California law increases housing costs

More and more California working families are struggling financially to make ends meet due in large part to the increasing cost of housing. And the problem is only getting worse.

According to the nonpartisan state Legislative Analyst’s Office (LAO), today the median price of an average California home is $440,000, which is nearly two-and-a-half-times greater than the national average home price of $180,000. The state’s average rent of $1,240 per month is 50 percent higher than the rest of the country. These costs are even higher in coastal and urban cities like San Francisco, where the median priced home is $1.25 million and rents easily exceed $4,000 per month.

California’s escalating housing costs are a result of well-meaning but nonetheless burdensome policy and regulatory mandates that make new housing construction more challenging and significantly more expensive. Confronted with state mandates, local growth-control restrictions, misused environmental reviews or new fee increases, it’s no wonder the housing industry is unable to keep up with demand and to ensure affordability.

We are now reaching a point where tough choices on the overall direction of our state’s housing policy must be made, otherwise our growing affordability crisis will lead to higher poverty rates and greater economic inequality.

One tough choice involves Senate Bill 32.

Senate Bill 32 proposes to significantly ratchet down California’s greenhouse gas emissions. While the world may need to take action on climate change, the reality is that this legislation has enormous implications for housing affordability. In the overall effort to combat climate change, California is one percent of the global greenhouse gas problem while many of the large developing countries that are major emitters of greenhouse gas emissions, such as China, Russia and India, refuse to take action for fear of hurting their economies.

To be clear, we support reasonable and balanced environmental measures. In fact, thanks to many of California’s laws, new homes and multifamily development projects built here today are some of the most energy- and water-efficient in the world.

But studies show that SB 32 will increase the costs of housing production by $58,000 or more per unit – meaning higher home prices and monthly rents that will hurt low-income and minority communities, further eroding the middle class and contributing to greater economic inequality.

SB 32 also will provide anti-housing special interests with a powerful additional tool to challenge new housing projects. The very projects that are needed to help increase supply and meet the growing demand.

Additional studies by groups including the United Way of California have found that housing costs occupy a disproportionate share of most family budgets in California, and that one in three households struggle every month to meet basic needs. Equally disturbing are the cost struggles faced by single mothers, cost impacts to minority households, and the finding that nearly 25 percent or nine million Californians are living in poverty – the highest rate in the nation.

To combat escalating housing costs for future generations, California needs to get serious about building all types of housing, not less.

Since the Great Recession, California has on average built 59,759 housing units per year. Experts tell us that to maintain a healthy housing market in a state as big and diverse as California upward of 200,000 new units should come on line annually. It is clear, California is far below what we need to match the demand from population growth, job growth and household formation each year.

Housing is just starting to recover. We need a reality check on public policies such as SB 32 and others that threaten new construction or that significantly threaten to inflate the cost of housing and hurt our economic recovery. Anything short of that will mean California is destined to a future in which housing costs continue to escalate, and the economic security of homeownership becomes out of reach for future generations of Californians.

By David Cogdill. David Cogdill is president and CEO of the California Building Industry Association. Lapsley is president of the California Business Roudtable.