Are Housing Costs in California Too High

It’s not news that housing in California isn’t cheap – many people would argue that you get what you pay for. But are housing costs reaching unsustainable levels for families across the Golden State? One recent report has found that the high costs of living in California are driving more and more families below the poverty line, a factor which could put a major damper on the real estate market.

A new study by the California Housing Partnership found that the state’s lowest-income households spend two-thirds of their income on housing, leaving little money for food, healthcare, transportation and other needs.

And 1.5 million low-income households — half of them in Los Angeles and Orange counties and the Inland Empire — do not have access to housing they can afford.

Federal measures of poverty do not include housing costs, but when they are factored in, according to the housing group’s report, the share of people living below the poverty line in California climbs to 22%, from 16.2% in federal reports. In high-cost Orange County, including housing costs nearly doubles the poverty rate, to 24.3%.

The problem has grown worse in recent years as rents have climbed and incomes stagnated. The annual median rent in California has grown 21% since 2000, while median income for renter households has fallen 8%. Meanwhile, state and federal funding for affordable housing has dropped sharply in recent years with the end of redevelopment agencies in California and the exhaustion of state bond funds.

The report comes as affordable housing advocates descend on Sacramento on Tuesday to push for more funding for low-income housing. Several bills before the Legislature, including a package proposed by Assembly Speaker Toni Atkins (D-San Diego), would add money to housing programs.

Do you believe that housing costs are getting too high? Have the increasing costs of living in California impacted your business? We’d love to hear your thoughts.

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  • RE_Insider

    We received this comment via email from one of our readers: Housing prices reflect the fact that very little housing has been built in the last 10 years. Basic Economics 101 says that the market drives price. Not everyone can afford to live in California, which is a good thing or we’d be bumper to bumper with people everywhere.

  • RE_Insider

    Another reader sent in this note about our article: Working mostly within the lower end of housing prices – if you call under a million dollars the ‘lower’ end – I am meeting so many buyers who cannot bring in the numbers to secure their loan. This is a mix of lender’s criteria and housing prices. I’m seeing people
    pushing outwards to the areas on the fringe of where they would actually want to live, and still struggling to secure a property. Outlying areas of Los Angeles have had a market price upswing, which I thought would begin to correct itself, but the lack of inventory (again) has kept the prices holding or even creeping upwards.

    I talk to people who are clinging to their homes, rather than cash in on the equity because, if they want to stay in California, they will be competing for a home in that pricier range, so it doesn’t make sense to move. It’s totally understandable.

    I purchased my own home in 2011, saw a slight decline in prices, then 2013 started to pick up when people began discovering they could get downtown, Hollywood and the Valley inside of 30 minutes from the Foothills. If you can let go of a mindset of what you must have, sometimes you will discover there are great areas just over the fence. This is where the values are to be had, but I doubt it will last much longer. Looking at what happened in Highland Park and the prices there; that’s what many predict is about to happen in the Foothills.