Coast key to state’s housing costs

The fact that home prices and rents are high in California is not news, but just how high may come as a surprise, courtesy of the Legislature’s nonpartisan fiscal adviser.

For decades, people living in California paid more for shelter than those in most of the rest of the country. But during the 1970s, “the gap started to widen. Between 1970 and 1980, California home prices went from 30 percent above U.S. levels to more than 80 percent higher,” the Legislative Analyst’s Office reported.

The state probably would have to build as many as 100,000 additional units annually – almost exclusively in its coastal communities.

Today, the average California home costs $440,000, or two-and-half-times the average $180,000 price tag of a home elsewhere in the nation, the LAO said. (The summary and full report is available here.) The higher costs are driven by insufficient new construction to meet demand in coastal areas, soaring land prices and, to some extent, construction costs.

California rents also are higher than the rest of the country. Renters pay an average of about $1,240 per month, 50 percent higher than the $840 national average.

The division between coastal and inland California is exacerbated by housing availability.

Competition for limited housing in coastal areas pushes up rents and prices, with those unable to afford those costs moving inland to less expensive housing. But that shift drives up the inland housing costs, as well. High land and construction costs also figure in housing costs. Another impact: Californians are four times as likely to live in crowded housing than others in the country.

Coastal residents, on the average, commute 10 percent further each day than commuters elsewhere in the state, “largely because limited housing options exist near major job centers.”

The LAO recommended sharply boosting the construction of houses and apartments in California’s coastal urban areas, which would involve a major commitment of resources.

“The general magnitude is enormous. On top of the 100,000 to 140,000 housing units California is expected to build each year, the state probably would have to build as many as 100,000 additional units annually – almost exclusively in its coastal communities – to seriously mitigate its problems with housing affordability,” the LAO said.

But tackling housing affordability could cause other problems.

“Additional housing of this magnitude will be extremely difficult,” the LAO noted. “It could place strains on the state’s infrastructure and natural resources and alter the prized character of California’s coastal communities.”