California has long prided itself on being a place where hard work leads to prosperity, where upward mobility is not just a dream but a lived reality. But today, that promise is breaking down.
A 2022 study from UC Berkeley’s Terner Center for Housing Innovation reveals a deeply troubling reality: the state builds only about 87,000 homes annually, less than one-third of the 312,500 units needed each year to meet demand.
That gap is not just a statistic—it’s a wrecking ball smashing through the financial security of millions of Californians who fall into the so-called “middle-income” category.
These are families earning between 80 and 120 percent of their region’s area median income—households bringing in roughly $80,000 to $130,000 a year depending on the local cost of living.
In any rational housing market, these would be the homeowners of tomorrow. But in California, they are increasingly renters for life, overpaying for shelter, delaying major life milestones, and watching their dreams of ownership recede.
Nearly 40 percent of middle-income households in California now spend more than 30 percent of their income on housing.
For one in ten, the situation is even worse—they are severely cost-burdened, spending more than half their income just to keep a roof over their heads. In a state as wealthy and economically dynamic as California, this is not just a policy failure; it is a betrayal of the middle class.
The idea that economic mobility is available to all is undermined when teachers, nurses, firefighters, and social workers cannot afford to live in the very communities they serve. This reality is especially acute in California’s coastal and urban centers, where land-use laws and zoning restrictions have created a stranglehold on housing production.
Before the passage of SB 9 in 2021, which allowed duplexes and lot splits on many single-family parcels, a staggering 75 percent of residential land in California was zoned exclusively for single-family housing.
That kind of exclusion is no accident—it’s a legacy of racial segregation, NIMBYism, and a profound political failure to prioritize the needs of working families over the preferences of incumbent homeowners.
The consequences are devastating. With fewer entry-level homes on the market, prices for existing stock skyrocket. In San Francisco, even lower-priced homes routinely sell for more than $1 million, putting them out of reach for middle-income families. In Los Angeles, new apartments rent for more than $3,500 a month—affordable only to households earning more than $140,000 annually.
The notion that the market will somehow take care of this gap has been disproven time and again. Developers, responding to high land and construction costs as well as zoning restrictions, naturally gravitate toward luxury units.
The result is a glut of high-end supply and a dire shortage of what the Terner Center calls “missing middle” housing—duplexes, townhomes, courtyard apartments, and smaller-scale multifamily options that used to be a staple of the American housing landscape.
The shortage has also reshaped California’s demographics. Middle-income families are moving out—leaving for states like Texas, Oregon, and Arizona where housing is more attainable. Those who stay are often forced into long, grinding commutes from exurban regions where home prices are lower.
Between 2014 and 2019, the number of people commuting from Sacramento to the Bay Area jumped by nearly 10,000. These shifts are not just about lifestyle—they are about access to opportunity.
When middle-income families can no longer afford to live near good schools, decent jobs, and stable neighborhoods, the foundational promise of economic advancement begins to collapse. This collapse is particularly stark for households of color.
While nearly two-thirds of Black middle-income families rent, just 37 percent of white middle-income households do. That disparity is not just about housing—it’s about wealth, security, and intergenerational mobility.
Some local governments are trying to respond. Cities like Woodland and Rocklin have amended zoning rules to allow for smaller lot sizes and more compact homes. Irvine has implemented inclusionary housing ordinances that require moderate-income units in new developments.
San Jose is exploring grant programs to help homeowners build Accessory Dwelling Units (ADUs) and lease them to middle-income renters. But these efforts, while commendable, remain piecemeal and insufficient. In Woodland, smaller local developers still struggle to make their infill projects financially viable, even with city incentives.
In Rocklin, middle-income housing has been more achievable thanks to rezonings and modest impact fees, but there is virtually no new housing for low-income households due to a lack of state support.
Irvine’s success in hitting its RHNA targets for moderate-income housing may have been overstated due to flawed affordability reporting prior to 2018.
