With its far stronger land use regulation, implemented in recent decades, California’s house prices relative to incomes (“median multiple”) have skyrocketed to 135 percent above those in markets where there is more liberal, traditional land use regulation. Each of California’s major metropolitan areas are now rated as severely unaffordable (the worst category of affordability) in the 13th Annual Demographia Housing Affordability Survey. Before California abandoned traditional regulation, its income adjusted house prices were only 30 percent higher than in the traditionally regulated markets. The problem goes beyond home ownership. California has the highest gap between the costs of renting and buying in California than elsewhere in the nation (the price-to-rent ratio). Among the 53 major metropolitan areas, San Francisco, San Jose, Los Angeles, San Diego and Sacramento show the largest affordability gap between renting and buying. That makes home ownership doubly challenging for would-be
The problem goes beyond home ownership. California has the highest gap between the costs of renting and buying in California than elsewhere in the nation (the price-to-rent ratio). Among the 53 major metropolitan areas, San Francisco, San Jose, Los Angeles, San Diego and Sacramento show the largest affordability gap between renting and buying. That makes home ownership doubly challenging for would-be first time buyers.
A future in which only 50 percent of households could afford houses would mean considerably less affluent middle-income households and higher poverty rates. It would stunt economic growth, because both the many more renters and buyers paying more would have less discretionary income to buy other goods and services. This could retard economic growth, as Chang-Tai Hseih and Enrico Moretti have already found to have happened, even with stringent regulation that has been somewhat limited geographically (beyond California to markets most notably like Portland, Seattle, Denver, and Miami).
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