A new think-tank study concludes that to call California’s housing problem a crisis in an understatement, and it’s mostly the state’s fault.
The report comes from NEXT 10, a nonpartisan group that works to “grow the economy and reduce greenhouse gas emissions.”
It’s new “Current State of the California Housing Market” analysis begins frankly.
“To say that California is in a housing crisis is an understatement. California’s housing market continues to suffer from a shortage of supply and lingering effects from the housing crash and recession of the last decade,” it says.
For example, California is at or near the bottom of the national rankings in the supply of housing relative to population growth, housing affordability, existing single-family home prices, housing cost as percentage of income and overcrowding.
It’s 49th nationwide in homeownership, with only 53.6 percent of homes owner-occupied.
It costs 21.9 percent of a household’s income to pay for housing in the state, with only New Jersey worse off.
“Of all states, California had the highest percentage of overcrowded renter households,” the report says.
Prices are higher than anywhere else in the country, which “has continued to drive many low- and middle-income households to other states.”
And only 24.7 housing permits were filed for every 100 new residents, a fraction of the national average of 43.1.
“The cost of development and stringent regulations have contributed to the relative lack of homebuilding in California,” the report says. “Tough environmental and zoning laws sometimes create obstacles for homebuilders that are seeking approval for development, especially in coastal cities.”
The report says there may be good intentions behind environmental and other restrictions, but regulations are in need of reform “as they are often poorly implemented and subject to serious abuse.”
The state’s own business economy has contributed.
“Migration patterns from 2006 to 2016 indicate that over 74,800 people over 25 years of age with bachelor’s degrees moved to California from other states on net. In contrast, 1,090,600 people without bachelor’s degrees moved out of California, on net,” the report says.
The top five destinations for those who leave California – Arizona, Nevada, Oregon, Texas and Washington, all had better home-ownership rates, the report says.
The state’s property tax structure, which limits increases to 2 percent per year if the home isn’t sold to new owners, forces higher increases when those residences do change hands, limiting newcomers’ options.
Home prices ended up being 113 percent higher than the national median.
Even rents were 40 percent above the national average.
That means lower-income households are leaving.
“Migration patterns confirm that low-income households are being driven out,” the report says. Those who do stay are more likely to “rely on some form of government assistance, which in turn puts fiscal pressure on state and local governments.”
Zoning laws also make it difficult for developers to provide new housing. Land is scarce because of mountains, the ocean and other restrictions.
And “some developers assert that many local governments favor commercial projects over residential because they provide a larger financial upside.”
“Cities and counties know that sales tax revenue collected by potential commercial and retail establishments far outweighs the property Texas homeowners would pay.”
The report says California’s “current housing supply is not able to support its growing population.’
“The low levels of construction will likely result in further increases in home prices, such that fewer and fewer California residents will be able to afford homes.
“The state’s lower-income residents suffer the most; they are burdened with having to spend a higher proportion of their incomes on housing and are forced to cut back on other discretionary, but often necessary, purchases.”
“More housing construction needs to take place.”