Urban Research Monitor
California: The Crisis at Its Worst?

Locked Out! California's Affordable Housing Crisis, a product of the independent, nonprofit California Budget Project (CBP), complements Housing America's Working Families. It puts the crisis in a larger context by analyzing how it affects almost all segments of the state's population, yet it also shows that its effects have spread to middle-income workers, with serious economic implications. In this vein, one of CBP's main findings further articulates the housing-economic growth connection: The strong California economy "has created [emphasis added] an affordable housing shortage of crisis proportions."

Along with reporting the effects of the crisis on working families (reinforcing the findings of Stegman and his colleagues), CBP shows that its effects in California are even more severe for the groups that housing policy has traditionally targeted (for example, recipients of the state's cash assistance program for poor families pay more than 60 percent of their income for housing).

Renters (43 percent of state households) face the greatest affordability challenges. Almost 25 percent of renting households spend more than one-half of their incomes on rent, and approximately 50 percent spend more than one-third. More and more families are likely to rent indefinitely; the median state household earns less than 66 percent of what it would need to buy a median-priced home. Thus, California has the nation's second lowest homeownership rate—55.7 percent, compared with 66.8 percent nationwide.

Because the crisis is so extreme in California, CBP finds that it "threatens to undermine the continued growth" of the state's economy. Many firms are having trouble attracting workers; key, but low-paid, workers (such as teachers and police) cannot live within close proximity to their jobs. This situation raises the same questions as the Stegman report.

CBP finds that California's housing crisis has three main contributing factors: lack of affordable housing, high job growth outpacing housing construction, and local tax incentives that tend to promote retail development rather than housing. CBP also details complex regional variations, ongoing mortgage discrimination, and overcrowding, which have led the crisis to reach what it calls "epic proportions" in some parts of the state. These findings reinforce those of Stegman and his colleagues; the crisis is having its worst effects on the poor, but it is also disrupting middle-income working families, whose critical role in the state's economy is being put at risk.

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