Executive summary

This policy brief is about the housing crisis that California is facing. This issue has caused greater strain on the middle class in the state and for you people as they are unable to find a place to live and it has pushed some people into poverty, due to the rising rents in California. Housing prices in the state have resulted in people leaving the state due to the fact that they are unable to afford living in the state.

Overview

The housing crisis affecting California is a complex issue that has been growing for many years, a persistent shortage of affordable housing, high prices, and a growing number of people experiencing homelessness. This is affecting many Californiaians, but mostly low- and middle-income families who are struggling to keep up from rising housing prices and having to live far from job centers due to unaffordable housing. California’s average home prices are now more than twice the national average, and rents in cities like San Francisco and Los Angeles have reached levels that put significant strain on household budgets. 

In California, a primary factor contributing to the crisis is the chronic undersupply of housing. Decades of restrictive zoning laws, lengthy permitting processes, high labor costs, high construction costs, land scarcity, and limited incentives for developers to build affordable housing exacerbate the shortage. The high cost of living and housing instability have driven many residents out of California, while others are unable to find affordable housing, experience overcrowding or face homelessness.

Addressing the housing shortage in California is important as it is the largest state in the union with the largest economy out of all the states, this can have profound effects to the housing prices in the neighboring states such as Nevada and Arizona, where they have now seen rising housing prices because of Californiainans moving because of the lower cost of living and lower prices compared to California. To address these issues there must be comprehensive policy solutions and collaboration among stakeholders, including developers, nonprofit organizations, state and local governments, and residents. 

Pointed Summary

• The housing crisis is a major issue in the state of California. 
• The issue has led to an increase in homelessness, with the highest number of people that are homeless in the nation.
• The situation will only worsen if not solved and it will lead to more homelessness and greater inequality in California.
• People will continue to leave the state for cheaper housing in neighboring states which can affect the employment rate in California.
• This will affect the economy of California, as they will see middle class people leaving the state, which could potentially lead to a decrease in tax revenue and in the labor force. 

Relevance

The housing crisis in California has been affecting the state for several years and there have not been any effective long term solutions that would solve the issue. The state in the past has seen rapid population growth and they were able to build enough housing for the population, but in the early 2000s, this started to weaken, especially after the 2008 housing crash, the number of housing being built in the state declined and plateaued to 8,000 units per year since 2008. This has affected the homeownership rate in the state which is 55%, and is below the national average of 65%.

This has resulted in higher costs for people in the states. The lack of affordable housing affects individual households and it has broader socio-economic impacts. Workers in essential sectors of the economy, such as healthcare, education, and public safety are increasingly unable to pay for living in the communities that they serve, causing workforce shortages for these essential sectors and leading to greater inequality. 

The rising level of inequality has resulted in communities that are facing increasing homelessness and crime. This has made the people in these communities feel unsafe and attempt to move out to other regions of the state such as the Inland Empire or the Central Valley or to neighboring states. 

Current Stances

The current stance of California in dealing with the housing crisis, is to build more housing, make current or future housing affordable, and address homelessness. The state government of California has decided to spend billions of dollars over the next few years to solve the homelessness situation and attempt to build more affordable housing. The work of advocacy groups for the construction of more housing has been also active for many years. They face resistance from local residents and local community leaders who see that more affordable housing will lead to their property values becoming affected by the possibility of low-income housing nearby. 

The pro-housing and YIMBY (Yes In My Backyard) advocacy groups are very active in major metropolitan areas in California such as in Los Angeles and San Francisco, where they have argued for building higher-density housing especially near public transit areas known as transit-oriented development (TOD). This would help in reducing car usage to commute to work and result in less traffic congestion especially in Los Angeles. 

The two cities though have very different stances on how to deal with the housing crisis. In urban planning, Los Angeles has focused on high density housing with transit-oriented development, with neighborhood preservation. San Francisco has pursued building denser, vertical development near commercial areas. The two cities also have different local policies on affordable housing, Los Angeles is focused on streamlining rules and regulations to increase overall housing stock, using transit oriented communities, while San Francisco is mandating that a higher percentage of new developments include affordable units. The two cities' approach to homelessness is very different with Los Angeles investing more in large-scale housing initiatives, while San Francisco is focusing on taxing large companies to fund homelessness services and programs. 

Tried Policy

There are many policies that have been attempted by the state of California to fix the housing crisis. Some of them such as rent control and tenant protections, streamlined permitting, and environmental review reform. Rent control has been a very controversial topic in California, many cities have had rent control implemented since the 1970s such as Los Angeles, San Francisco, and Oakland, but the Contra Hawkins Rental Housing Act, limited local governments to implement rent control. There have been many propositions to allow local governments to enact rent control but they have failed to pass. 

