Living in California isn’t for the faint of heart or people with skinny wallets. That’s because California is facing one of the worst housing crises in the United States, and there aren’t affordable places to live nearly anywhere in the Golden State.
Today, homeownership levels in California are at their lowest point since World War II, and many people are simply giving up and leaving the state altogether because they are unable to find a place to live they can afford.
Housing is a challenge for all
Homes in California are on average 2.5 times more expensive than the median national home. The typical cost for a home in California is $437,000, lower than only Hawaii mortgage rates.
Renters don’t get a break either in the California housing market, as rents across the state are the highest in the country. During the recession, while rents across the country dipped, in California they stayed the same and later rose quickly after the economy started its recovery. The average rent for a two-bedroom apartment in San Francisco is an astonishing $4,000 a month.
Compounding the problem, rising rents haven’t been offset by an increase in wages across the state. While wages in California are higher than the national average, they aren’t enough to pay for their homes. In San Jose, where the median income is around $100,000, people are still paying 40 percent of their monthly income toward rent.
Gentrification and homelessness
Gentrification may seem like a big-city problem limited to large metro areas, but it’s actually happening in rural areas as well. As low-income residents leave the state, they are experiencing negative net migration, while higher-income residents are increasingly moving into California. From 2000 to 2015, California lost nearly 800,000 residents with incomes near or below the poverty line. Of those that left since 2007, three-quarters made less than $50,000 annually.
Rising rents aren’t just increasing the number of people moving out of the state, it’s also increasing the homeless population of the state. Between 2015 and 2016, other states saw a decrease in the homeless population, but California experienced an increase of 2,400 homeless people, according to a report by the U.S. Department of Housing and Urban Development. Rising rents in Los Angeles caused a 30 percent increase in people experiencing homelessness, and Zillow estimates that every 5 percent increase in rent causes 2,000 more people to become homeless.
California needs to build more to keep up with population growth and help keep prices down. For that to happen, 180,000 homes would need to be built annually. For the past 10 years, the state only managed to build half of that and never surpassed the 100,000 mark. From 2010 to 2017, California’s population increased by 2 million people, with most going to urban centers with populations of 500,000 or more, creating a crowded marketplace for housing.
Construction costs have soared across the country. It’s especially difficult in California, where construction jobs are down, and there are no workers to be found. Developers are having a hard time building for cheap without skilled workers. Land costs are also increasing construction costs as developers have to prioritize higher-end projects to make a profit. There is also a limited amount of land around the state, and there’s no better example of the massive land shortage in California than we see in the city of San Francisco.
Then there’s always NIMBYs, which stands for Not In My Backyard. These are local residents who oppose new development near their home. In many cases, they are able to successfully stop many projects with their activism. Many people, including California Gov. Jerry Brown, pin the blame on this crowd for worsening the housing shortage all over the state.
Takeaway: California is a warning for the rest of the United States
California doesn’t seem to see an end in sight with the current housing crisis. Local laws, NIMBYs, scarce land, lack of skilled workers, land costs, etc. are all playing a part in keeping California the way it is.
In many ways, California serves as a warning for the rest of the United States. In many cities across America, we’re not building enough housing for many of the same reasons it’s hard to build in California. The Golden State ignored these problems for decades, and now they find themselves at a dead end.
Cities need to make housing affordable by allowing more construction. If they don’t do this, they risk going down the same road as California.
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