Due to a combination of population growth and a slow response by the home-building industry, California had by 2020 fallen an estimated 3.5-million units short of what was needed to bring supply into balance with demand. Since that time, the gap has narrowed by half, with the state logging a net population loss of 700,000 at the same time as roughly the same number of new housing units have been built. But that still leaves the state 1.5-million units short.
According to a 2023 housing-affordability survey conducted by Demographia International, which ranked housing affordability in major metropolitan areas around the world, California had three cities in the top 10. Measuring median home price divided by median household income (the higher the worse), San Jose’s ratio was 11.5, Los Angeles had 11.3, and San Francisco’s was 10.7. The No. 11 spot was San Diego at 9.4. Every one of California’s major cities is among the worst places in the world to try to purchase a home.
The conventional wisdom used to be that a home was affordable if it cost no more than three times the purchaser’s household income. California has managed to triple that ratio, and higher interest rates have only pushed its home prices down by a paltry 0.8 percent over the past year. According to Zillow, today the average home in California costs $747,352, compared to $348,539 in the rest of the United States.
The Legislature has in recent years made it easier for developers to build affordable housing. But dense, multifamily housing carries higher costs per square foot, and runs contrary to the prevailing sentiment of homebuyers, which is to live in a detached, single-family home.
The extreme environmentalist ethos that prevails in the Capitol, as well as in countless courtrooms across the state, guarantees that most housing developments will be high-density projects inside the footprint of existing cities. Single-family homes – and developers willing to brave the gauntlet of disincentives to build them – will remain in short supply and out of reach for the average working family in California unless the Legislature also allows the construction of new cities.
Edward Ring is a co-founder of the California Policy Center and the author of “The Abundance Choice: Our Fight for More Water in California.”