And San Jose—despite being one of the state’s largest cities—has only built about 18 percent of its RHNA-assigned housing for people below 120 percent of AMI (Area Median Income), citing high construction costs and fierce opposition to multifamily development.
The common thread in all of this is that local reforms alone are not enough. California’s housing crisis is a statewide structural problem that demands statewide structural solutions.
First and foremost, the state must continue—and accelerate—its efforts to eliminate exclusionary zoning. Allowing only single-family homes on vast swaths of urban land is not just inefficient; it is immoral. We cannot solve a housing crisis by building only the most expensive kind of housing.
Second, the state must invest in more accurate tracking and accountability. Too often, jurisdictions report that they are producing “moderate-income” housing when in fact rents and home prices are far out of reach for families in that income band.
Finally, California must explore creative financing tools that help produce deed-restricted moderate-income housing without cannibalizing funds for deeply affordable housing. This could include targeted tax credits, density bonuses, or public-private partnerships that bring down costs without sacrificing affordability.
Ultimately, the question facing California is not whether we can solve our housing crisis—it’s whether we will. The state has the tools, the research, and the policy blueprints to build a future where middle-income households are not pushed to the margins. What we lack is political courage.
Until we are willing to confront the legacy of exclusion, embrace more housing in every community, and put the needs of future generations ahead of parochial self-interest, the middle class will continue to vanish. And with it, the very soul of California.
From article: “That gap is not just a statistic—”
It’s a fake statistic. There is no housing shortage. The population isn’t growing, people aren’t having kids at replacement levels. (We’ve been through this a number of times.)
Also, cost of everything has been rising – why would the cost of housing (which is now actually declining) be any different?
“Economic mobility” would be better-served if the policies of this country did not encourage home ownership for most people. The costs of buying and selling a house (as well as the cost of moving) is what causes people to lose massive amounts of money. Renting is actually better for someone seeking “economic mobility”, so that they’re able to pursue opportunities which arise anywhere in the country (without incurring massive costs associated with buying and selling a house). Not to mention the cost of moving the stuff that most people accumulate, when they buy a house.
https://news.ku.edu/news/article/study-finds-us-does-not-have-housing-shortage-but-shortage-of-affordable-housing
Ron O
I have refuted your assertion multiple times with data and I’ll do so yet again. The number of people per household in California grew by 10% from 2.9 to 3.2 from 2010 to 2020 but the % of households with children decreased from 37.4% to 33.1%. This indicates the number of adults per house increased significantly indicating an increasingly tight housing market. Living in one’s own home is a key indicator of economic mobility.
I’m not sure what you’re trying to “prove” with uncited statistics (especially since the university study I cited shows there is no housing shortage). But those living in a given home are, in fact, living in one’s own home. Is there something “wrong” with inter-generational living, for example? If so, you better tell that to Lennar in regard to their built-in granny units. Also, tell that to most Asian cultures, since they place value on inter-generational living, instead of kicking out their own kids when they turn 18. (Seems like “white” Americans are increasingly-realizing the stupidity of that “goal” as well – which might explain some of your uncited statistics.)
But again, the university article I cited shows that the U.S. “overbuilt” homes during the previous decade. To quote:
“In fact, from 2000 to 2020, housing production exceeded the growth of households by 3.3 million units. The surplus from 2000 to 2010 more than offset the shortages from 2010 to 2020.”
My third comment for today, so have at it.
Ron keeps repeating this quote even though he has never read the study and so he is taking the quote out of context. it doesn’t actually mean we have a housing surplus.
The quote — “housing production exceeded the growth of households by 3.3 million units from 2000 to 2020” — refers to gross units built vs. net new households formed. But this is a false comparison unless you account for:
• Demolitions and obsolescence (homes that are torn down, become uninhabitable, or are permanently taken off the market),
• Vacancy rates and second-home ownership,
• Mismatch in location, size, and affordability (e.g., luxury units built while affordable supply shrinks).
