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Graphics courtesy of Next 10. Photo by Brian Addison. Above: construction on a housing development at Broadway and Pacific takes shape.
A trio of new studies conducted by Beacon Economics—the same group that provided the economic study which showed that a lack of housing has spurred displacement and gentrification here in Long Beach—indicate that the lack of housing and soaring housing costs are the main culprit in pushing low-wage earners and the middle class out of California.
While this issue has been continually raised by nonprofit organizations and housing advocates, the affect on California’s future economic growth is at the the epicenter of the studies—especially and particularly given that, according to one of the reports analyzing employment, California leads the way in creating low-wage and middle-income jobs.
The issue? They can’t afford a roof over their head, creating a dichotomy of services the state needs given the number of jobs but a lack of housing and an affordability gap that doesn’t match the jobs being provided.
Despite that job growth, more folks are moving out of California than moving in according to California Migration: A Comparative Analysis—and those who are moving in are wealthier than the vast majority of people moving out, of whom mainly migrated to Texas, Arizona, Nevada, Oregon, and Washington.
In short, increasing housing costs have made California an equally increasingly difficult place for lower-income families, those with lower education levels, and those with unstable jobs to maintain even a resemblance of quality living. On top of that, the middle class of our state is experiencing an increasing lack of home ownership amongst its ranks, with many being stuck in the renting world.
Meanwhile, those with higher education levels and affluence continue to find the state an attractive place to live with its liberal social leanings, beaches, metro areas, and the lure of being the Golden State.
“California is sinking deeper into a housing crisis, and this raises questions about the sustainability of the state’s overall economic growth,” stated F. Noel Perry, founder of Next 10, the organization commissioned Beacon to take on the studies. “California continues to draw more high-earning, educated people from other states and countries, but the ever-increasing cost of housing is forcing lower- and middle-income Californians to leave the state in hopes of finding more affordable housing.”
Intimately attached to those soaring housing costs is not just California’s historic lack of building but a far newer trend: no one to build the housing despite the push for more. Of the jobs most leaving California, according to the aforementioned study, construction workers led the exodus.
This is one cog in a complex network of failures outlined in The Current State of California Housing: A Comparative Analysis, indicating that most areas in the state failed to meet housing goals set forth by the Regional Housing Needs Assessment (RHNA). Of the 58 counties in California, only six have permitted at least 80% of the units mandated by RHNA, and 41 have permitted less than 50% of the goal.
“In the years to come, the dearth of new homes could exacerbate the problem, making housing even less affordable for many California residents,” wrote Adam Fowler of Beacon. “The cost of development and stringent regulations have contributed to the relative lack of homebuilding in California. Tough environmental and zoning laws sometimes create obstacles for homebuilders that are seeking approval for development, especially in coastal cities.”
Fowler notes that some of these laws, such as the California Environmental Quality Act (CEQA, pronounced colloquially as “see-kwa” amongst urban designers and policy makers), “reflect good intentions” but are “in need of comprehensive reevaluation and reform as they are often poorly implemented and subject to serious abuse.”
That abuse has largely been led by anti-housing coalitions, suing cities and counties over housing projects that have brought the state to historic lows in supply. The result? Exorbitant housing costs:
That Proposition 13 line is important: that prop limited property tax increases, despite the type of property, to no more than 2% per year as long as the property isn’t sold. For new developments, that means commercial spaces are more attractive over residential because tax revenue through sales brings in more money. When it comes to homeownership, the benefits increase under the same ownership for longer periods of time, making it difficult for new homeowners to enter the market.
In other words, we are losing entire sectors of workers due an affordability issue when it comes to housing—and that runs across every income earner except the wealthy.