California Housing Crisis Research Paper

California, the land that once embodied the pioneer spirit and the American dream, now embodies the American nightmare; the rich get richer while the hardworking sink deeper into the mud of fiscal disparity. Those who cannot afford life in large cities often paradoxically cannot afford a higher paying job. Celebrities and lawyers reside in hilltop mansions while the economically lower classes flounder to make a living and stay in their homes. College graduates continue to move back into their parents’, while others move out of their home state altogether.

In California, a $400,000 three-bedroom condo and a $700,000 single-family suburban house seem like an absolute steal, while these exponentially inflated prices might astound the average American home-buyer. The California housing crisis, resulting in the most productive of America’s states having the highest rate of homelessness, is one of the most alarming signs of disregard and suppression of the 99% by the 1% in America, and must be recognized and acted upon by state legislature in order to have any chance of continuing California’s economic success.

The shrinking middle class is one of the largest victims of California’s corrupt housing market. Throughout the state, thousands of multiple-income families are hard-pressed or unable to gain housing. As house rental and sales prices continue to steadily rise, the minimum wage lingers at a measly $11.00 per hour. Though an $11.00 minimum may be the the third highest in the country—behind Washington’s $11.50 and the District of Columbia’s $13.50—it fails to meet the requirements of a living wage in most of California (See Figure A). According to investopedia.com, “living wage refers to a theoretical wage level that allows an individual to afford adequate shelter, food and the other necessities. A living wage should be substantial enough to ensure that no more than 30% of it gets spent on housing.” For most of the state, In fact, these solutions only apply to a single adult, no children household.

Even the upper middle class actively participates in this divide. Those who have the means to do so strive towards fiscal ascent, owning single-family homes and flats in the city. They splurge with the money they have to resemble the upper class, buying Teslas and avoiding ‘sketchy’ parts of town, taking jobs in the tech and medical industries.

Following the devastating wildfires of 2017, Sonoma County faced an even more dire need for a solution to the housing crisis. In their efforts to buy or rent new homes, victims of the fires experienced first-hand Some landlords even attempted to price-gouge the displaced victims of the fires.

So why is California so expensive to live in? The answer lies in several factors, starting off with its timeless desirability. California has long been idolized as a land of promise and beauty, from the initial desires of settlers seeking to ‘Manifest Destiny’ to the drive from the Gold Rush to modern day Americans looking to live in a state of technological, agricultural, and cultural prosperity and diversity. From the soaring arches of the Golden Gate Bridge to the glimmering lights of Hollywood, the California Dream persists from person to person, state to state, and country to country. The essential issue is that demand far outweighs supply, but consumers continue to purchase. In essence, they will not compromise on the bountiful benefits of living in California, enabling the California housing market to persistently rise.

Ever since the economic growth of the industrial revolution, migration towards large cities has become a staple of American society. As more and more migrate to cities in search of recreation, job opportunities, rich culture, and strong economy, they too add to the desirability of said cities. And the more desirable a city is, the more people will want to move there. In his book The Complacent Class: The Self-Defeating Quest for the American Dream author Tyler Cowen concludes that as long as this pattern continues, “the wealthier parts of the country will become wealthier yet, and the most talented individuals will entrench themselves in those areas, raising rents forever to very high levels” (67).

In an effort to slip past the bulletproof big-city housing markets, Californians buy bordering land that provides somewhat easy access to jobs without surrounding farm-towns suddenly metamorphose into bustling little cities, bubbling with the promise of opportunity and comfort. Residents choose to commute rather than pay skyrocketing prices for housing in cities like Los Angeles or San Francisco. The city of Novato, for example, less than an hour outside of San Francisco, was not too long ago almost unheard of, perhaps only for Bay Area residents’ desire to avoid it. Because of its proximity to ‘The City by the Bay’, Novato is now home to more than 2,500 businesses, has state of the art scientific research programs, and the average household income is one-and-a-half times that of the national average. The city of Novato’s website boasts that “the labor pool in Novato is well educated and affluent, with over one-third of the residents over 25 having a college degree.” Entrepreneurs see increasingly affluent cities such as these and decide to home their start-ups there, bringing further jobs, wealth, and on top of it all, demand for housing. This gentrification makes housing prices skyrocket, driving out middle and lower class residents and pushing them farther away from the high-wage jobs in the city. Such is the story throughout California.

