By Carson Bruno.
This is an abridged version of an article that appeared in the May/June 2015 Issue 1502 of the Hoover Institution’s Eureka – a bi-monthly publication on relevant California policy topics. To read the full Issue 1502, visit Eureka. To read more about the Golden State Poll, click here.
California’s housing prices are the 2nd highest in the country (second only to Hawaii); according to Zillow, Californian home values and rental prices are roughly 2½ times and 1½ times, respectively, the national averages. Homeownership is a signifier of upward economic mobility, but many Californians cannot afford these daunting prices threatening the California Dream.
Property ownership enables individuals and families to put their equity to work leading to enhanced opportunities for economic mobility and the California Dream is best characterized by the belief that, by coming to the Golden State and working hard, (and with a dash of good luck), an individual can strike success. Yet with homeownership out of reach for the median household, and rental prices just as much a strain on household budgets, the Golden State Poll tested a series of concerns related to the affordability crisis. Three-fourths of Californians named “younger generations will have a difficult time owning a home” (28 percent), “low-income individuals/families being priced out of the area” (17 percent), “middle-income individuals/families being priced out of the area” (15 percent), or “I’m being priced out of the area in which I currently live” as their top concern, showing deep anxiety that the lack of affordable housing is seriously impacting most Californians ability to achieve the cornerstone of success. In fact, a plurality named one of the four California Dream-centric concerns as the top concern across all demographics and regions.
Californians appear to have accurately assessed the problem. But when it comes to the solution, they seem to put short-term gratification over long-term, sustainable results. Among the three state-level and three local government policies to improve housing affordability tested, Californians sided with solutions that will attack the crisis’ symptoms, but do little to address the underlying cause. 54 percent strongly or somewhat support Sacramento subsidizing regional public transportation to ease commutes over increasing the renter’s tax credit (40 percent) or relaxing CEQA to encourage more housing construction (33 percent). On the local government policies, 47 percent strongly or somewhat support passing more rent control laws over changing zoning laws (38 percent) or relaxing open space requirements (36 percent), both which would encourage more construction. The only long-term solution to California’s housing affordability crisis is more housing supply. But that takes time. And it appears Californians are less willing to wait, even if those policies solve the problem.
While California has had a housing affordability problem for more than 30 years, it may just now be threatening the California Dream since the state’s economy has significantly shifted from a diverse, across-the-state economy to a Silicon Valley/Bay Area-centric economy, where the housing crisis is particularly acute – 78 percent in the Bay Area, the most among the regions surveyed, said housing prices are very or somewhat expensive. And this has implications. As more of the state is reliant on jobs in just one area – particularly an area as unwilling to endorse pro-growth policies as the Bay Area (relaxing CEQA, changing zoning laws, and relaxing open space requirements received the most opposition among the three regions) – those Californians seeking homeownership are facing immense friction. Regardless of Californians’ decisions when faced with the affordability crisis (i.e. move or spend more of their income on housing), California’s economy will eventually suffer. And without a vibrant economy, the California Dream that so many have realized could become a distant memory – and for others, an unobtainable goal.
Note: Unless specifically noted, all references to Californians in this analysis refer to Californian adults residing in the Bay Area, Central Valley, and Southern California.