California is ignoring one path to fixing our housing crisis

OPINION – California’s housing affordability crisis isn’t getting better. And outdated ways of thinking have caused us to neglect one possible path toward fixing it.

Rents and home sale prices remain at historically high levels and home prices have only eased because soaring interest rates have added to the affordability crunch, leaving prospective buyers no better off. Millions of working families remain locked out of any chance of owning their own home – and because homeownership is the primary way Americans build wealth and financial security, our housing crisis is crippling the economic prospects of too many Californians.

This particularly impacts Black, Latino, Indigenous and certain Asian/Pacific Islander communities, who start with less wealth and lower incomes than white Californians. The white homeownership rate is 63.1%, compared to just 35.6% for Black Californians.

One obstacle to overcoming the racial homeownership and wealth gaps is that policymakers and others generally view housing through the lens of two broad categories that date back to post-World War II housing policies: ownership of single-family homes or renting in multifamily apartment buildings. For example, Fannie Mae, which plays a crucial role in the home mortgage market, classifies its work on condo lending under the “single family” umbrella, even though condos are by definition multifamily projects.

But there is a third major category of housing we’ve long ignored: multifamily homeownership. In researching our just-published report on multifamily homeownership, we found disturbing gaps in both available data and in attention from policymakers to the opportunities and challenges this form of homeownership presents.

Condominiums are the most common form of multifamily homeownership – California has 1.15 million – but there are many others: co-ops, tenancies-in-common, community land trusts, and a nearly endless range of informal arrangements that happen when friends or relatives decide to purchase a home together and share it.

Multifamily homeownership can be significantly more affordable than single-family homes. A 2022 Urban Institute analysis found that across the country, condos generally cost less to buy than single-family homes – in Los Angeles the difference was $250,000. Some kinds of multifamily developments, like community land trusts, are designed from the start to be and stay affordable.

For many families, that difference in cost makes owning their own home possible.

In addition to affordability, multifamily homeownership can have huge environmental and land use benefits. It can produce more dense, walkable, bikeable, transit-friendly communities, reducing sprawl, traffic and pollution.

A variety of issues hold back expansion of multifamily homeownership. For instance, affordable condos large enough to hold a growing family are extremely scarce. The family-sized condos that do get built seem mostly aimed at the luxury market. Other approaches, like community land trusts, are underutilized.

Programs that theoretically could support multifamily homeownership, like the Low Income Housing Tax Credit or Housing Choice Vouchers (aka Section 8), are not well designed to do so. Lenders generally view condos as more risky than single-family homes and see co-ops or tenancies-in-common as even worse, driving up costs for borrowers – or making it hard to get loans at all.

In addition to affordability, multifamily homeownership can have huge environmental and land use benefits.

While government at various levels closely regulates the construction of multiunit housing, once people buy a condo, a share in a co-op, or just a house to share, they’re pretty much on their own. That contributes to disasters like the 2021 collapse of a condo tower in Surfside, Florida, which likely could have been prevented with more attention to maintenance and repairs.

Unfortunately, we don’t fully understand the challenges and opportunities of multifamiliy homeownership. Our bipolar way of looking at housing has left multifamily homeownership less studied, less understood and less supported. We lack the most basic data because there’s been little research focused on this area and major surveys like the U.S. Census ask very little about housing.

Multifamily homeownership is not for everyone, but it can play a larger role in solving California’s housing crisis and reducing our racial wealth gap. For that to happen, policymakers, lenders, nonprofit housing leaders and the housing industry as a whole need to give this form of housing the attention it needs.

Adam Briones is the CEO of California Community Builders. Alex Schafran is a writer and consultant based in California.