(The Center Square) – According to the latest housing affordability index from the California Association of Realtors, housing affordability in California has collapsed to pre-Great Recession levels in 2007. Today just 16% of California households can afford the median home for sale in the state, compared to the national average of 36%.
While affordability was even lower immediately before the Great Recession, the relative income needed to afford housing in California has never been higher. To afford the median home in the state, including condominiums and townhomes, a household must make at least $208,000; for the Bay Area, Los Angeles, and the Inland Empire, those numbers are $326,000, $190,000, and $142,000 respectively.
Housing experts agree that the only way to reduce real housing prices is to build enough housing for prices to go down, and state leaders seem to be largely united around this goal. Governor Gavin Newsom announced a goal for California to build 2.5 million homes by 2030, which comes out to an average of 312,500 homes per year.
With just more than 123,000 homes built in 2022, housing production must expand significantly to have any chance at meeting this goal.
“The housing crisis we are experiencing in California was decades in the making, but we are taking aggressive steps with an all-of-the-above approach, which includes unprecedented actions to bring about accountability at the local level,” said Governor Newsom in a November 2022 release highlighting his 2030 goal. “Understanding that we have no time to waste, in just one year, the Housing Accountability Unit has moved with a fierce intensity to break the status quo and remove bureaucratic roadblocks.”
However, in its first year of operation, the Housing Accountability Unit, part of the California Department of Housing and Community Development, helped complete just 1,700 of the 3,500 CHD-involved units that year, a drop in the bucket towards the state’s housing goals.
According to data from the U.S. Census Bureau contextualized by the First Tuesday Journal, California housing starts have declined since 2022, with single family home starts down 19% to 25,000 units for the 6 month period from October 2022 to April 2023 over the year prior, and multifamily housing starts down 7% to 28,200 for that time period. At an annualized rate of 106,400 units for this most recent six month period, combined with rising interest rates reducing the feasibility of many projects, it’s likely the state’s production of housing will end up lower in 2023 than in 2022, regardless of the governor’s efforts.