In other words, just because more units were built than households formed doesn’t mean they’re in the right places or priced appropriately.
Ron also ignores the fact that this is one study. Others from groups like the Terner Center, Harvard’s Joint Center for Housing Studies, and Up For Growth have all found that there is a significant shortfall of affordable and available housing.
If Ron hasn’t read the full report, he shouldn’t be making sweeping claims based on a decontextualized quote. At best, it’s a partial truth. At worst, it’s a statistical distortion used to deny the real housing affordability crisis.
I keep pointing this out, but he doesn’t want to spend the $50 or whatever to read the whole thing.
Add this point, I also think household formation is problematic as a control measure. After all what if cost or market constraints constrain household formation? The idea that we can just compare new housing units to household formation assumes that household formation is a free, unconstrained process — but in reality, it’s shaped by exactly the problem we’re debating: housing scarcity and affordability.
Richard, when I was growing up in suburban Philadelphia a very large percentage of households had three generations … two parents, three or four children, and one or two grandparents. Bottom-line, we have are victims of our own sense of entitlement.
That sense of entitlement extends to the number of square feet that each home has.
Our largess is killing us.
Richard McCann said … “Living in one’s own home is a key indicator of economic mobility.”
There are at least two fatal flaws in Richard’s statement above.
(1) Because of Prop 13, living in one’s own home is an indicator of the immobility of the homeowner. The reason for that is simple … property taxes. Many Davis residents have owned their homes for decade(s) and their Prop 13 protected property taxes are les than half of what they would be if they moved from their existing home to a new home, where the property taxes would be based on the new home’s purchase price. That increased annual expense strikes enough fear into the home owner(s) that they stay in place even though they want to move. There is a word for that … immobility.
(2) The characteristics of one’s home are much, much, much less of a determinant of economic mobility than the characteristics of one’s employment, and the jobs situation in Davis is abysmal. As a result, there is a whole lot of structural economic immobility in Davis, and very little economic mobility.
You’re ignoring all the research and data on the generational wealth gap which is driven almost entirely by home ownership
From article: “Some local governments are trying to respond. Cities like Woodland and Rocklin have amended zoning rules to allow for smaller lot sizes and more compact homes.” In Woodland, smaller local developers still struggle to make their infill projects financially viable, even with city incentives.”
Is that right? If so, what does that tell you regarding a city which ALREADY pursues sprawl (and every other growth opportunity within its massive, undeveloped city limits) but still can’t make housing “cheap” – DESPITE allowing smaller lot sizes AND subsidizing its developments?
And what does THAT tell you about the overall premise being put forth on here?
Analysis shows that building more housing lowers housing prices:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4629628
Supply Skepticism Revisited
On the other hand:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4266459
“(1) Because of Prop 13, living in one’s own home is an indicator of the immobility of the homeowner. The reason for that is simple … property taxes. Many Davis residents have owned their homes for decade(s) and their Prop 13 protected property taxes are les than half of what they would be if they moved from their existing home to a new home, where the property taxes would be based on the new home’s purchase price.”
Yet Matt repeatedly insists new housing doesn’t pay for the services required.
Ron, I don’t insist. The financial analysts that the City hired to analyze each proposed development report that reality.
The most recent such analyst’s report confirming that fact was presented to the Fiscal Commission on April 2, 2025 by Matt Kowta of BAE (Bay Area Economics).
Further evidence that the annual recurring revenues of housing don’t pay for the services required is the massive unfunded roads and bike paths repairs and building repairs and greenbelt maintenance and parks maintenance and weeds control, just to name a few. Those required services aren’t happening because the City doesn’t have the money. Talk to Donna Provenza about weed control. https://nextdoor.com/p/JW_6KFT7txjq?utm_source=share&extras=Nzg2Mzkx&ne_link_preview_links=&share_platform=10&utm_campaign=1748528831226&share_action_id=348953a2-8bf9-4251-8f3e-904cc8e2c685