The Obvious Fix for California’s Housing Crisis

A new nationwide study confirms cities and states that make it easy to build new housing get more housing, lower prices, and better economic outcomes.

SACRAMENTO — California has for years endured a housing crisis, as median statewide home prices top $825,000 and coastal metros see prices soar well above $1 million. The results are predictable. Large percentages of Californians struggle to get by. “California has higher rates of cost-burdened households than the U.S. as a whole,” per the Public Policy Institute of California. “More than half of the state’s renters — and four in 10 mortgaged homeowners — spend 30 percent or more of their household income on housing.”

The Legislative Analyst’s Office reports on this striking statistic regarding homeowners: “Payments for a mid-tier home were nearly $5,900 a month in March 2024 — an 82-percent increase since January 2020. Payments for a bottom-tier home were over $3,500 per month — an 87-percent increase since January 2020.” The math is easy. A middle-class California homebuyer needs to earn more than $70,000 a year just to pay for housing costs.

California progressives like to say, “Well, it’s going to be expensive to live in our lovely state. If you want affordable house payments, you can always move to Michigan or Alabama.” They claim we can’t build our way out of this crisis. But consider Austin, Texas, which is hardly some unsophisticated backwater. In fact, it’s a prime destination for California expats given its cultural appeal and rather liberal values. Its home prices are among the highest in Texas.

Yet the Texas Tribune reports that after a dramatic spike in prices following COVID — and the influx of knowledge workers from across the country — housing prices there are dropping. Rents, it reports, have fallen for 19 straight months, with the median rent at a downright affordable $1,645 per month, which is practically free by San Francisco Bay Area standards. Austin isn’t facing an economic depression. The reason is simpler: The city makes it relatively easy to build housing.

As the Tribune added, “The chief reason behind Austin’s falling rents, real estate experts and housing advocates said, is a massive apartment building boom unmatched by any other major city in Texas or in the rest of the country. Apartment builders in the Austin area kicked into overdrive during the pandemic, resulting in tens of thousands of new apartments hitting the market.” One news report found the Dallas–Ft. Worth metro area alone permitted more housing than all of California — five times more on a per-capita basis.

A new study from the George W. Bush Institute, “Build Homes, Expand Opportunity,” examined the home-building policies in major metros across the United States and came to similar conclusions: “If all of America’s 250 largest metros had policies similar to those of the 25 Sun Belt-Mountain state metros, the 250 largest metros would have added about 5.6 million more homes from 2010 to 2023 than they actually did. … Average home prices would be $115,000 lower than they are today, we estimate. Monthly rents would be $450 lower.”

California, for instance, has high demand but slow-growth policies that constrain the construction of new housing. Many Midwest areas have reasonable policies, but little demand, and prices remain low. But many metro areas in the Sunbelt and Mountain states have high demand and pro-growth policies. So prices in these growing cities will be higher than in stagnant ones, but they still remain relatively affordable — and often have stable prices despite the growth.

The report pointed to the right policies, but those are mostly well known: streamline permitting, relax zoning rules, allow for diversity of land uses, and build quality supporting infrastructure. It also issued a caution to states such as California that want to subsidize their way to lower prices: “Policies focused on subsidized homes for lower-income families are drastically under-delivering relative to America’s needs and failing to target the nation’s most vulnerable residents.” Even some California Democrats have acknowledged that reality.

I’ve supported many of California’s efforts to streamline construction, exempt California Environmental Quality Act (CEQA) requirements, and reduce zoning restrictions. Unfortunately, those myriad efforts haven’t led to a building boom largely because they address the problem on a piecemeal basis by exempting only the types of projects — multifamily, affordable, and transit-oriented apartments — that progressive lawmakers like. As CalMatters confirmed, “this spate of recent California laws and others like it intended to supercharge the construction of desperately needed housing, have had ‘limited to no impact on the state’s housing supply.’”

Meanwhile, the Legislature continues its war on “sprawl,” even though the vast majority of Californians say they prefer to live in single-family homes. The YIMBY (Yes In My Back Yard) crowd’s mantra is, “just build housing,” but too often its advocates are more interested in pushing the urbanist vision of high-density living interconnected by buses and rail lines. However, more pundits are finding that this urbanist approach will not adequately address housing shortages.

As thought leaders derided the suburbs, a New York Times article recently explained, “Cities and states responded by adopting anti-sprawl rules that created growth boundaries, made it easier to sue over new development and in some cases prevented even moderate density by limiting housing to multi-acre parcels. The predictable result was that the pace of building slowed, housing costs exploded and anti-development sentiment became so pervasive that by the early 1980s the word ‘NIMBY’ — short for ‘not in my backyard’ — had proliferated to describe it.” California, of course, led the charge.

But Times writer Conor Dougherty reached the right conclusion: “Why America Should Sprawl: The word has become an epithet for garish, reckless growth — but to fix the housing crisis, the country needs more of it.” Actually, we don’t only need sprawl. We need looser regulations to ease the construction of any type of housing that the market demands. Unless we do so, inflation will continue to rise, families will continue to struggle, and the American Dream will become increasingly unattainable.