan for and approve housing.
One major consequence of lackluster homebuilding in coastal California is that many workers are denied access to California’s high-wage job markets because they are unable to find housing. These workers are pushed to other parts of California or beyond where their wages tend to be lower. This, in turn, contributes to widening gaps in incomes across regions in California, as well as between low-income and high-income workers.
Amid rising housing costs, many low-income households have moved from the state’s coastal areas to relatively inexpensive inland areas. In recent years, the largest source of migration of low-income households to California’s inland metropolitan areas has been the California coast.
The effects of California’s housing crisis appear to fall more heavily on younger Californians. Young Californians today spend more of their income on housing and are less likely to own a home than was true of prior generations of Californians when they were young.
Looking at the last 3 years, many coastal areas appear to be on pace to meet state housing production goals. Despite this, high costs and limited supply of housing persist. This suggests that state production goals do not reflect the full extent of demand for housing in these areas. Production goals likely need to be higher if the high cost of and intense competition for housing in these areas is to be curbed.
The rising popularity of short-term rental websites such as Airbnb and HomeAway has increased interest in the role of vacation homes in California communities. Vacation homes generally represent only a small share of all housing in most counties, with the smallest shares typically found in large urban areas and the largest shares in rural mountain and coastal areas. In most areas of the state, however, the share of housing used for vacationing has grown significantly in recent years.
About 20 percent of California’s housing is located outside the state’s 10 major metropolitan areas. These rural housing markets are diverse. Nonetheless, they share a common feature with the rest of the state: their housing is more expensive than the national average.