Affordable housing crisis haunts the middle class, too

A mother and her teen daughters looking at townhomes in Vista. (Photo: Simone Hogan, via Shutterstock)

The COVID-19 pandemic has underscored just how many Californians are living only a paycheck away from eviction or foreclosure.

Thousands of Californians have fallen behind on their rents and mortgages as joblessness skyrocketed – with the Legislative Analyst’s Office estimating that even with unprecedented government assistance, Californians owed $400 million in unpaid rent in 2020.

Even before the pandemic, middle- and low-income residents were leaving the state for more affordable options.

At the heart of this is what we have long known: exorbitant housing costs have made it extremely difficult for families to save for a rainy day, keep paying their rent and mortgages in the case of an emergency, and work their way into the middle class.

Gov. Newsom and legislative leaders have indicated their commitment to figuring out long-term solutions to California’s housing crunch, and much policy work in the Legislature has focused on affordable housing options for California’s most vulnerable citizens. We applaud this commitment and the work done thus far; however, housing affordability is an issue that impacts middle-class Californians as well.

Even before the pandemic, middle- and low-income residents were leaving the state for more affordable options, with fewer people moving into the state to replace them. Most leaving the state had an income of less than $100,000, with most moving into the state making over $100,000 – exacerbating problems of income inequality.

As we work to rebuild from the pandemic and create a California that is accessible for all, new housing construction that reduces costs and lessens time to project completion is vital to those efforts. The Housing Contractors of California, as the dedicated businesses building housing options for California’s middle class, stand ready to work with Gov. Newsom, legislative leaders, and other stakeholders to spur new housing construction, yet are increasingly concerned about solutions to the “missing middle” housing problem.

One immediate way that Governor Newsom and legislative leaders can partner with us to lower the cost of housing on all Californians is to help end unscrupulous lawsuits against housing contractors that drive up the cost of housing.

The Private Attorneys General Act, or PAGA, was designed to help workers remedy violations of state labor code through civil suits, but has ballooned to costly and prolonged legal battles even when no substantial violation occurred, often ending with settlements before they reach the court. When it comes to the state’s housing crisis, the threat of PAGA litigation diminishes the ability of private contractors to help make a dent in the housing crunch.

Many of these frivolous lawsuits have resulted in millions of dollars in unforeseen construction costs that ultimately get passed on to the homebuyer, needlessly driving up price of home ownership for Californians across the state. Unfortunately, these barriers of entry put on homebuyers aren’t getting enough attention.

Housing contractors, state agencies, and the business community at large have all noted that PAGA has primarily benefitted attorneys who bring claims with or without merit, only to settle quickly out of court for little money and with their fees reimbursed. A recent report showed that PAGA claims through private attorneys cost twice as much, deliver half the benefit to workers, and take longer than when the state Labor Commissioner resolves the claim directly. PAGA reform is essential to reducing housing costs.

The Housing Contractors of California are eager to get to work on solving our state’s most intractable housing challenges, furthering the construction of market rate housing for the middle class and expanding homeownership and opportunity to all.

Creativity must match political will in order to help heal the inequalities the pandemic has brought to light and the ways in which Californians looking to get ahead are unfairly being punished.

We call on Governor Newsom and legislative leaders to help us grow the middle class and make housing more affordable, prioritizing missing middle housing with equal urgency as other sectors of the housing crisis.

Editor’s Note: Jeff Mullin is president of Pacific M Painting and a member of the nonprofit Housing Contractors of California.

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