THE CALIFORNIA LEGISLATIVE ANALYST’S OFFICE released a report last week addressing one of California’s biggest economic issues, the high cost of housing.

It is not difficult to understand why California continues to struggle at retaining and attracting businesses and jobs to the Golden State, considering the extremely high cost of housing.

California has long been one of the most expensive states to buy a home. Unfortunately that gap has been widening significantly since 1980, and today the average home in California costs roughly two and a half times more than the national average.

The average cost of a home in California is $440,000, compared to the national medium of $180,000.
California renters also face similar difficulties. The average rent in California was $1,240 a month, nearly 50 percent more than the national average.

California is a desirable place to live. Unfortunately there are just not enough new housing units being built to accommodate all the people that want to live here. This problem is particularly acute in coastal areas of the state.

Between 1980 and 2000, construction of new housing units in California coastal metropolitan areas grew by just 32 percent, compared to 52 percent construction growth nationally.

Growth in Los Angeles and San Francisco was even slower, at just 20 percent.

There is a direct relationship between the lack of new housing and increasing home prices. The study reports that the lack of affordable housing in coastal areas has put pressure on inland counties driving growth in these areas disproportionately and driving home values up in these outlying areas.

This also has a direct impact on quality of life issues, as California workers commute an average of 10 minutes longer than residents in other states.

Aside from the higher costs for land in California, extraordinarily high development fees in the state lead to higher home costs. A 2012 national survey found that the average development fee exclusive of water-related costs levied by local governments for a single family home was $22,000 in California compared to just $6,000 nationally.

Local resistance to new housing contributes to the lack of new homes that can be built. The report found that local residents will often take action to prevent growth in their communities. Economic fears that increased supply will diminish property values and the non-economic fears related to change often motivate residents to take action to slow or even stop development.

Voters are increasingly turning to the ballot box and passing measures aimed at limiting growth. Does this sound familiar?
Building in coastal areas has been particularly underwhelming because of community resistance to additional housing and particularly difficult environmental regulations.

The report specifically mentions the California Environmental Quality Act (CEQA) as a regulation that is frequently used by anti-growth groups to stifle development, increasing costs and limiting the number of new housing units that can to be developed.

Californians devote a higher percentage of income to housing than residents of other states despite relatively higher incomes in the state. High housing costs are particularly burdensome for lower-income households forcing these households to spend a higher percentage of their income on housing. These households typically have the longest commutes, because workers are forced to live in outlying areas.

Given the magnitude of the problem, the report urges the legislature to put all policy options on the table, saying, “Major changes to local government land use authority, local finance, CEQA and other major policies would be necessary to address California’s high housing costs.”

Guy Benjamin (CAL BRE License #01014834, NMLS 887909) writes a weekly column for The Herald, offering general information on real estate matters. As it is impossible to address all possibilities and variations, he will try to answer individual questions by readers who contact him at 707-246-0949 or guyb@fairwaymc.com.

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