There’s a severe shortage of affordable rental housing all over the country, and it may be worse in California than anywhere else. The root issues are plainly simple to identify (although more challenging for policymakers to properly fix). Here’s California’s rental housing crisis succinctly captured in five charts – adapted from a presentation I gave recently to the California Housing Finance Agency’s board of directors.
1. California has the third-highest share (among all states) of severely cost-burdened renters, per Harvard Joint Center for Housing Studies.
BUT it’s a tale of two markets, as…
2. California also has a very high share of upper-income renters, the 2nd-largest share of renters with incomes above $75k.
3. Despite the large need, California has the nation’s smallest share of ultra low-rent housing (<$600/mo), per Harvard. Of course, California also has some pricey real estate, but the problem is exacerbated by underfunding affordable housing and blocking too much new housing.
4. The big issue in California many pundits miss: Occupancy is super (unhealthy) high even in the priciest market-rate rentals, per RealPage data. It’s not an affordability issue at those rent levels because qualified demand IS there … It’s a severe housing shortage at ALL price points.
5. California needs more low-income housing creation, but also more upper-income housing creation — which would pull more people up and open up availability in cheaper units. But it’s not happening fast enough. California is adding market-rate apartments at HALF the rate of the U.S. average, per RealPage data.
Meanwhile, California cities continue to focus on treating side effects (via rent control, renter screening regulations, extended eviction moratoria, etc.) – but those don’t actually solve the root issue of undersupply. Regardless of your view on those topics, they’re undeniably contributing to supply shortage.
So, how can California best solve its rental housing crisis? First, remember, big ships don’t turn fast. Proper solutions must start immediately, but they’ll take years to fully play out.
First: Focus on accelerating the removal of barriers to new construction. California is infamous for its extensive red tape to new development. Well-intended environmental reviews are routinely “weaponized” by the anti-development NIMBY crowd for no other purpose but to delay or stop construction of multifamily housing.
Zoning issues are getting attention, as well, and California has taken some positive steps – but much more progress is needed to unwind decades of anti-multifamily zoning practices, particularly in large cities like Los Angeles. Accessory dwelling units (ADUs) are also a popular topic, but so far aren’t happening at enough scale to really move the needle.
Also, cities across California focus heavily on inclusionary zoning and developer fees to fund incremental numbers of affordable housing units as part of market-rate development. But those practices amount to small drops in the bucket of affordable housing creation, while driving up the cost of market-rate housing to offset them – which could, in turn, limit many projects as they try to “pencil out” for development. More worrisome, it appears many cities rely too much on inclusionary zoning to solve a problem that requires more direct public funding (which too many cities are unwilling to prioritize).
Additionally: Find real solutions to adequately fund affordable housing construction, maintenance plus renter subsidies. These are the permanent fixes and lasting solutions that, for decades, California (and most other states) have been unwilling to adequately fund. Big problems require big solutions, and big solutions require big funding. Solving the rental housing crisis requires a strong partnership between the private and public markets, and in California, the public is failing to play its role.