A recent study has awarded California the title of the state with the least affordable home prices in the lower 48 states.
But a new ballot measure wants to cut back on NIMBY lawsuits brought by special interests that critics say work against housing production and potential homeowners.
According to a recent report from the Urban Reform Institute, four California metropolitan areas - San Jose, Los Angeles, San Diego and San Francisco - were ranked the four least affordable metro areas in the continental U.S., on par with the housing affordability levels seen in other countries without the same levels of private homeownership as in the U.S.
The unaffordability of the California markets far outstrips all other U.S. markets, except Honolulu, which is on the Hawaiian island of Oahu, the Urban Reform Institute report finds.
The report notes housing unaffordability is among the leading drivers of out-migration from California, as hundreds of thousands of former Golden State residents flee to states with more affordable living options. And the report notes that, for those who remain in California, high home prices will remain one of the leading drivers of income and wealth inequality.
"Where land use policy contributes to deteriorating housing affordability, the resulting increase in inequality can be viewed as an outcome of public policy," the Urban Reform Institute report's authors wrote. "Solving the housing affordability problem requires reforms that restore the competitive market for land in highly regulated markets and avoiding land use policies that worsen affordability where competitive land markets continue to exist."
Edward Ring, a senior fellow with the California Policy Center, agreed the fault for such unaffordability should be laid at the feet of California lawmakers, regulators and others who work to uphold and wield policies which limit supply, impose excessive impact fees, and slam homebuilders with lawsuits filed under the California Environmental Quality Act (CEQA), Ring said.
CEQA was signed in 1970 by then-Gov. Ronald Reagan to guard against runaway industrial growth, but recently national green groups have also used it to hamper new residential development.
With 163,000 square miles in California, only 5 percent of which is considered urban – and roughly 300,000 buildable acres – it should be illogical that owning a single-family home is more a pipe dream for middle-class and first-time homebuyers, Ring said.
“Yes, it’s more expensive - the whole state of California is too expensive, even the interior is much higher than the national average;” Ring said. “The real question is why.”
Besides CEQA, the real constraints are the fees and regulations that have been imposed on California community builders, Ring said.
“The ratio of urban space to open space in California is greater than in any other state,” Ring said. “There's all kinds of room to build more in California, all up and down the I-5 corridor, the Highway 99 corridor in the Central Valley, all up and down the 101 corridor.”
It requires a rational energy and water policy, he added.
“California could harvest more water, unlike landlocked Arizona and Nevada,” Ring said. “Even in dry years, we get 100 million acre-feet of precipitation in the state – that’s in a dry year.”
The process has become so burdensome, that fewer and fewer developers can afford to build: “In Sonoma County, In January 2022, the fee total for a single family house in Santa Rosa was $51,862. In Windsor, traffic mitigation fees alone are $11,475 and $6,941. Developers complained to the Grand Jury about both the cost and the inconsistency of these fees.”
On top of costly impact fees, one study estimates close to half of new construction is targeted by CEQA litigation.
But a new group, Californians for Home Ownership, wants to give voters a say in the pace and rate of new home construction, with a ballot initiative that would only allow district attorneys to file CEQA litigation, eliminating endless costly lawsuits brought by private attorneys.
“It takes away standing for people to sue – if they're not actually directly impacted; if they’re not a district attorney,” Ring said. “This is a very decisive CEQA reform.”
Ring noted it is physically possible to build very inexpensive housing in California; it’s only 5% urbanized.
“It obviously is if we have the right policies,” Ring said. “And if you made the building codes more in line with the rest of the country. And if you streamlined the permit process, so it's not this extortionate opportunity for municipalities with chronic deficits to cover them by charging – they go up to $100,000 in some cases.”
The U.S. Supreme Court is scheduled this week to hear arguments involving the fees imposed on the owner of a single-family home near Lake Tahoe.
While California has proposed building 3 million climate friendly homes by 2030, it’s not known how many have been built since the plan was announced in November 2022.
“For California to have affordable housing, the whole attitude has to change,” Ring said. “We have to be willing to critically examine every single thing that we’re told we have to do to stop climate change – yes, we should be pushing the edge with technology. But we should be doing it with things that are cost-effective, and that people in the rest of the world can do.”