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Addressing the Housing Crisis

“Housing Policy Reform: Economic Policy Challenges Facing California’s Next Governor” 

Increasingly restrictive zoning and other land-use regulations are the primary factor driving ever-higher California housing costs. California’s housing price premium averaged only about 35 percent between 1940 and 1980, despite the enormous population growth that occurred in this period, when California grew from about seven million residents to about twenty-four million.

The substantial rise in California home prices since 1980 coincides with more restrictive land use regulations, including tighter zoning regulations. Many studies present evidence that these regulations are substantially increasing housing costs. One study by economists Edward Glaeser, Joseph Gyourko, and Raven Saks (2005) concluded that restrictive zoning regulations increased housing prices in San Francisco and San José by about 50 percent. This premium is likely to be even higher today.

Other studies have reached similar conclusions: zoning slows down the construction of new housing units and makes it difficult to build public infrastructure.

California land use regulations are reducing residential construction, which in turn increases housing costs, reduces living standards, imposes an unreasonable financial burden on many families in the state, and slows economic growth. A recent study by economists Kyle Herkenhoff, Lee Ohanian, and Edward Prescott (2018) estimates that shifting California land-use regulations back to 2000 levels would expand California’s population and ultimately generate an additional $800 billion in California incomes and production.

The solution to California’s housing affordability crisis is to create a regulatory framework that balances the interests of economic growth, housing affordability, and development sustainability with environmental protection, protecting California’s rich historical heritage, and development planning that also addresses the challenges created by traffic congestion and expanding public utilities. More housing needs to be built, particularly multifamily housing units, and this can be done while respecting these other considerations.

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