California’s Housing Crisis
Why It’s Worse Than Ever
The cost of housing in California has become completely unmanageable for many residents. The gap between California’s housing costs and the rest of the country has grown into a chasm, making homeownership a faraway dream for many. Despite political promises to address the crisis, restrictive policies, high construction costs and economic pressures continue to drive prices even higher.
Housing Costs Are Out of Control
Home prices in California have skyrocketed far beyond the means of the average household. In the late 1960s, the typical California home was valued at about four times the average household’s income. Today, it’s more than eleven times what a typical household earns. The median home price in California is $869,000, more than double the national median of $404,500. California homeowners also face nearly $29,000 per year in hidden costs like property taxes, insurance and maintenance—over $10,000 more than the national average.
These prices put homeownership out of reach for many Californians, resulting in the second-lowest homeownership rate in the country. While two-thirds of households nationwide own their homes, in California, just over half do.
Renters are struggling as well. About 44% of Californians are renting, according to the U.S. Census. The average monthly rent is the state is $2,750, more than 35% higher than the national average of $2,000, according to online real estate marketer Zillow. More than half of California renters are rent-burdened, meaning they spend over 30% of their income on rent and nearly a third are severely rent-burdened, spending over half of their income just to keep a roof over their heads, according to the Harvard Joint Center for Housing Studies.
Even with California’s progressive policies to limit rent increases to 5% plus inflation, or up to 10% in some cases, renters could face hundreds of dollars more each month adding up to several thousand dollars each year in higher rent.
So Why Is Housing So Expensive?
California’s housing shortage isn’t just about demand—it’s about the high cost of building homes. Several factors make construction more expensive in the state:
Regulations and Red Tape
Land-use restrictions, environmental reviews and local permitting delays add years and millions of dollars to housing projects.
High Construction Costs
The cost to build in California has soared. Between 2008 and 2018, construction costs increased by $44 per square foot statewide—and $81 per square foot in the Bay Area.
Land Costs and Borrowing Expenses
Land prices are among the highest in the nation, and high interest rates have made financing new developments and new homes even more expensive.
Inflation and Hidden Costs Are Making It Worse
Even for those who do manage to buy a home, hidden costs make homeownership even less affordable. The average property tax bill in California is $6,832 per year and annual maintenance and repair costs add another $16,966— or $1,413 per month just to keep the home in livable condition. Utility bills are also high, with electricity rates among the highest in the country and energy costs totaling nearly $2,000 per year (although you can expect to pay far more as a ratepayer of one of the state’s Investor-Owned Utilities).
And these costs are rising fast. Inflation and increasing living expenses have pushed homeownership costs up 32% since 2020, making it even harder for families to afford.
Despite growing frustration from residents meaningful reform remains uncertain. While Sacramento leaders say they recognize the affordability crisis, their policies often contradict efforts to reduce costs. High taxes, aggressive climate regulations and policies that drive up construction and home ownership expenses make it unlikely that housing will become significantly more affordable anytime soon.