Reformed but Not Resolved: California’s Housing Crisis


Houses in San Francisco. (Jorg Hackemann/Shutterstock)

On Sept. 15, 2017, as students were preparing to move into their new homes and apartments for the new academic year, the California Assembly voted on a highly controversial package of housing bills in their last session before the new year. This was months in the making, and a direct response to the housing crisis California has faced for the past decade.

The most contentious bills—Senate Bill 2, Senate Bill 3, and Senate Bill 35—were all passed, albeit by a very small margin. SB 2 would provide a new, permanent source of funding for housing through $75 real estate transaction fees. SB 3 would issue a $4 billion bond, $1 billion in assisting veteran loans and rates and $3 billion for supporting cost effective housing rentals, and passed on a 54-20 vote. SB 3 will be slated for a public vote in 2018. SB 35, which makes it harder for cities to block new housing even if they fail to meet regional goals for approving developments, passed on a two-thirds majority vote. These three major bills have proved that the California government is serious about housing reform. But is it enough to reverse the already plummeting housing crisis?

California has always been a highly desirable location compared to other U.S. states, but demand for housing has outpaced new housing development for the past decade. The median cost of a house in California is $500,000, almost twice the national median. Many residents have to live hours away from their workplace to find affordable housing. This could have serious consequences like worsening traffic along highways, increasing air pollution, and decreasing worker productivity in all sectors. Some companies are beginning to relocate to areas with more affordable housing because the costs are simply unsustainable for the employees, as well as the companies issuing housing subsidies.  

These bills will most likely not resolve the housing crisis. Many experts have pointed out that the Assembly session ignored a major key in solving the proverbial puzzle: Prop 13. Amended in 1978, this proposition stated that new property taxes could not increase by more than 2 percent per year if the house was not sold. This means that any home buyer who purchases a new house in California would pay exorbitant taxes relative to their neighbors who have lived in the neighborhood for twenty-something years. This makes it exponentially difficult for first-time buyers to find affordable housing. While this proposition gives older tenants and owners a small monetary relief, it hasn’t assuaged the exorbitantly high market prices that rise higher each year, and increase in property tax for new buyers. Additionally, starter homes are essentially nonexistent in this expensive era since most demand is situated in the coastal urban areas and those areas are rarely have open land.

SB 35 will streamline approval for projects, but there are still massive barriers for developers. California’s construction labor is about 20 percent more expensive than elsewhere in the nation. Strict building codes and environment laws have created a cumbersome wall that block hundreds of potential projects. It costs about $50,000 to $75,000 more to build a home in California than in the rest of the U.S.

Advocates for SB 2 as an incentive for developers predict a fund of $250 million per year to help raise and build houses in the near future. But this could prove problematic, as shoddy businessmen could penetrate the market and set up shop within the most desirable state. This, coupled with SB 35, could create unhealthy competition within the market. Many standards, like environment, energy, health, and community, that are already in place could be ignored. If new affordable housing were allowed to bypass these standards, the result could be over-priced and terribly maintained complexes.

The city of Houston is a perfect example of lax housing laws. While Hurricane Harvey was a travesty, it did expose the bad city planning and development as evident from the destruction of many homes. As the only major U.S. city without a zoning code, which divides a city into different zones and applies different permissions to buildings depending on its classification, Houston faced a exponentially worse flood than it would have. As many citizens oppose enacting a zoning code for fear of raising the housing prices, shady developers will prey on the immediate demand for new housing. But these houses will not adhere to high standards, and the process will repeat again. It is worth mentioning that someone needs to pay for the billions of dollars spent on federal emergency aid (Hint: the taxpayers). If an earthquake were to happen in California, which is plausible, it would be in the state’s interest, as well as its citizens, to have high quality building and homes.

Unfortunately, California’s housing crisis will not be resolved anytime soon, with tech companies’ ever-increasing demand for more employees and our rates of immigration rising. The future seems bleak without any sound solution. The state is expecting 180,000 new homes to be built next year, but California hasn’t built 100,000 homes in any year for the past decade.

Echoing Assemblyman David Chiu (D-San Francisco), “We are living during the worst housing crisis our state has ever experienced.”


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