Streamlined permitting would be beneficial in building more housing in California, especially in the cities where most of the demand is. Red tape and excessive regulations have been one of the many complaints that the developers have on the state and why they have not built more housing. There have been several bills that have been signed by the Governor to help streamline the housing regulations such as Senate Bill 35 in 2017. According to the Legislative Analysts Office, they find that construction costs for housing are 20% more expensive than the rest of the nation. 

Reforming the California Environmental Quality Act (CEQA) is another policy option that the state has considered important to fix to build more housing. The main issue of CEQA is that it takes up so much time for it to be approved, thus discouraging developers from building. A CEQA report will find out if the project will have impacts on the environment, such as water quality, energy consumption, and if the project is near a historical or cultural landmark. There are many pro-housing activists that have lobbied and protested the state government to make it much more streamlined and in 2021 the governor signed AB 2221 which streamlined CEQA for accessory dwelling units and ‘junior’ accessory dwelling units.

Policy Problem

A. Stakeholders

There are many different stakeholders in the issue, such as the residents and tenants, developers and real estate investors, local and state government officials and agencies, nonprofit organizations and advocacy groups, and employers and business associations.

The residents and tenants of California, especially low- and middle-income households, are directly affected by the housing crisis. Many low-income tenants face rising rents, risks of eviction, gentrification, and a competitive affordable housing market. There are many renters that have pushed for rent control, greater affordable housing development, and tenant protections.

The developers and real estate investors are key stakeholders in building new housing stock. They construct the majority of new housing units across the state. They also play an important role in advocacy and lobbying for less regulations, streamlined permitting, and tax incentives for making new housing developments less costly. While the majority focus on market-rate housing, there are some developers that do build affordable housing and temporary housing, if they are provided with government funding and incentives. 

Local and state government officials and agencies play a large role in developing housing policy for the state. Local agencies such as the Los Angeles County Development Authority and the San Fransisco Mayor’s Office of Housing and Community Development, are important agencies that provide services to low-income people. The state agency that creates statewide housing goals, regulations and funding priorities is the Department of Housing and Community Development. There are also policymakers and urban planners that are responsible for creating housing regulations, zoning laws, and funding initiatives to address housing needs across the state. 

Nonprofit organizations and advocacy groups are an important stakeholder as there are some organizations that focus on housing access, raising awareness for changing housing policies. The role that these nonprofit organizations play in research, public awareness, policy advocacy, and for sustainable and affordable housing.

Companies and business groups are affected by the possibility of a smaller labor pool. Employers are impacted by the housing crisis as there are commuting challenges and a reduction in workforce availability. Commuting is a serious problem in California, specifically in Los Angeles and Southern California, traffic congestion is causing many employees to lose time in traffic causing them to be late to work. 

B. Risks of Indifference

If the housing crisis in California is not solved this would result in an increase in poverty, homelessness, inequality, and migration out of the state. The situation could lead to the neighboring states to have the same crisis as California. Homelessness in the state would get worse as the rising housing costs would force many low-income and middle-income individuals into difficult living situations. This would result in greater government assistance for these individuals, to provide shelter, health services, and it could lead to concerns of public safety. 

The housing crisis if not solved would lead to a worsening job opportunities, because of the rising prices and the housing scarcity this could lead to economic inequality. With limited affordable housing, this makes it difficult for people to find housing near job centers, which would limit the availability of workforce for the job centers. If not solved this would cause people and employers to leave the state due to the high cost of housing.

There would be an increase in poverty because of the lack of affordable housing in the state. According to the California Housing Partnership in 2022, the state has around 900,000 affordable housing units, while the state needs about 1,300,000 affordable housing units. This would result in people to live far away from the job centers and for those residents that decide to live closer to the job centers, this could have negative effects on their disposable income, as they would need to spend more to cover housing costs and less on basic necessities.

C. Nonpartisan Reasoning

The situation of housing in California has resulted in differing opinions on how this can be solved by streamlining regulations and labor laws, reforming land use and zoning laws and incentivising the construction of affordable housing. Strict labor laws have stifled developers from building in the state, they cite the generous worker protections and the high minimum wage as reasons for not building more housing in the state.

Current zoning and land-use regulations have restricted where development can occur and they are able to build it is usually single-family, low-density housing, which does not reduce the housing shortage as much. The use of laws such as CEQA, have made it easier for projects to get delayed or stopped by citizens or by the state.
Incentivising the construction of affordable housing has not worked as the state and federal funding for affordable housing has decreased. The incentives provided to developers is also not enough for them to be incentivized to build more affordable housing. Because the state is not providing subsidies to developers, there are fewer affordable housing projects being funded.

