For years, debates have raged about whether California is really experiencing a “housing crisis.” Some argue it’s exaggerated, others insist it’s a market correction, and still others claim it’s simply a consequence of prosperity.
But new national housing report card data confirms what millions of Californians already know firsthand: housing is unaffordable because we don’t build enough of it — and the main culprits are our own laws and policies.
According to Realtor.com’s newly released State Report Card, California is among the worst performers in the nation when it comes to housing affordability and homebuilding.
The state earned an “F” grade, joining Rhode Island, Massachusetts, New York, Hawaii, Connecticut, and Oregon at the very bottom of the rankings.
As Realtor.com Chief Economist Danielle Hale puts it, “Our state report card rankings reveal stark disparities in housing affordability and homebuilding efforts across the U.S. While some states are leading the way with strong homebuilding activity, others are grappling with high housing prices and sluggish construction.”
“If California is serious about solving its housing crisis,” says Dan Dunmoyer, president and CEO of the California Building Industry Association (CBIA), “we need a legal and regulatory system that supports—not stifles—homebuilding. That means [environmental regulation] reform, streamlined permitting, and more flexible land-use policies.” – Dan Dunmoyer, California Building Industry Association
The numbers tell the story plainly.
California, a state notorious for its unaffordable housing, is the worst in the nation for its permits-to-population ratio.
California, with 11.7% of the U.S. population, accounted for just 6.8% of all new residential permits issued last year — a staggering shortfall. In a state where millions of new homes are needed to close the affordability gap, the pace of construction is hopelessly inadequate.
Meanwhile, home prices continue to soar. California’s median listing price stands at $756,185 (that figure cited in this report is a good deal lower than what I’ve seen elsewhere), far beyond what most residents can afford, even with relatively high median household incomes.
Some still insist there is no crisis. But this is not rocket science: when the demand for housing vastly exceeds supply, prices rise. California’s failure to build enough housing — especially affordable and entry-level homes — is the primary engine driving unaffordability, displacement, and homelessness.
What drives this failure is not geography, wealth, or population density. It is excessive regulation and restrictive land use policies. Homebuilders in California point to a tangle of burdensome permitting processes, environmental regulations, and local zoning laws that dramatically raise the cost, risk, and difficulty of building new homes.
“If California is serious about solving its housing crisis,” says Dan Dunmoyer, president and CEO of the California Building Industry Association (CBIA), “we need a legal and regulatory system that supports—not stifles—homebuilding. That means [environmental regulation] reform, streamlined permitting, and more flexible land-use policies.”
He’s absolutely right.
The California Environmental Quality Act (CEQA), originally intended to protect against genuine environmental harms, has been weaponized to block, delay, and drive up the costs of housing projects large and small.
Special interest groups, competitors, and even well-meaning neighborhood activists often file lawsuits under CEQA not to protect wetlands or endangered species, but simply to prevent new neighbors.
Projects that meet all zoning requirements and planning approvals can still be tied up in litigation for years, driving up costs and making many developments economically unviable.
As a result, builders often abandon projects before a single shovel hits the ground. When they do proceed, those costs are passed on to buyers and renters, pushing affordability even further out of reach.
California is not alone. States like New York and Oregon, which also received failing grades in Realtor.com’s report card, suffer from similar dysfunctions.
Michael Fazio, executive director of the New York State Builders Association, points out that New York’s latest move to impose high-level wetland protections on 1 million acres of land near existing suburbs will make new construction even harder. In cities like Syracuse, protected acreage has increased by 245%, cutting off precisely the land that could have provided new housing close to infrastructure.
Fazio warns: “Builders are leaving because it’s just so onerous. They’re picking up … going to North Carolina, South Carolina, Virginia, where regulations aren’t as onerous as here.”
States in the South and Midwest now dominate the housing affordability and construction rankings. South Carolina, for instance, earned an A — the highest grade awarded — for its relative affordability and strong construction pipeline.
Texas, awarded an A- grade, is aggressively pushing residential construction to meet future demand, even though housing affordability has slipped slightly below the national average.
All 13 states receiving A or B grades are located in the South and Midwest. In contrast, the West Coast and Northeast — the most heavily regulated regions — hoard the failing grades.
In California, even as state leaders declare housing a priority, they continue to enable obstruction at the local level.
Cities and counties deploy exclusionary zoning, lengthy review processes, arbitrary height limits, and minimum parking requirements that restrict new development and inflate housing costs.
A single small apartment complex can require dozens of hearings, years of environmental studies, and tens of thousands of dollars in fees before even beginning construction.
Local officials often capitulate to loud anti-growth factions at the expense of broader community needs. The result is a chronic undersupply of housing, soaring homelessness, longer commutes, and growing economic inequality.
