California’s housing affordability crisis stems from high population growth in critical areas, slow new home construction, and local mismanagement of the housing market. The Housing Crisis Act of 2019 is a legislative initiative that is designed to reverse this trend.
California has been a fantasy destination for millions of people inside and outside the US. Even a popular song, California Dreamin’, has been written about it. Some demographers, however, predict that California’s total population may actually begin to shrink soon, as more people leave the state than move into it, despite California’s high rate of overseas immigration. A lot of this has to do with the state’s deepening housing crisis.
The Extent of the Problem
Put bluntly, the situation is grave:
● California ranks next to last among the 50 states and the District of Columbia in housing units per resident.
● Statewide, five new residents compete for every new housing unit. In the Bay Area, the ratio is closer to seven to one.
● The average rent for a one-bedroom apartment in San Francisco is over $44,000 per year – nearly half again the pre-tax salary of the average bank teller.
● The average single-family dwelling in Los Angeles costs over $600,000; in San Francisco, the average is closing in on a million dollars.
● Around 25 percent of the nation’s homeless population reside in California alone, most in the large coastal cities.
● California needs to double its current rate of homebuilding just to keep up with demand, and it will need to triple or quadruple the current rate to put a serious dent in the housing crisis.
Reasons Why
The housing crisis can be analyzed at different levels. At the most basic level, the problem is simply that demand greatly exceeds supply. This statement begs the question, of course, as to why supply can’t keep up with demand in the first place. Although the situation is complex enough to fill a textbook, a few primary drivers of the crisis can be identified:
● Ironically, considering the scope of the homeless problem, the increase in demand results from strong economic growth, especially in Silicon Valley.
● Local governments are extracting high property taxes along with stringent zoning regulations and permit requirements, thereby reducing the financial incentive to build and driving up the prices of those homes that do get built.
The Housing Crisis Act of 2019
The Housing Crisis Act of 2019 streamlines the process for granting housing permits and approvals, and it limits fees that governments can collect. The law also limits the number of public hearings on housing project proposals and prevents local governments from raising fees after a project has already been approved. Urban areas may not change building standards, reduce the number of new housing units permitted, or place a moratorium on new home construction.
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