Policy Options

There are various policy options that can solve the housing crisis in California such as, streamlining regulations and labor laws, reforming land use and zoning laws and incentivising the construction of affordable housing. Streamlining regulations in labor laws would be beneficial to solving the housing crisis. This would result in streamlined housing approvals such as a reducing the time needed to approve a project this would incentivise the developers to build more housing, near areas that require it such as in near transit hubs or near job centers.

The next policy option would be zoning reform and land use reform. This could be to incentivize pro-housing developments and pro density projects. Relaxing zoning restrictions would allow for higher density housing like I said in your transit hubs. California has fixed this by passing legislation such as SB9 and SB10 which would allow duplexes and fourplexes in single family zones and streamline approval for denser housing in urban areas; this would increase housing stocks and reduce urban sprawl.

The last policy option would be to incentivize the construction of affordable housing such as, reducing developers fees and increasing subsidies for developers especially in your transit hubs and urban centers. By incentivizing developers this would reduce the costs to start up construction and make them more likely to build more housing. This can also be done with public and private partnerships to allow local governments and private developers to promote mixed-income housing projects that can utilize government land and provide incentives to the private developers to create affordable housing units .

Conclusions and Recommendations

My recommendation would be to implement the second policy option, as it would result in less uncertainties for the developers and it would embolden public governments to be responsible for encouraging denser housing. This could be seen in large cities such as San Francisco and Los Angeles, as there would be greater tools at the developers and at local governments building into denser housing. For Los Angeles this would result in less traffic if the development is much more pedestrian friendly and in San Francisco this would result in higher density which would reduce inequality and homelessness in the city 

Acknowledgment

The Institute for Youth in Policy wishes to acknowledge Paul Kramer, Carlos Bindert, Gwen Singer, and other contributors for developing and maintaining the Programming Department within the Institute.

Work Cited

1. Alvarez-Nissen, M. California Naturally-Occurring Affordable Homes at Risk Report 2023. California Housing Partnership, 23 Mar. 2023, https://chpc.net/resources/california-naturally-occurring-affordable-homes-at-risk/.
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2. California Budget and Policy Center. Kimberlin, Sara. What Should Be the State’s Role in Rent Control? State-Level Tenant Protections Can Be One of the Tools to Address California’s Housing Affordability Crisis. Apr. 2019, https://calbudgetcenter.org/resources/what-should-be-the-states-role-in-rent-control-state-level-tenant-protections-can-be-one-of-the-tools-to-address-californias-housing-affordability-crisis/.
3. California Department of Housing and Community Development. Transit-Oriented Development (TOD) Housing Program. https://www.hcd.ca.gov/grants-and-funding/programs-archived/transit-oriented-development-housing#:~:text=To%20increase%20public%20transit%20ridership,development%20of%20specified%20housing%20developments. Accessed 9 Nov. 2024.

5. Legislative Analyst’s Office. California’s High Housing Costs: Causes and Consequences. 17 Mar. 2015, https://www.lao.ca.gov/reports/2015/finance/housing-costs/housing-costs.aspx.

6. Legislative Analyst’s Office. The 2023-24 Budget: Updates on Recent Housing and Homelessness Augmentations and Overview of Proposed Budget Changes. Legislative Analyst’s Office, 29 Mar. 2023, https://lao.ca.gov/handouts/socservices/2023/2023-24-Budget-Housing-Homelessness-Proposed-Budget-Changes-032923.pdf.

7. Mejia, Marisol C., and Camille A. Perez. “An Update on Homelessness in California.” Public Policy Institute of California, 1 May 2024, https://www.ppic.org/blog/an-update-on-homelessness-in-california/#:~:text=The%202023%20PIT%20count%20released,6%25%20from%20the%20previous%20count.

8. Paluch, Jennifer, and Joseph Herrera. “Homeless Populations Are Rising around California.” Public Policy Institute of California, 1 May 2024, https://www.ppic.org/blog/homeless-populations-are-rising-around-california/.

9. The Governor’s Office of Planning and Research. CEQA 101 - Office of Planning and Research: What is CEQA? https://opr.ca.gov/ceqa/docs/20210809-CEQA_101.pdf. Accessed 9 Nov. 2024.

10. U.S. Census Bureau. California: Profile Data. data.census.gov, https://data.census.gov/profile/California?g=040XX00US06. Accessed 9 Nov. 2024.

11. Walters, Dan. “California’s High Construction Costs Limit Housing. A Supreme Court Decision Might Help.” CalMatters, 16 Apr. 2024, https://calmatters.org/commentary/2024/04/housing-construction-costs-supreme-court/#:~:text=Development%20costs%20are%20particularly%20high,reality%20of%20housing%20in%20California.

12. Why Are Housing Costs So High in California?. Legislative Analyst’s Office, 4 Mar. 2015, https://www.lao.ca.gov/reports/2015/finance/housing-costs/housing-costs.aspx.