California’s housing crisis has gotten worse, not better, over the last 30 years

The Public Policy Institute of California, a think tank that conducts vigorous and objective research into vital state issues, is celebrating its 30th anniversary with a series of retrospective reports.

Housing, or the chronic lack thereof, is arguably the most important of those issues, since it lies at the core of so many of California’s existential challenges. They include the nation’s highest levels of homelessness and poverty, a yawning gap in generational wealth, and the outflow of people and jobs to other states with more abundant and less expensive housing.

Unfortunately Public Policy Institute researchers Hans Johnson and Eric McGhee could find little progress over the past three decades, writing, “While California’s housing market has undergone tremendous changes over the years, with some aspects worsening in the last decade, the central problem — high housing costs — remains the same.

“As California’s population has increased, more housing units have been built — yet housing costs and rent increases have outpaced building,” they add.

Since 1990 the state has added 3.6 million homes, up 33%, and 9.4 million residents, up 31% as of last January. California’s median home values grew 56%, from $456,000 to $753,000, and rents rose from $1,300 to $1,800.

In California housing values are still more than twice the national average and rents are about 50% higher.

Such high housing costs spawn other socioeconomic issues, the researchers continued, to wit:

• California has the nation’s second lowest rate of home ownership, behind New York, and home ownership is particularly scant among young adults, and Blacks and Latinos of any age. “The bursting of the housing bubble that led to the Great Recession in 2008 hurt homeownership for Californians of all races and ethnicities, but African Americans and Latinos were more affected,” the study says.

• High housing costs cause many Californians to be financially burdened. “The share of renters who are stressed — paying over half their income in rental costs — is considerably higher here than in other states,” Johnson and McGhee found. “Not surprisingly, housing stress most affects lower-income Californians, who are generally already in the cheapest rental units and cannot move to escape the burden.”

• Housing stress in California has been growing fastest among middle-class families; “one in six middle-class renters in California are now spending over half their income on housing.”

• High costs are a major factor in the homelessness crisis. The federal government estimates that California’s homeless population increased by 47% from 2007 to 2023, while the state’s overall population grew by just 7%, and “the vast majority of Californians experiencing homelessness are unsheltered; the state accounts for almost half of the nation’s unsheltered homeless population.”

• High costs drive people to other states, with the highest outflows occurring when the cost differentials are the greatest, and “this net outflow has been highest among precisely the lower- and middle-income Californians who have been hit hardest by the cost crisis.”

• Finally, the wealth gap between those who own homes and those who don’t has widened, with more than a million Californians becoming millionaires who “reflect the state’s past more than its future; they are far older and more likely to be white than the typical Californian. For many of them, this equity may be a key piece of their retirement plans. But these higher values do make it more challenging for younger Californians of modest means to buy into their first home.”

Although saturated with negativity, the housing study offers a potential silver lining in that California’s population has leveled out and if demand weakens, it might be possible “that robust housing growth will put a dent in the state’s housing shortage.”