Expert Says Housing Supply Shortage Is Central to California Affordability Crisis

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CLAREMONT, Calif. — California’s housing affordability crisis is rooted primarily in a shortage of homes and a political system that has made it too difficult to build them, according to Bowman Cutter, who says state and local leaders must confront supply constraints if they want rents and home prices to fall.

In an interview published by Pomona College ahead of a California gubernatorial debate, Cutter said the state’s affordability problems are being driven by both demand and supply, but emphasized that the dominant force is the failure to produce enough housing for a growing number of households.

“The major force driving house prices in California is a lack of supply,” Cutter said. “There is also a demand side force. The number of households is increasing, and household size is getting smaller—fewer families, more singles—which means, per capita, people are demanding more housing because people are not grouping together in housing units.”

He added that even with relatively modest population growth over the last decade, housing demand has continued to rise because more people are seeking their own units rather than sharing space.

“So, despite the relatively small population growth in California over the last 10 years, the number of households is increasing,” Cutter said.

Cutter said the shortage is not simply the result of market forces, but of policy choices that have constrained construction and increased costs, particularly at the local level where zoning and land-use decisions are often made.

“The lack of supply is primarily a political failure,” Cutter said. “Mainly at the local level, there are many regulations and policies that all have the effect of making housing difficult and expensive to construct.”

He pointed to the limited rebuilding activity following the January 2025 fires as evidence that California’s regulatory structure can impede recovery and new construction alike.

Cutter also said California’s increasing urbanization has reduced the number of places where relatively inexpensive housing can be built. In already dense neighborhoods, he said, new projects often require significant infrastructure upgrades, adding costs that do not exist on undeveloped land.

“There’s also an economic element where housing becomes increasingly more expensive to build in denser neighborhoods,” Cutter said. “Building in dense neighborhoods requires all kinds of infrastructure changes and additions that building in green fields does not.”

Because supply is so constrained, Cutter said housing prices in California are determined less by construction costs and more by competition for scarce units in high-demand areas.

“California’s regulatory regime is so strict that you can think of it as almost a fixed supply of houses,” Cutter said. “Any household that wants to move into the expensive urban areas of California must pay enough for housing so that somebody else will move out of that urban area.”

He added, “The price of housing in California is not set by the cost of building additional housing supply. Instead, it is set by how high the prices must go, both rental and house prices, in order to force somebody out.”

On the issue of fairness, Cutter said housing policy should be viewed in the context of broader generational economics. He argued that existing systems already direct substantial public resources toward older residents, and that limiting new housing can further increase wealth disparities between generations.

“We can think of our tax system as one that takes money from working adults and families raising children and transfers large amounts to older people,” Cutter said. “Regulations that restrict housing construction are an additional mechanism to transfer wealth to older people.”

At the same time, he said some people see neighborhood control over development as a legitimate exercise of property rights, illustrating the broader policy tension between local autonomy and statewide affordability goals.

Looking ahead, Cutter said one of the fastest ways to reduce costs would be to improve the speed and competence of local housing approvals, which he described as a major source of delay and uncertainty for developers.

“The lowest hanging fruit is to dramatically increase the competence and speed of local government housing approval,” Cutter said. “A major driver of housing costs and consequently lower supply is that developers struggle to get a clear answer regarding the regulations.”

He also criticized recent policies in Los Angeles, including taxes on high-value property sales that apply to multifamily projects, arguing such measures may drive investment elsewhere.

“A smart investor may look at Los Angeles as the vanguard of California housing politics and take all their money elsewhere,” Cutter said. “Any prospective real estate investor can take their money and spend it in Houston or Nashville or Austin instead.”

Finally, Cutter called for broad zoning reform in areas designated for higher-density housing. He specifically cited rules governing height, parking, open space, setbacks and affordable housing mandates as barriers that should be reconsidered.

“The final clear necessity is to take a chainsaw to the local zoning and regulation codes,” Cutter said. “I would like to see local governments designate neighborhoods that are going to be high density and then remove all these regulations.”

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