Opinion: Tackling Housing Crisis Is Key to Reducing California’s Poverty Rate

Housing costs are inextricably linked to poverty.  California, the world’s fourth-largest economy, leads the nation—not in income equality, not in opportunity, but in poverty.

According to a new analysis by the Niskanen Center, California has the highest poverty rate in the country when housing costs are factored in. And the reason is clear: sky-high housing costs have eclipsed the gains made by decades of anti-poverty programs. If we want to get serious about fighting poverty, it’s time to recognize housing policy reform for what it is: anti-poverty policy.

The research, authored by Zachary Parolin, paints a sobering picture. The Supplemental Poverty Measure (SPM), which accounts for local living costs, shows that California’s poverty rate is a staggering 17.7 percent—far above the national average of 12.4 percent. That difference is almost entirely explained by California’s rental prices.

In fact, the analysis found that if California’s rents were in line with the national average, the state’s poverty rate would fall dramatically and land somewhere near the middle of the pack. It’s a startling finding that underscores just how central housing costs are to understanding poverty in the Golden State.

For decades, policymakers have poured billions into anti-poverty programs like SNAP, the Earned Income Tax Credit, and housing subsidies. But in California, those efforts are like bailing water from a sinking boat without plugging the hole. Rising rents have swallowed those gains whole. Parolin’s analysis finds that since the 1980s, every dollar of increased SNAP benefits in California has been more than canceled out by higher housing costs. 

That’s not a failure of social policy—it’s the consequence of a housing market that caters to the wealthy while leaving everyone else behind.

The story of California’s housing market is, in many ways, a story of divergence—between the incomes of the richest Californians and those of everyone else. Since the 1980s, rental prices have closely tracked the incomes of those at the 90th percentile, but have left behind the median and especially those at the 10th percentile. Incomes at the top have doubled, and the housing market has followed their lead. Meanwhile, families at the bottom have seen modest gains that are nowhere near enough to keep pace with rising rents. This mismatch has turned housing into the central driver of poverty in California.

So what would it take to fix this? 

Parolin’s analysis offers a path forward. A 15 percent reduction in rental prices in California’s most expensive cities—Los Angeles, San Francisco, San Jose, and San Diego—would be equivalent, in its poverty-reducing impact, to the historic 2021 Child Tax Credit expansion. That policy lifted millions of children out of poverty nationwide, and briefly cut child poverty in half. Now imagine doing the same, not through checks in the mail, but by lowering the rent. That’s the scale of what’s possible if California tackles its housing crisis head-on.

Of course, achieving those reductions in rent won’t be easy. It would require a massive increase in housing supply—on the order of 60 percent in some of the highest-cost markets. That may sound impossible, but history says otherwise. Cities like Irvine, Bakersfield, and Elk Grove have managed to grow their housing stock by 50 percent or more over two decades. Austin, Texas, grew its housing stock by over 60 percent between 2000 and 2020. The lesson is clear: large-scale housing growth is not a pipe dream. It’s a political choice.

San Francisco, for example, would need to build around 80,000 new units to reduce its poverty rate meaningfully. That’s a tall order, especially in a city where new housing is often met with fierce local opposition. But it’s not unprecedented. In fact, it’s almost exactly the number of units the city is already targeting for development over the next decade. The question is whether California’s political system—at both the state and local level—has the resolve to follow through.

What’s often missing from the housing debate is this redistributive lens. We talk about housing affordability in terms of economic growth, or environmental sustainability, or the needs of the middle class. But we rarely talk about it as a core issue of economic justice. Yet that’s exactly what it is. Making housing more affordable would reduce poverty just as effectively as the biggest anti-poverty programs we’ve seen in decades. It would ease the burden on families, free up income for food and healthcare, and provide the kind of stability that no rental voucher or tax credit can fully replicate.

California’s housing crisis is not just about homelessness, or long commutes, or young people being priced out of the cities they grew up in. It’s about poverty. It’s about whether a full-time worker can afford to live with dignity. It’s about whether children go to bed hungry because rent eats up the grocery budget. It’s about whether anti-poverty policy will ever be enough if the cost of living keeps pulling the rug out from underneath low-income families.

The evidence is in. We cannot fight poverty in California without tackling housing. That means reforming zoning laws, streamlining permitting, reducing CEQA abuse, and standing up to local NIMBY opposition. It means acknowledging that every blocked apartment project is not just a blow to housing supply, but a blow to California’s anti-poverty efforts. It means recognizing that when we say “no” to housing, we are saying “yes” to entrenched poverty.

This is not a call for magical thinking. I am not claiming that building more homes will solve all of California’s poverty or income inequality problems. 

But it’s a necessary condition for solving one of its most urgent ones.

If California is serious about reversing its shameful poverty ranking, it must abandon the illusion that rental prices will fix themselves and embrace housing policy as the next frontier in economic justice. The future of millions of Californians depends on it.

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