Housing Increasingly Out of Reach for the California Workforce
In California’s Housing Divide – Public Policy Institute of California (ppic.org), we learn that our housing crisis is worsening, especially for African Americans and Latinos. Authors Marisol Cuellar Mejia, Hans Johnson, and Julien Lafortune write, “The housing crisis in California affects residents of all races and ethnicities, but the lack of affordable housing is particularly acute for African Americans and Latinos. Skyrocketing rents in many California metro areas impose growing financial burdens, limiting opportunities for savings. Combined with rising home prices and interest rates, owning a home has become harder to afford over the past year, even as many saw growth in wages. Given the disproportionate impact of the COVID-19 pandemic on households of color, disparities in homeownership are expected to widen. To address these gaps, policy actions that target the causes of these longstanding inequities are necessary.”
The authors state, “Before the pandemic, the racial homeownership gap in California was large, but it appeared to be narrowing. In 2019, the Latino homeownership rate stood at 44.1%, or 19.2 points below that of white households. The Black homeownership rate was even more worrisome at 36.8%, or 26.4 points below the rate for white households. However, Latino and Black households also saw large gains in homeownership between 2014 and 2019 (2.2 and 2.3 percentage points, respectively). Meanwhile, homeownership among Asians grew the most in this period (2.5 percentage points) and, at 59.8%, was only 3.4 points below the white homeownership rate in 2019. Because home equity makes up the majority of wealth for low- and middle-income families, gaps in homeownership rates magnify wealth inequality.”
“Most homeowners start as renters who then save their way into buying a house—but when rents are high, chances to save are low” say the authors. “African American and Latino renters are more likely to pay a sizable share—30% or more—of their household income on gross rent, making the prospect of saving for homeownership daunting. (Even among homeowners, African Americans and Latinos are more likely to spend a high share of their income on mortgages.)”
Dan Walters in A Solution that Won’t Fix California’s Low Homeownership (Link) says, “California is the land of dreams and extremes and nowhere is that more evident than in the state’s very low rate of homeownership. Just 56% of California’s families live in homes they own, very slightly higher than New York’s lowest-in-the-nation 55% rate and nearly 10 percentage points behind the 65% national rate, according to the Public Policy Institute of California.”
Walters explains, “That so few Californians live in their own homes should not be surprising. After all, the state has the nation’s highest rate of poverty and when the near-poor are added, more than a third of the state’s nearly 40 million residents live with financial distress, PPIC has calculated.”
He says, “Moreover, the state’s median home price of $834,000 — nearly twice the national figure — means that only a quarter of California families can afford such a home, those with incomes of $160,000 and above. In other words, homeownership is another of the many indices of California’s highly stratified society — one infinitely ironic for a state whose political leaders, particularly Gov. Gavin Newsom, tout it as a model of egalitarianism and social mobility that should be emulated elsewhere.”
What can be done to improve the housing situation in California? Unfortunately, Walters doesn’t think much of President Pro Tem Toni Atkins proposal. His critique is, “Under her California Dream for All, the state would partner with some families to make down payments on home purchases and then recoup its investment when homes are later refinanced or sold. Atkins’ program would join other state programs that already offer homeownership assistance. And while her sincerity is genuine, at best her proposal would help only an estimated 8,000 families in a state where about 7 million families are renters.”
Walters says, “It’s typical of politicians’ approaches to social and economic disparity — create a new program with a catchy title that has little impact, if any, and sidesteps core issues. California’s low rate of homeownership results from high levels of poverty and sky-high home prices. Throwing a few dollars at it doesn’t solve the problem and could even make it worse by enticing some families to buy homes they really cannot afford.” That’s what went wrong in 2008 when the housing bubble burst.
Walters advises what the real solutions are, “California’s homeownership rates will rise when the state improves its economic fundamentals — when it removes impediments to housing construction, makes itself more welcoming to investment in middle-income jobs and improves educational outcomes of poor children.”
When the budget is finalized, we will see how much money is going into new housing and after that, which housing bills get the Governor’s signature. It is encouraging that there are efforts being made, even small ones, but we need serious action taken to address the dire housing needs of our state.
