Government Regulations Worsen California Housing Shortage

house-constructionAs housing prices continue to rise in California, a significant number of our residents are being denied access to the American dream of homeownership. Today, only about one-third of our fellow citizens can afford to buy a median-priced home in the Golden State, down from a peak of 56 percent just four years ago.

With this in mind, the CALIFORNIA ASSOCIATION OF REALTORS® convened “Housing Affordability and California’s Future,” a real estate summit held recently in Los Angeles. The summit brought together and drew on the ideas of top industry leaders from financial institutions, government agencies, academia, public policy and real estate, who shared one common goal: to explore ways to increase housing affordability in California. 

There are many reasons for the steep decline in affordability. California continues to be a destination for millions of people, and it is difficult for supply to keep up with demand. But the reasons go beyond simply lagging housing construction. In particular, government regulations worsen the problem. Restrictive environmental, land use and zoning regulations artificially constrain supply, which makes it difficult and expensive to meet demand.

These rules, regulations and road blocks have taken their toll on housing.  We are now so far behind the curve that, according to the non-partisan California Legislative Analyst’s Office, the state needs to build 100,000 new homes every year – double what’s being built now — just to catch up with current housing needs.

And the McKinsey Global Institute recently reported that California’s housing shortage is costing the state more than $140 billion per year in lost economic output because Californians spend so much of their income on housing.

Before local governments can effectively address homelessness and affordability, they must recognize that it is a supply problem. It must be defined in terms that everyone can understand. REALTORS® believe the issue is appropriately defined as a need to provide adequate and affordable workforce housing for all segments of the community.

A lack of affordable workforce housing affects communities in many ways.

  • The growth of bedroom communities far removed from job centers adds to urban sprawl and all the challenges that it brings; workers who have to find shelter in distant communities must commute longer hours to get to their jobs, increasing traffic congestion and air pollution for all the cities in between.
  • The lack of housing for workers in the community makes it harder for employers to attract workers to fill their jobs. If they can’t find workers, the employers will take their jobs, and their tax revenue, elsewhere.
  • The socio-economic balance of the community is as important as the quality of the air we breathe, the roads on which we drive, and the amount of tax revenue in our city coffers. A healthy city is one that provides housing for all segments of its workforce, not just those who can afford luxury homes. The economic viability of a community is choked off by the lack of affordable workforce housing.

Once we recognize the importance of workforce housing, we can begin the process of increasing supply. Fortunately, there are many things local governments can do to address this housing shortfall, including:

  • Embrace higher density and infill.
  • Encourage housing next to transportation hubs, like light rail.
  • Speed up permit approval times and eliminating red tape.
  • Provide incentives to developers who include affordable rental and ownership housing, like density bonuses and reduced parking requirements.
  • Choose the development of workforce housing over retail developments that generate greater sales tax revenue.
  • Resist “NIMBYism” and educate the community about the importance of workforce housing and resist the call for short-sighted and excessive environmental constraints.

The achievability of homeownership for all Californians is ultimately tied to the success of the state’s economic future, but a thorough assessment of the state’s biggest economic and real estate challenges reveals the difficulty of balancing opportunity with responsibility amidst the pressing need for solutions.

Working together with the state’s top minds and influential leaders, we can better understand the solutions we can undertake to put California back on the map for those who are looking to buy and get their piece of the homeownership dream.

Joel Singer is CEO of the CALIFORNIA ASSOCIATION OF REALTORS®

This piece was originally published by Fox and Hounds Daily