There is no credible path out of the housing crisis that does not include serious reforms.
California must overhaul CEQA to eliminate frivolous lawsuits while preserving genuine environmental protections. It must streamline permitting, limit discretionary review, and allow by-right development for housing projects that meet established plans and zoning rules. It must loosen restrictive zoning to allow for more multifamily housing, accessory dwelling units, and mixed-use developments near transit and job centers.
The legislature has made small steps in the right direction, passing laws like SB 9 and SB 10 to encourage modest density increases. But far more systemic reforms are needed to meaningfully close the housing gap — estimated at nearly 4 million homes nationally, with California accounting for a disproportionate share.
No state earned an A+ on Realtor.com’s housing report card, a reminder that even the best performers have room for improvement. But California, with its resources, climate, economy, and talent, should not be failing. It should be leading.
Instead, we have created a system where building a simple apartment complex can take a decade, cost millions more than necessary, and be derailed at any point by a NIMBY lawsuit or bureaucratic veto. Meanwhile, young families leave the state, workers endure crushing commutes, and homelessness spirals to humanitarian levels.
The housing crisis is not unsolvable. States like Texas, Iowa, and South Carolina are proving every day that abundant housing is achievable with the right policies. California can choose to change course — but only if its leaders summon the courage to dismantle the barriers that have made shelter a luxury good.
Until then, expect the failing grades — and the human suffering they represent — to continue.
“For years, debates have raged about whether California is really experiencing a “housing crisis.”
Nope
Nope what? Nope there haven’t been debates or nope, California is not experiencing a housing crisis?
Just Nope
Hey, I got the conversation going. I mean, nothing makes my day, and everyone else’s, like DG and RO going at it about the so-called ‘housing crisis’.
I’ll agree. The “debate” is about “more regulation vs. less regulation” of permits, housing supply etc. The “crisis” is in service to builders. There are more vacant homes than our homeless population (five times more in San Francisco). The problem isn’t permits, it’s distribution of resources.
So how do you see that working? Say I have a vacant home. Why is it vacant? Maybe it’s being worked on. How would I get the rent paid if a homeless person moved in? Would the City start forcing people to rent their vacant properties? If it became a drug den and was trashed or burned to the ground, who pays? Could I even get insurance?
From article: “Some argue it’s exaggerated . . .”
Some argue that the definition of “housing crisis” hasn’t even been put forth/defined, and means different things to different people and groups.
Some (including university professors) argue that there isn’t a shortage of housing.
Some argue that pursuing economic development far in excess of a what an existing community needs creates a “shortage” in particular locales, and drives up the cost to astronomical levels. Thereby pricing out the original residents. (Your honor, I present as “evidence” – Silicon Valley and its surroundings.)
But many don’t address the statistical points raised in this article
I suspect they do address the statistical points in this article.
And that one key statistical point (a non-growing California and U.S. population) isn’t addressed at all in the article. Young people (nationwide) aren’t having kids anywhere near replacement levels these days, and not just in California. This is a DRASTIC change.
Also, housing inventory is drastically increasing, including in California. The downturn is now occurring.
What statistical indicator does this article use? What do you see as the advantages and disadvantages of that measure?
You tell me, since you brought it up.
And then tell me how what I brought up fits into whatever narrative you’re claiming. Or, if you think it doesn’t apply, then put forth your reasons that it doesn’t.
You might need to look at ALL of the evidence.
You have to do this otherwise you’re not really evaluating the article, there’s a specific measure, it is explained, what is it and what do you see as the strengths and weaknesses of its use.
I see several arguments/statistics in the article, including a claim brought up by the builder’s industry group (in large text). Is that the one you want me to take seriously?
You’re being stubborn. You’re willing to spend all day arguing, I’m just asking you to do an evaluation of the measure they use here.
Sorry – I’m honestly not seeing it. I’m seeing several claims in the article, none of which strike me as particularly-relevant.
Since you think something in there is important, you could make it easier by quoting it. It’s not as if I’m able to hide anything that’s already in your article, and I suspect I’ll have a response to whatever it is you think is important.
The vacancy rate in Davis is up two years in a row. The pegged-high rents being asked two years ago are no longer working – rents lowered in many cases. Hundreds of houses in Davis in the last year or so have been languishing on Zillow and ‘price reduction’ posted to many, sometimes two . . . even three . . . price reductions before selling. For those trying to capture the prices from two years ago that no longer apply.
Housing Crisis? Over/History
California generally a pricey place to live: Yes
Davis CAN solve the expensiveness of living in California? F-No!
“Davis CAN solve the expensiveness of living in California? F-No!”
