Analysis: Report puts California housing shortage in national perspective

A national report has shined a harsh new light on California’s well-documented housing shortage.

“America is experiencing a housing crisis,” begins the executive summary of “Housing Underproduction in the U.S.” an analysis published last week by Up for Growth, a Washington, D.C.-based pro-housing policy group whose financial sponsors include Zillow, CBRE, the National Association of Realtors and the real estate data company Yardi Matrix.

Nowhere is the crisis more acute than California, where the state median home price has more than doubled the national average. Residents of L.A. who can’t afford the market has transformed the Inland Empire into one of the nation’s fastest-growing regions.

California’s housing shortfall — pegged in a widely cited McKinsey & Company analysis at about 2 million units — was created over decades, largely by a combination of high population growth and restrictive building policies. Regulatory laws, such as the environmental law CEQA, also hinder construction; Up for Growth’s report also cites the “extreme example” of California municipalities’ building fees.

For years the shortage has been a high-profile talking point, frequently cited by housing advocates and politicians as a rationale for controversial new laws such as SB 9, which effectively banned single family zoning.

“California’s severe housing shortage is badly damaging our state, and we need many approaches to tackle it,” Sen. Scott Wiener, the San Francisco Democrat who is perhaps the state’s most prominent pro-density advocate, said last year when Gov. Newsom signed the signature zoning bill.

Up for Growth’s 77-page report puts California’s situation in a national context. And that context shows that California is in a class by itself: The nation as a whole has a “housing underproduction” — or deficit — of 3.8 million units, more than twice the number from 2012, the group calculated. Its underproduction figure for California is 978,000 units, more than three times the number for Texas (322,000) and more than four times the number for New York (234,000). Oklahoma and Montana, by contrast, have deficits of 3,000, and relatively populous Illinois and Georgia have deficits of around 120,000.

Up for Growth based its existing housing count on 2019 housing numbers, and used various factors, including so-called missing households and unit occupancy levels, to determine housing need in all of the country’s 309 Metropolitan Statistical Areas.

In absolute terms, the epicenter of California’s shortage is Greater L.A. (counted as the Los Angeles-Long Beach-Anaheim metro statistical area), where the report cited a shortage of 389,000 units, the most of any metro area in the country. The Inland Empire, or Riverside-San Bernardino-Ontario, has a shortage of 153,000, the country’s fifth highest, and San Francisco-Oakland-Berkeley has a shortage of 114,000, the country’s seventh highest.

The New York, Miami and Washington D.C. areas rounded out the top five, and the San Diego, San Jose and Sacramento metro areas also ranked in the top 25.

When the shortage is measured as a percentage of existing housing stock — a data point that better controls for a given metro area’s population — California metro areas dominate the list even more. Oxnard-Thousand Oaks-Ventura has a deficit of 10.9 percent, second nationally only to the small city of Gainesville, Georgia. Riverside-San Bernardino-Ontario ranked third, with a deficit of 10.4 percent; the Central Valley city of Merced ranked sixth, at a deficit of 8.7 percent; and Los Angeles.-Long Beach-Anaheim ranked eighth, with a deficit of 8.4 percent. Apart from the Miami metro area, which came in 10th, the non-California metros in the top 10 were all relatively small, with populations under 500,000.

Even without much impact from SB 9, the underlying calculus behind the state’s shortage could already be changing slightly — for two years running California has actually lost population — but it’s a list that helps illustrate just how far apart the Golden State has diverged from the rest of the country on new construction. It also helps explain why California consistently dominates yet another ranking: of the country’s most unaffordable housing markets.

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