Californians: Here’s Why Your Housing Costs are So High

CALmatters is a nonprofit, nonpartisan media venture explaining California policies and politics.

By Matt Levin and Ben Christopher

HOW BAD IS IT?

1.) Just how hard is it to buy a home in California?

Hard. Really hard.

Both compared to how hard it is in other states, and how hard it was for previous generations of Californians to buy homes.

While it’s always been more expensive to be a homeowner in California, the gap between us and the rest of the country has grown into a chasm.

The median California home is now priced 2.5 times higher than the median national home. As of 2015, the typical California home costs $437,000, easily beating the likes of Massachusetts or New York (only Hawaii had more expensive houses).

Despite relatively low mortgage rates, exploding housing prices have caused California’s homeownership rate to dip significantly. Just over half of California households own their homes—the third lowest rate in the country, and the lowest rate within the state since World War II.
It’s not just housing prices that are affecting homeownership rates. Studies have found that student debt loads, rising income inequality and changing housing preferences among younger Californians are also at play.

2.) RENTS DIDN’T DIP DURING THE RECESSION, AND NOW ARE SOARING

Rental costs across the state are some of the highest in the country. While listed housing prices dipped dramatically in the wake of the Great Recession, rents in California remained relatively stable before soaring in recent years in hot markets.

3.) IT MAY COST MORE TO LIVE HERE, BUT THEY PAY YOU MORE.

That’s somewhat true—median earnings for Californians are higher than the national average, and are significantly higher in certain regions like the Bay Area with tremendously pricey costs of living.

But on average, income over the past two decades has not kept pace with escalating rents.

4.) CITIES ARE BEING GENTRIFIED—AS IS THE ENTIRE STATE.

It’s difficult to measure things like “gentrification” and “displacement”—when the arrival of higher-income, higher-educated residents in a community results in the expulsion of longtime lower-income residents. But there’s little question change is happening rapidly across many California cities.

Researchers at UC Berkeley found that more than half of low-income households in the Bay Area are at risk of, or already experiencing, gentrification. It’s not just lower-income communities bleeding households—higher-income neighborhoods are losing their lower-income members as well. And in places like the Boyle Heights neighborhood of Los Angeles, gentrification protests have exposed escalating tensions between longtime Latino residents and new, predominantly white arrivals.

Where are these low-income people going? Increasingly, out of state.

We're just getting started... For Matt and Ben's full report on California's housing crisis please visit our Housing Project page.

If you have questions about housing in California? We want to hear about it!

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CALmatters is a nonprofit, nonpartisan media venture explaining California’s policies and politics.