Large cities provide middle and lower class Californian families little chance to pursue the splendorous opportunities in the midsts. Often, those that do struggle day in and day out to make ends meet. In Los Angeles, for example, many families with two parents working full time are unable to pay gas, electricity, or rent. According to an article by KPBS.org, “Recent research conducted at UCLA found that there is a correlation between high cost of living and homelessness rates. As rents continue to rise, millions of low-income Californians struggle to meet ends meet, and many live on the edge of homelessness.” NPR reports on a family that “know[s] they’re living right on the brink of homelessness, even though they’re both employed and can afford to pay their bills and make rent.” This family has lived out of their car before, and fears they will have to do so again in the not-so distant future. According to Ben Metcalf, the director of the state Department of Housing and Community Development, “[California] has more than 1.7 million low-income households spending more than half their income in housing costs. When you’re paying that much for housing, with so little left over, even a minor shock can start a cycle of homelessness.” With the lack of housing and immensely high prices, it is no surprise that California has the nation’s highest percentage of homelessness.

Higher housing prices have a direct correlation to the numbers of people experiencing homelessness in the state. Though California has the fifth largest GDP of any state or country, one in five of its residents lives in poverty, the highest rate of poverty in the country. Following the logical order, California also has the highest rate of homelessness in the country.

“A lot of people will wish to settle in or near very large cities with lots of jobs, lots of economic sectors, and lots of amenities. Cities that have enough size and diversity to fit the interests of both people in a couple [:New York City, Boston, Los Angeles, Chicago, and San Francisco]. And so the rents and home prices in those locales become exorbitantly high, in part because only large and well-developed places offer non-movers the flexibility they may turn out to need”.

With high rises and cramped housing, rent in the city of San Francisco seems like it should be much lower. Reality reveals that even this housing just isn’t enough, so Much of the Democratic party suggests that supplemental and low income housing is the way to go in order to encourage regrowth of the middle class in California. Wealthy homeowners and landlords, albeit reasonably in a fiscal sense, refuse to vote for city measures to allow low income and government-supplemented housing in their neighborhoods. Owning land in California’s big cities is one of the greatest investments to make. Just as a board of investors for a big name company encourages the company to make decisions that will bring the highest rate of return, home owners desire prices in their neighborhoods to continuously rise, providing an exponentially lucrative return on their initial investment into the property. Owners fear that less ‘desirable’ housing in the area will drag down the value of their investments. “Although many neighbors and governments promote and encourage supportive housing, ‘[u]ncooperative local governments or Not-In-My-Back-Yard (NIMBY) residents can effectively shutout affordable housing if allowed to do so.’” Overall favored steps fail thanks to the resistance of local-inspired policy, and cities fail to accommodate the middle and low-income individuals and families they rely on for success.

However, this does not have to be the case. Local governments must look beyond the temporary tax benefits of having a higher-earning constituency and see that California cannot guarantee success without supporting its lower and middle classes. Working class people are the backbone of the state and country, filling the less flashy jobs that keep the economy and local systems running: public school teachers, maintenance workers, agriculture supply manufacturers and small business owners. According to Peter Brownell, research director at San Diego’s Center on Policy Initiatives, the middle class is essential to a prosperous economy. He argues that, ‘when people have stable, middle-class incomes, it means they have money in their pocket to consume all kinds of goods, whether that’s purchasing housing, buying new clothes, buying cars, buying refrigerators. [California’s] economy is driven by consumer spending.’ And as of 2015, the percent of the population inhabiting the middle class fell from approximately 61 percent in 1971 to 50 percent. This missing 11 percent either moved to the upper or lower classes or moved out of California altogether. Though residents are clearly willing to struggle to maintain their convenient and opportunous California lifestyle, as exemplified by NPR’s highlighted family, many have reached a breaking point where they feel the high cost of living becomes too much to bear. They move to states such as Oregon, Texas, and Arizona where they can pay tens of thousands of dollars less for higher quality homes. Through either decisions of wealthy voters, measures carried out by cities against the will of their residents, or from another economic Recession, California will eventually have to change its course if it hopes to continue its prosperity.

