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California’s Housing Shortage

California’s housing shortage is real and it’s severe. Most blame the crisis on ‘supply and demand’…the demand is obvious, the supply is the real issue. Why are we not building more, what is stopping housing growth? The fact is that Californians have no resolve to actually do anything about the shortage; politics and money have weighed in more important.

To really grasp the depth of our predicament, a simple comparison to Houston can be made. Houston is a city that is home to a quarter of the population of California, but the state has built more multi-family housing than California in the last decade. From 2011 to 2016, California only added one new housing unit for every 5 new residents. California actually had a surplus of out-migration from 2007 to 2016 for households earning less than $110,000.

The solution seems easy, build more housing! But the fact is that no politician will actually do just that. The real obstacle here is money, housing does not generate it and retail does…for the state anyway. Retail space offers sales tax revenues while costing very little in government-funded services such as fire, police, sewer, schools, etc. In contrast, housing of the same value brings no revenue yet costs local governments copiously in public services. This difference is what causes political incentives to grow the retail sector and penalize housing. No governor will go against the obvious culprit, sales taxation policy, and instead, they send it to the next candidate in line. Until sales tax incentive policies cease, land use zoning will continue to favor retail over multi-family housing.

California taking steps to address the housing issue with statewide rent control actually impedes the solution by reducing new construction and decreasing incentive to renovate existing housing stock. It has been shown that within a generation, low-income families have fewer housing choices in rent control areas than those without rent control due to these factors. 

What’s the solution then? The first step in solving a problem is to recognize it, the hard part is actual action and resolution. We need to persuade politicians to prioritize housing over revenue, people over profit. You can do your part by voting appropriately and demanding change when it comes to our government’s action on land use.