California looms large when discussing housing affordability. The Golden State is the most populous state, with one in eight Americans living in the Golden State, but the homeownership rate is dismal. Ben Metcalf, Managing Director, said: Terner Center Towards housing innovation According to the University of California, Berkeley, California’s homeownership rate is 50 percentage points lower than the rest of the nation, at just 44% in 2021. This represents a serious downward trend from the 50% homeownership rate in 2000.
Due to notoriously high home prices, the monthly payment for a typical home in California is $5,500.
What is the solution? A panel of experts spoke at a recent meeting California Association of Realtors The (CAR) leadership conference outlined the scope of the problem and some of the solutions that may be available at the federal, state, and local levels. CAR CEO John Sebree moderated the discussion between the Turner Center’s Metcalf and CAR Chief Economist Thelma Hepp. core logic, Robert Kleinhenz, director of California State University’s economics research lab, and Logan Mortashami, chief analyst at HousingWire.
the core of the problem
Why is it so expensive to buy a home in California? Terner Center shows that about half of the homeownership gap is directly attributable to the affordability crisis, which is a direct result of a lack of housing supply. It was shown that
“It’s made it difficult to build new housing,” Metcalf said. environmental regulationsbuilding codes, local regulations, and opposition to the construction of infill apartment complexes.
Kleinhenz noted that the state is in a dire situation. shortage of supply For many years. In 2000, CAR estimated that the state would need approximately 250,000 new units per year to meet demand. But Kleinhenz said the state has never come close to that number, and is currently at a difference of 2 million to 2.5 million vehicles.
“The rise in housing prices is due to an increase in demand for supply, and we have to build more housing,” Kleinhenz said. “How many homes are we building? Over the past 10 years, building permits have never exceeded 120,000 homes.”
In fact, Hepp pointed out that California will have issued only 70,000 permits for single-family homes in 2023. houston metro area. “California [has been] It has been the market with the most inventory constraints for years. ”
As a result, housing disparities are also creating labor disparities. “Compare the number of people leaving California every year. High-income people are leaving California because there are no opportunities in California,” Hepp said. “We need to move the conversation to: How do we make sure our kids stay here and have the same opportunities that we have?”
The challenge of paving the way for the next generation of homeowners is a challenge for the speakers on stage and for the many real estate professionals in the audience who have seen families leave the state for more affordable areas. It was personal for me.
“The challenge for me is when I have adult children who want to live somewhere else,” Kleinhenz said. “That’s when we realize we need to step up our game. We need to build more facilities and create opportunities for our descendants to stay here.”
Sebree agreed. “We need to have a common goal: a California where everyone wants to live and work. How can we increase housing production?”
This issue has plagued California for decades, as the state has taken various steps to address the housing problem. Metcalf said 140 different laws regarding housing affordability have been enacted since 2016, but those laws have not had a significant impact on permit numbers.
progress of SB9 Since zoning for single-family homes was outlawed in 2021, there have been numerous attempts to expand the ability to build accessory dwelling units (ADUs) to increase density.
Ministerial approval, a streamlined permitting process that does not require public hearings or approval by local officials, went into effect in California in 2018 and could move housing construction forward. However, even with all these laws in place, cost and local regulations remain factors that limit development.
“Land prices in Southern California are $3 million to $4 million an acre,” Kleinhenz said.for us [California] Overall, the cost will be between $700,000 and $800,000 per acre. To begin with, construction costs are much higher than elsewhere. ”
So what will move the needle in California? Sebree asked each expert what policy changes they would make if given the chance. The most cited is zoning changes, especially reversion. downzoning It took place in the 1990s. Mohtashami suggested that the government encourage new construction by reducing loan interest rates to 0%.
What will happen to the vacant office buildings in some of California’s largest cities? The commission agreed that converting office buildings for residential use is too expensive. “The code doesn’t work,” Mortashami said. “We’re more likely to see pickleball courts built than we are to build housing.”