So, here’s the deal: we’ve got a report saying that California‘s housing policies are kind of to blame for homes being crazy expensive there. This whole situation is making it tough for young folks, minorities, and immigrants to move up the income ladder.
Ever since the pandemic hit, California has been seeing sky-high home prices. Low mortgage rates got everyone excited about buying a home, which led to fierce competition and prices shooting up. Back in February 2020, the median listing price in California was $575,000. Fast forward to May 2024, and it’s jumped up by over $200,000, now sitting at $787,000 on average. That’s according to the Federal Reserve Economic Data.
The Demographia International Housing Affordability report checked out housing costs worldwide and found that California has some of the least affordable spots. Actually, of the five priciest areas they looked into, four are right there in Cali – San Jose, Los Angeles, San Francisco, and San Diego.
According to Joel Kotkin, who runs the Center for Demographics and Policy at Chapman University, these crazy high housing prices are not doing any favors for young people, minorities, and immigrants. He’s saying these so-called ‘progressive’ housing policies are actually hurting folks’ chances at moving up in the world.
Kotkin has mentioned that California’s focus on building more compact housing hasn’t really helped increase the number of homes available, which is crucial for making homes more affordable.
He also pointed out in a Los Angeles Times article last year that even though California has laws supposedly supporting new housing development, these laws haven’t really led to more homes being built to tackle the affordability problem. Instead, recent data shows a drop in housing construction.
The report, done by Chapman and the Frontier Centre for Public Policy in Canada, highlights that during the COVID times, a lot of folks moved out from cities to suburbs or other areas outside the big U.S. metro spots, and that played a big role in driving up home prices.
Remote work also had a hand in the housing price spike. With lots of people working from home due to pandemic rules, there was a surge in the demand for houses with more space and outdoor areas, making prices shoot up.
The report shared that the number of hours Americans spent working from home quadrupled compared to pre-pandemic levels in 2019. San Diego figured that about two-thirds of the spike in house prices due to the increased demand was thanks to the shift to remote work.