California’s High Housing Costs: Crippling Economic Productivity, Increasing Poverty

John Cox
John Cox is a San Diego area businessman and a Republican candidate for Governor. He can be reached at John@JohnCoxforGovernor.com.

Living in California is a blessing and a curse these days. California’s most obvious best qualities are location, landscape and lifestyle. The Golden State has beautiful and diverse weather, limitless outdoor recreation, along with mountain ranges, valleys and coastline boasting some of the most breath-taking landscapes in the world.

However, this beauty does not make up for our economic decline. The all too familiar shenanigans by the Legislature’s majority party during the recent budget debate, and our current Governor’s assertion that the product is balanced has become an annual but misleading refrain. While California is America’s largest and richest state, it has fallen into disrepair and is unaffordable for many of its 38 million residents.

Fewer and fewer of California’s residents can even afford a median-priced home, which is now around an eye-popping $496,620. Rent prices are currently double the national rate. The average one-bedroom apartment in California now rents for about $1350, and an average two-bedroom apartment is $1500. But it gets worse. The average rent for a two-bedroom apartment in Los Angeles will set you back more than $2,700 per month, and San Francisco… more than $4,700 per month to rent a two-bedroom apartment!

This is unsustainable and we are not doing renters or new home-buyers any favors.

California’s high housing prices are a significant component of our state’s high cost of living.  High fees and multitudinous regulations are the primary drivers of this cost – I’ve been told by some developers that fees and costs exceed $60,000 even before a shovel is put in the ground.   These regulations make affordable building nearly impossible, and in turn leaves the market unable to meet demand, artificially driving up the cost of rents and mortgages. When a family has a very high percentage of their monthly income going to a house or apartment, there is little money left for necessities, for savings, or much of anything else. The economy overall suffers (as employers leave to find places where their employees can afford to live) and unless it changes, the 5 million California residents who left during the past decade will continue to grow.

On nearly every list of the best and worst states in which to live and make a living, California is always ranked at the bottom or near it due to its high cost of living index (third highest in the country).  It’s no surprise that California leads the nation in poverty and one-third of the nation’s welfare recipients reside here.

This most recent budget offers little relief or solution to this problem; the issues are systemic to a great degree, and ideological as well.  Democrats believe in government; they are funded by those who want big government to bend to their wishes – this carries a cost.  Current actions by the Democrat majority Legislature and Governor have only increased the burden on many middle and lower income families with their new gas tax and they are going even further, now proposing an estimated $400 billion single-payer health care plan.

I believe that in order to really resolve these issues and get to the root of the problem, we need transformative leadership both in the Legislature and the Governor’s office. It isn’t enough to simply talk nostalgically about how California used to be. Too much has occurred and the control of special interests in policy decisions is too strong for half measures.

These special interests initiate legislative proposals like Assembly Bill 199, a bill to mandate a high prevailing wage in home construction, which will drive the cost of home building higher, only making it even more difficult for those workers building homes to ever afford one.

But keeping up with demand and supply is only one part of the solution. The drop in new housing starts is a leading economic indicator and validates that our state economy is moving in the wrong direction. California’s ever-increasing wage requirements, overly stringent zoning and environmental regulations and high impact fees do more to hurt those least able to afford housing and rents.  Six out of the seven least affordable metropolitan areas across the U.S. are in California. They are Los Angeles, San Francisco, San Jose, San Diego, Riverside and Sacramento, according to a recent UCLA Anderson School report.

Our housing problem will require innovative thinking and more than just budget subsidies or temporary regulation suspensions. California’s housing affordability problem needs to be addressed holistically, and collectively we need to heed this strong warning by this canary in our economic coalmine.

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