A house sits atop a pile of money next to the state of California.
Illustration by Lanette Behiry/Real Estate News

California 'engineered' its housing crisis — now it's trying to fix it 

State Senator Scott Wiener blames California's housing woes on decades of "terrible policy decisions," but he says legislation can help turn things around.

June 25, 2023
4 minutes

Key points:

  • Wiener spoke during a presentation in conjunction with the release of Harvard's annual State of the Nation's Housing report.
  • Instead of relying on cities to figure it all out, the state is trying to take a more regional approach, particularly around zoning and inventory requirements.
  • Legislative proposals include rezoning to allow for more density and streamlining the housing development process.

It's a common refrain that all real estate is local, but to tackle problems like housing affordability and availability, it's time to take a broader approach.

That's the perspective of Scott Wiener, a state senator from California who spoke during Harvard University's Joint Center for Housing Studies presentation and panel discussion on June 21. The presentation was done in conjunction with the release of its annual housing report.

Scott Wiener, California State Senator, 11th District
Scott Wiener, California State Senator, 11th District.

"Yes, there should always be a local aspect of housing; every community is unique. But we have to also view this at a broader policy level, just like we view water or education or health care," Wiener said. "[Housing] is having massive impacts around climate and income inequality and homelessness."

Finding an affordable place to live in California has been a challenge for some time, and the problem is only getting worse. At the end of 2022, only 17% of California households could afford a median-priced home of $790,020, according to data from the California Association of Realtors (CAR). That's down from 25% at the end of 2021.

With inventory remaining low, home prices continue to rise in the Golden State in 2023: According to a May report from CAR, the median price of homes sold in the state that month was a whopping $836,110 — which is actually a decline compared to the frothy days of May 2022, when the median price was $893,200. A recent Redfin report also noted that inventory levels were plunging in many metro areas this spring, particularly in Southern California.

California 'pioneered the housing crisis'

During the State of the Nation's Housing presentation, Wiener was not shy about the problems facing California, asserting that the state "pioneered the housing crisis."

"Our housing crisis in California was absolutely engineered with a terrible layering of terrible policy decisions over about 50 years," Wiener said, noting that as the state grew in population the number of housing units being built collapsed.

He pointed to a policy shift in the 1970s and 1980s as a key contributor to the current housing shortage. During those two decades, cities like San Francisco and Los Angeles methodically banned multi-unit construction in large swaths of land within the city limits. Eventually, more than 70% of California's residentially zoned land was reserved for single-family homes.

Legislation targeting restrictive zoning laws

Addressing this inventory problem regionally rather than at a hyperlocal level is something Wiener and his colleagues in the state legislature have been working on over the past few years. Specific proposals include state-imposed rezoning to allow for duplexes and four-plexes in single-family zones, reducing new development costs, eliminating parking space minimums, and streamlining the development process by allowing permits to be approved within months instead of years.

Some legislation to address housing affordability is still struggling to move forward. Funding for California's Dream For All housing assistance program didn't make it into the latest state budget, pausing what was a wildly popular program. 

Dream For All offers a "shared appreciation loan" which helps cover a buyer's down payment. When the buyer sells the home, they repay the loan plus a portion of the appreciation. When the program was introduced in March, its $288 million in funding was almost immediately depleted.

"The fact that an initial funding round was fully committed in just 11 days of the program's launch clearly illustrates the demand and desire for working Californians to become homeowners," CAR said in a statement expressing disappointment that no additional funds were approved.

Tackling the problem from multiple sides

Because California's housing situation has reached a crisis level, Wiener said a growing coalition of business, labor and environmental organizations is getting involved.

The support of environmental organizations has been especially important, as many now recognize that bad housing policy results in sprawl, longer commutes and homes being built in dangerous wildfire areas.

"We need to stop using process, and particularly environmental laws to impede climate action," Wiener said.

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