Notes from the California housing crisis
The California Building Industry Association sent out a memo from president and CEO Dave Cogdill on Monday regarding what it deemed a "housing crisis" in California.
"California is facing a housing crisis that has reached alarming proportions: demand is far outstripping supply, driving prices up and keeping far too many working Californians from becoming first-time homeowners," read the report's summary.
Cogdill cited reports from the nonpartisan Legislative Analyst's Office and Beacon Economics that point to the lack of supply as the primary culprit of California's expensive housing prices. Consequently, both of these reports also recommend adding up to an additional 100,000 private housing units annually as a meaningful solution.
Here are some other highlights from the memo.
The average cost of a California home is $440,000 -- two-and-a-half times the average national home price, according to a March 2015 report from the LAO. California's average rent is also outpacing the national average at $1,240 per month -- 50% higher than the rest of the country.
California's homeownership rate was 54.1% compared to a national average of 63.8% for the fourth quarter of 2015, according to the U.S. Census Bureau.
Potential consequences of this trend continuing unabated include: the inability for employers to recruit and retain employees, the migration out of California of middle- and lower-income earners, an inability for lower-income earners to attain homeownership to build wealth, and a general increase in the poverty index.
According to the LAO and Next 10, there are a number of reasons why housing supply is so low, which include regulations, community opposition and lawsuits, and local finance and land use policies that favor nonresidential development and work against increasing densities.
Ideas for public policies to address the affordability gap include: policies that allow dense development in coastal cities, or expand new market rate housing to alleviate competition.
The memo also pointed to policies that can make matters worse, such as Mandated Residential Prevailing Wage on Privately Funded Residential Projects, which would result in fewer construction jobs, higher housing costs, and lost GDP and revenues.