California Building Fewer Homes As Residents Continue Getting Smacked With Astronomically High Rent

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Robert Schmad Contributor
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Californians are building fewer housing units as rent prices in the state remain among the most expensive in the nation, causing millions to leave the state.

The number of housing permits issued in California fell precipitously last year, dropping from 135,565 in 2022 to fewer than 78,000 in 2023 as of writing, according to data compiled by the California Department of Housing and Community Development (CDHCD). As Californians build fewer homes, the state faces a multi-million unit housing shortage and the second-highest average rent in the nation, factors pushing many to move elsewhere.

New housing approvals fell across the country in 2023, though disproportionately so in California. The number of new housing permits approved nationally fell 11.7% between 2022 and 2023, according to census data. California’s decline was more pronounced, with the state seeing a 42% decline in permit approvals in 2023 as of writing, CDHCD data shows. (RELATED: California’s Fast-Food Minimum Wage Hike Could Spell Trouble For Public Schools)

Two factors are also impacting home construction nationally, including higher interest rates, which make borrowing for projects more expensive, as well as a shortage of construction workers.

At his 2019 inaugural address, California Democratic Gov. Gavin Newsom pledged to launch an effort to increase the amount of affordable housing in the state that he said would be comparable to America’s post-war Marshall Plan. Since then, he has signed dozens of pieces of legislation and allocated billions of dollars aimed at increasing the Golden State’s housing supply.

Despite the governor’s efforts, construction is declining and rent remains high in California. The average rent payment in California is almost $2,000 a month, and the number of housing units built in the state fell by 38,944 units in 2023, according to data at the time of publication.

The median home in the United States cost $417,700 as of the fourth quarter of 2023, according to the U.S. Department of Housing and Urban Development. In California, the median home was sold for $675,667 as of January, according to Zillow.

The Newsom administration wants to build 2.5 million new homes in California by the end of the decade, CalMatters reported. Newsom had campaigned on building 3.5 million homes in the state. With only 98,351 units built in 2022 and 59,357 in 2023, the state is not on pace to meet the governor’s current goals.

More than 1 million people left California between 2020 and 2022. Nearly a majority of Californians, 45%, say that the state’s high housing prices have them considering moving, according to a March 2023 poll published by the Public Policy Institute of California.

California’s declining population is exacerbating the state’s burgeoning deficit, as emigrating taxpayers leave the state with lower annual revenues.

The California Tenant Protection Act caps the amount landlords can increase rent by over a 12- month period. Economists have long held that rent control policies reduce the amount of housing units available to tenants, according to a 2018 research paper published by the Brookings Institute.

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