What’s Causing California Housing Crisis

Ongoing California Housing Crisis
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The topic of California housing crisis has dominated much of the real estate news landscape in rent years, and many experts have no idea why.

Finding home in California has grown to be rather difficult; some even call it a crisis. The Golden State is experiencing a housing shortage despite the exodus and new building. What’s the issue? Most likely, it’s not what you think.

California Housing Crisis

According to the most recent California Association of Realtors affordability index, the state has returned to its pre-Great Recession levels from 2007. According to The Center Square, only 16% of Californian households can currently afford the median property for sale in the state, which is lower than the 36% national average. The inflow of unauthorized immigrants, widespread homelessness, and the high expense of living may be the first causes that come to mind, but other variables are also at play.

The state suffers from “restrictive zoning codes that favor existing homeowners over potential new residents, lengthy lawsuit-laden approval processes, soaring costs for construction and land, and a shortage of available workers to build,” according to Vox.

Building more homes makes sense as one approach to lower the cost of housing and the California housing crisis. In order to achieve this, Democratic governor Gavin Newsom set a target of 2.5 million homes being built by 2030, or 312,500 every year. He wrote in a newsletter in November 2022, “Understanding that we have no time to waste, in just one year, the Housing Accountability Unit has moved with a fierce intensity to break the status quo and remove bureaucratic roadblocks.”

According to The Center Square, however, “in its first year of operation, the Housing Accountability Unit, part of the California Department of Housing and Community Development, helped complete just 1,700 of the 3,500 CHD-involved units that year, a drop in the bucket towards the state’s housing goals.”

Why then is the government unable to reach the goal? The carpenters’ unions are one challenging barrier. Every time lawmakers have attempted to adopt new laws to solve the California housing crisis during the previous ten years, they have encountered opposition. Unions naturally desire greater employment prospects, but they also want to ensure that the work is done by unionized workers, which entails better wages and benefits. However, the majority of the state’s construction workers are not unionized.

In a state with such a wide variety of pay standards, there is also the issue of prevailing salaries. Why, for instance, should the Central Valley, which is primarily an agricultural region with low income and a high welfare dependency rate, pay the same wage for public works employment as the larger coastal cities?

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The California Environmental Quality Act, which was passed in the 1970s and requires construction projects to consider difficulties with air quality, noise, and natural resources in their planning, is another barrier. The “not in my back yard” movement’s frequent legal challenges against major construction projects have halted or delayed the development of new dwellings. Today, it’s usual for a planned housing project to endure court battles for at least three to four years, incurring additional costs in the tens of thousands or even millions of dollars, according to Vox.

Change in Demographics

According to Hans Johnson, a senior fellow at the Public Policy Institute of California, who writes for CapRadio, a significant portion of the issue is related to the state’s changing demographics. “For the first time ever, the state is losing population,” Johnson said. And that’s kind of the result of a confluence of demographic circumstances. In our state, we have the lowest birth rates ever observed. Add to it deaths brought on by the epidemic and a rising death rate due to California’s aging population.

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