As long as housing availability is not rising, hopeful residents and financial experts suggest a significant raise in minimum wage. They see that, as noted earlier, minimum wage must come much closer to reaching the calculated living wage for a single adult. Despite the nationwide positive impacts of the USA’s minimum wage, federal legislation cannot be solely relied upon to set minimum wage. Each of the fifty states faces entirely different economic circumstances, and thus while the federal minimum wage of $7.25 sets a helpful baseline, the states themselves must assess the needs of residents and the costs of living in order to ensure a living wage for as many people as possible. At the moment in California, this means raising minimum wage by at least three dollars. However improbable this may seem, the state seems to be on the way to progress. In 2016, Governor Jerry Brown signed a bill that promised an increase in minimum wage to $15 by 2022, and already minimum wage has risen by one dollar.

Several other proposed solutions lie in the realm of changing land use and taxes. One proposed solution is to re-zone commercial land into that used for affordable housing. A housing developer guest-writing for the online news source Urbanize Los Angeles references the fall of in-person retail and mega shopping malls in California. He proposes that land set aside for commercial use should be rezoned into either affordable housing units or mixed-townhome projects. Though critics may argue that commercial land must be used for that which it what originally zoned, including shopping malls or business parks that have the potential to encourage business, the developer . Another group proposes that reinstating redevelopment could cause a significant increase in housing quality and quantity. SF Chronicle staff writer Antonio Villaraigosa suggests that local governments should be fully returned the power “to use redevelopment authorities to fund workforce and affordable housing for teachers, nurses, firefighters, seniors, low-income families and the homeless.” He believes that such an action would . This could potentially create housing closer to public transportation, lessening the financial burden of paying for gas. Finally, California Governor-elect Gavin Newsom supports tax-incentivising the development and marketing of low-income housing throughout the state.

While the solution to California’s housing crisis clearly will not manifest as a single-step all-healing bill, the state must continue to search for resolutions. Each small measure passed, each government-supplemented house built means another member of the workforce has the chance to prosper in the state they call home. Despite the USA’s founding principle to protect the needs of the minority, the rich minority has far too much power thanks to their possession of public policy-influencing wealth. The needs of the majority–the middle and lower classes; the working people; the blue-collars–should be running the economic and political show.

Bibliography

1. Cabales, Victoria. ‘A Deeper Dive Into California’s Housing And Homelessness Crisis.’ KPBS Public Media. https://www.kpbs.org/news/2018/aug/28/deeper-dive-californias-housing-and-homelessness-c/.
2. ‘City of Novato, CA.’ City of Novato, CA | Home. https://novato.org/business/novato-wants-your-business.
3. Cowen, Tyler. The Complacent Class: The Self-defeating Quest for the American Dream. Picador, 2018.
4. ‘Everyone’s Neighborhood: Addressing “Not in My Backyard” Opposition to Supportive Housing for People with Mental Health Disabilities.’ Disability Rights California: California’s Protection and Advocacy System. September 2014. https://www.disabilityrightsca.org/system/files/file-attachments/CM5301.pdf.
5. Sharma, Amita. ‘California’s Middle Class Is In Decline, Despite The State’s Immense Wealth.’ KPBS Public Media. https://www.kpbs.org/news/2018/mar/15/californias-middle-class-decline-despite-states-im/.
6. Siegler, Kirk, and Linda Wang. ‘California Housing Crisis: Working But On The Brink Of Homelessness.’ NPR. April 16, 2018. http://www.npr.org/2018/04/16/601970552/californias-housing-crisis-working-but-on-the-brink-of-homelessness.
7. Staff, Investopedia. ‘Living Wage.’ Investopedia. December 12, 2017. https://www.investopedia.com/terms/l/living_wage.asp.
8. ‘U.S. Department of Labor.’ United States Department of Labor. https://www.dol.gov/general/topic/wages/minimumwage.
9. Villaraigosa, Antonio. ‘A Solution to California’s Housing Crisis – Reinstate Redevelopment.’ San Francisco Chronicle. September 28, 2017. https://www.sfchronicle.com/opinion/openforum/article/A-solution-to-California-s-housing-crisis-12235876.php. 

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