v 31.35 | California’s Housing Crisis
Welcome to Happening in California, a brief look at political news, insights, and analysis of the world’s fifth-largest economy.
The American Dream is often defined in part by homeownership — a key component of upward mobility and generational wealth creation.
But here in California, the prospects of achieving this aspect of the American Dream for a generation of young adults and low-income Californians is dimming.
Today, with the median price for an existing single-family home at $859,000, California has the second lowest homeownership rate in the nation.
Here are a few quick takes on California's housing crisis…
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Tom Ross | President and CEO | Swing Strategies
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The Big Picture: Skyrocketing home prices are pushing out many Californians who hoped to climb the homeownership ladder — blocking a path for wealth creation for many middle-class and low-income families experiencing worsening economic inequalities.
California is known for many things but it’s no secret affordable housing isn’t one of them. And while California has always been more expensive than the rest of the country, in the past decade the housing crisis has spiraled exponentially.
Despite all of California’s economic and geographic advantages, there is a breaking point in terms of the cost of living in the Golden State — and that point appears to have been reached for many Californians.
Since 2020, California has experienced its first-ever population decline — losing more than half a million residents according to the California Department of Finance.
The number of homes built in California has utterly failed to keep up with demand. A report by McKinsey & Company puts the shortfall at 3.5 million homes. California ranks 49th among the 50 US states for housing units per capita and 38th in new homes built per capita.
The impact of stunted housing development is all too predictable: the median home price has doubled in the last 10 years. As a result, 46% of Californians and 63% of lower-income residents stated that housing costs cause themselves and their families financial stress according to a June 2023 PPIC survey.
And with monumental barriers to boosting new home development…
NIMBYism and zoning restrictions
Time-consuming and strict California Environmental Quality Act (CEQA) requirements
The highest development impact fees in the country
Rising hard construction costs, such as labor and materials
…there won’t be a quick fix to California’s housing affordability crisis.
In the past two generations, the homeownership rates for Californians aged 25-45 have plummeted. The 25-35 year-old cohort has experienced the steepest drop with a 60% decline in homeownership.
What does this mean in practical terms? For Californians starting their careers, they’re faced with the prospect of never being able to afford to live where they grew up. Take for example Santa Clara County where the median single-home price is now $1.8 million — a 260% increase since 2000 according to data collected by the California Realtors Association.
In just seven years, California has experienced an unprecedented outward migration of more than one million of its residents. Undoubtedly, this exodus includes many younger Californians who still want to realize the American Dream that has become unaffordable in the state where they grew up.
The Bottom Line: California’s housing crisis is denying a generation of young adults and low-income families the opportunity of homeownership. The demographic, economic, and political repercussions are bound to be significant.
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