The Bleak California Housing Picture

Affordable housing (Photo – Ellie Trevarthen)

As the debate over SB 50 and other state legislative efforts to boost California’s housing supply heats up, it is worth reviewing how dire the housing situation is in the state.

By Ethan Elkind

Here are some data points:

– High Home Prices and Rents:

• According to the California Legislative Analyst’s Office, the average California home costs about two-and-a-half times the average national home price, at $440,000 (much higher in major metro areas). This price divergence began in the 1970s, when California home prices went from 30% above U.S. levels in 1970 to more than 80% higher by 1980.
• According to the California Department of Housing and Community Development (HCD), the majority of California renters (more than 3 million households) pay more than 30% of their income toward rent, while nearly one-third (more than 1.5 million households) pay more than 50% of their income toward rent.
• According to a Hope Center for College, Community, and Justice study, 19% of community college students in California are homeless, while 60% are considered “housing insecure.”
• Almost 25% of all homeless people in the country live in California, according to federal data.

– Extreme Housing Shortage Relative to Demand:

• California ranks 49th among all U.S. states in housing units per resident, behind only Utah, where residents tend to have large families in single homes, according to a 2016 McKinsey study. The McKinsey analysis showed that California has 358 homes per 1,000 people, whiles comparable states like New York and New Jersey have more than 400 homes per 1,000 residents.
• HCD calculated that the state needs to build 180,000 additional homes annually, but housing production has averaged fewer than 80,000 new homes each year over the last 10 years and is currently declining.

– Local Zoning is a Key Barrier:

• While the 2016 McKinsey study presented a goal of 3.5 million units needed to address the shortage and stabilize prices, UCLA’s Lewis Center found that California cities and counties currently are zoned only for a combined 2.8 million new housing units. Many of these zoned parcels are located in rural areas far from jobs, which is not where housing is needed.
• The New York Times recently mapped local zoning in some major cities and found that 75% of Los Angeles and 94% of San Jose is zoned exclusively for single-family homes.
• UC Berkeley’s Terner Center documented that in two-thirds of California’s cities and counties, multifamily housing (i.e. apartments) is allowed only on less than 25% of available land.
• The Terner Center also showed that fully one-half to two-thirds of all land in California is reserved exclusively for single family homes.
• In 1933, according to University of Texas’s Andrew Whittemore, less than 5 percent of Los Angeles’ zoned land was restricted exclusively restricted for single-family homes. By 1970, however, half of the land in Los Angeles was zoned only for single family residences, according to UCLA’s Greg Morrow.
• Morrow noted that zoning in Los Angeles went from allowing up to 10 million residents in 1960 to only 3.9 million residents by 1990.

– Local Permitting Processes Remain a Major Barrier:

• The Terner Center estimated that local permit and impact fees on new units average $150,000 per unit.
• Environmental review under the California Environmental Quality Act (CEQA), which is triggered when local governments make permitting decisions discretionary as opposed to ministerial, ranked as the ninth biggest barrier to housing overall, according to a Terner Center survey of planners.
• The Rose Foundation found that CEQA litigation affects fewer than 1 out of 100 projects not already exempt from the law; litigation has been steady at about 195 lawsuits per year on average since 2002.

These numbers show not only the human cost of California’s housing crisis, but also the need for a strong policy response to fix the governance system that exacerbates the problem. Will this legislative session bring any change?