Housing Shortage In California

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The affordability of housing is one of the most critical factors that determine the well being for Californians. Housing affects people’s lives in terms of education, recreation and choices for jobs. On the state level, the cost of housing has important impact on California economy, affecting the extent to which employers are able to hire and retain workers and influencing their preferences on whether to work and remain in California.

The cost of housing is high in California. Home prices are much higher than they are in other densely populated states. By 2015, the cost of a typical California home was $437,000, more than double the U.S. average, $179,000 . Besides the high absolute value, the home prices and rents in California have grown …show more content…

Low-income households spend more on housing due to the increased home prices. As a result, they have to spend less money on other essential spending. In terms of local cost of living, California’s poverty level is the highest nationwide and about 9% higher than the average . This is primarily resulted from the high housing costs.

PROBLEM CONTRIBUTORS

With regards to the causes of the housing supply shortage in coastal areas, main contributors that lead to the issue are local finance structures, community resistance and environmental reviews.

Local Finance Structures
In California, the finance structure of local government gives them more incentives to approve commercial (non-residential) housing development. Cities and counties find fiscal benefits come primarily from the commercial development, such as hotels, restaurants, and retail establishments. The tax revenue received from these establishments could often offset the cost for a local government to provide public services. On the contrary, the affordable housing developments cause more local costs than yielding high tax revenues. Therefore, local governments have the motivation to develop commercial establishments by zoning considerable lands for such purposes. Consequently, many cities and counties have approved their land use planning disproportionately towards commercial …show more content…

In the decision process, both growth controls and project reviews could inhibit the new housing development in the coastal areas.

First, growth controls exist in many cities and counties in the coastal metros. More than two-thirds of the cities and counties in California coastal areas have enacted policies limiting housing growth . Some of them adopted policies that directly cap the number of new homes to be built in a specific year, or limit the densities of the building A common indirect policy to limit new housing growth is to require a supermajority, of the local boards to approve the construction project. However, such supermajority often is hard to reach, leading to the project to be scotched.

Second, the project reviews in coastal areas often are cumbersome. Housing projects are required to go through multiple layers of review before approval, each of which increases approval time and complexity. Local government in California coastal metros takes about seven months to issue a building permit, while a common U.S. metro takes less than five months . Additional project review time is related to housing prices as well. In the Bay Area, every additional layer of review is associated with 4% increase in home prices

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