Why Housing Is Unaffordable in California

What could really help is deregulation, but residents aren’t likely to get it from Democratic lawmakers.

By Allysia Finley of the WSJ. Excerpts:

"Between 1950 and 1970, home prices were about 30% above the national average. By 1980 that had widened to 80%. In 2015 it was 150%."

"so why not move to another state? A net 800,000 people did just that between 2005 and 2015, and many of them earned less than $30,000."

"over the past four decades California added only about half as many new housing units as it needed to keep up with population growth, and most of that construction was inland where there is less demand."

"home construction needs to increase 80% to meet demand. Achieving this would require bulldozing regulatory barriers, which Democratic politicians are loath to do."

"in California’s coastal metros more than two-thirds of cities and counties have policies explicitly aimed at restricting housing growth, such as limits on density. When a developer wants to break ground, local governments impose multilayered reviews that can mean getting approval from the municipal building department, health department, fire department and planning commission as well as elected officials.

Neighbors can delay or block projects using the state’s 1970 Environmental Quality Act."

"Getting a building permit in San Francisco takes about three times as long as in the typical American metro."

"Local governments tack on hefty development fees, which run about three to four times as high in California as in the rest of the country. Politicians often attach conditions to projects requiring developers to pay workers “prevailing wages,” determined by local unions. This is one reason the cost of construction labor in California is about 20% higher than nationwide. Stringent building codes and energy-efficiency standards can add tens of thousands to the price of a house—even though low-flow appliances often cause people to use more water.

All told, it costs between $50,000 and $75,000 more to build a home in California than in the rest of the country."

"Zoning is generally the biggest obstacle to development in coastal areas. In Orange County’s foothills, local residents have protested rezoning 4.4 acres of barren land to allow 22 homes to be built on 10,000-square-foot lots—half the size of the current requirement."

"California’s housing policies are intrinsically regressive. Limiting the supply drives up home values in well-to-do coastal communities, while pricing everyone else out of the market. Households in the lowest quartile in California spend about two-thirds of their incomes on housing; those in the top quartile spend just 16%."