Hilarious…
“What drives this failure is not geography, wealth, or population density. It is excessive regulation and restrictive land use policies.”
Sorry, I call “BS” on that statement. The Bee is promoting the same line of talk, too. My reply:
The Bee editorial cites CEQA [i.e. regulation] as what makes housing expensive in California, but it’s completely misguided. What makes housing more expensive is prop 13, the limit on real estate taxes. It not only makes real estate a safe, cheap haven to park wealth, it encourages land speculation–the speculators can cheaply hold land off the market until it reaches peak price–making property ever more expensive. Houses will typically rise to the value banks will lend, and since they lend multiples of available discretionary income, the lower prop 13 tax also encourages higher prices since it makes more income available for mortgage payments. Want lower priced housing? Repeal prop 13. The influence of CEQA pales to insignificance compared to Prop 13.
And never mind the gigantic loophole that allows commercial properties to avoid paying even what prop 13 demands. If you sell a house, the assessed value rises to the sale price (typically increasing real estate taxes). If you sell less than 50% of a piece of commercial property, no reassessment occurs. So Michael Dell (of Dell computers) could buy a hotel in Santa Monica, splitting title between himself, his wife and a corporation he controlled, and it remains assessed at its 1978 value (plus the pittance prop 13 allows in annual appreciation). This costs the state an estimated $12 billion annually. Could the state build more housing with that money? Gosh, I wonder!
Unfortunately, the public rejected prop 15 (see makeitfairca.org) which would have repealed the commercial property loophole. Taxes are always bad! (and let’s not forget regulation is always bad!)
It’s not particularly surprising you’re advocating “streamlining” regulation–a load of codswallop, IMHO–I’ve even heard “environmentalists” advocate that very pseudo-solution.
One other solution unmentioned: public banking. Other jurisdictions have found it’s cheaper to house the homeless than to pay for the police to hassle them, and emergency rooms to treat them. A public bank could make the loans that fund construction and permanent financing for low-income housing repaid by the savings.
Of course California’s infrastructure bank (the state’s public bank) can’t make loans based on savings. It can’t even fund the rebuild of the Bay Bridge or the Kings’ stadium–Goldman Sachs did that.
Public is always bad! Private is always better! Please ignore the fact that publicly-owned SMUD is 35% cheaper than privately-owned PG&E, and its executives, unlike PG&E’s, are not consulting with criminal attorneys about the possibility of being prosecuted for negligent homicide for blowing up a gas pipeline in San Bruno, or burning down Paradise.
True dat re: Prop 15
Proposition 13 has been effective (partially) repealed – during the same election in which voters rejected Proposition 15.
Proposition 19 passed, and eliminated much of the ability to ensure that children have the same property tax rate as their parents did.
But it also permits current property owners to bring their “tax” with them, when moving throughout the state. (I believe it really only works when the replacement property is of equal or greater value, however.
Overall, Proposition 19 was an enormous property tax increase, that will be realized over time. Realtors were one of the groups behind this, partly to “force” sales by those inheriting property.
I don’t think that voters will further weaken Proposition 13 for residential property, more than they already have. (But from what I read, it seems that a lot of voters didn’t understand what they were approving – by design.)
The other limiting factor (regarding “profit”) is capital gains tax beyond $250K for a single person, and $500K for a couple.
To clarify, the capital gains exclusion does apply to not “blank land” (or non-residences).
So I believe that someone like Fouts (who recently sold Chiles Ranch, I understand) could be subject to capital gains tax on his profit. (Assuming he doesn’t have some other write-off to offset it.)
But Proposition 13 would enable him to pay relatively low property taxes, as long as he held it.
And Proposition 19 only applies to primary residences and “family farms”.
I know someone who stupidly sold their home in the Bay Area recently, and paid an enormous amount of capital gains.
Truth be told, that person should have rented it out until one of the two of them (an older couple) dies. I believe at that point, the survivor gets a full step-up in value (no capital gains), if married.
Plus, they “somehow” didn’t know that the east side of the Sacramento valley is “hot” in the summer. So of course, at least one of them regrets what they did.
“does not apply” to blank land and non-residences (was editing, and ran out of time).
In any case, Proposition 19 eliminated a lot of the “complaints” regarding Proposition 13 (for residences, at least). But I’m not sure that the average citizen understands what occurred regarding that.
Was curious, and looked up 1031 exchanges. Looks like it applies to vacant land as well (and defers capital gains).
This is how one becomes very wealthy, over time. Defer forever, until you die. At which point, I understand that your heirs get a stepped-up basis.
But I assume the property tax wouldn’t be carried-over to the replacement property in that case.
Probably best to get yourself a good accountant (before you rely on comments on a blog). And I’m pretty sure that developers do just that.