Report says unaffordable housing markets in California pose threat to middle class's survival

CALIFORNIA – A Chapman University report, published this week, found that unaffordable housing markets in California and across the world pose a threat to the middle class’s survival.

The researchers say convincing policy makers to change directions before the new generation loses all hope of home ownership is going to be the hard part.

Four impossibly unaffordable markets in California

The California Association of Realtors (CAR) published a report in May, showing the statewide median home price exceeded $900,000 for the first time ever, setting a new record-high.

Chapman University’s Demographia International Housing Affordability report found that the United States had five impossibly unaffordable markets, four of which are located in California – San Jose, Los Angeles, San Francisco and San Diego.

The annual report assesses housing affordability in 94 major markets across eight nations – Australia, Canada, China, Ireland, New Zealand, Singapore, United Kingdom and the United States.

Riverside-San Bernardino and Sacramento were listed as severely unaffordable US markets.

Photo credit: Demographia International Housing Affordability

Middle-class is under siege due to land costs

The report found that the middle-class is under siege principally due to the escalation of land costs.

Researcher Wendell Cox says over the last half-century, urban planners have successfully shaped policies that seek to stop the expansion of urban areas (sprawl) and increase urban population densities.

“This international planning orthodoxy relies on urban containment, with its strategies of greenbelts, urban growth boundaries, rural zoning (large lot zoning) on urban peripheries and compact city policies (densification),” said Cox.

Cox says each of these strategies reduces the land available for development of middle-income housing. As land has been rationed in an effort to curb urban sprawl, the excess of demand over supply has driven prices up.

“All of the Impossibly Unaffordable Markets in Demographia International Housing Affordability follow the “international planning orthodoxy” as do nearly all of the severely unaffordable markets,” said Cox.

What is good for people

Cox says restrictive housing policies may be packaged as progressive, but in social terms their impact could better be characterized as regressive.

“High housing prices, relative to incomes, are having a distinctly feudalizing impact on our home state of California, where the primary victims are young people, minorities and immigrants,” said Chapman University Center for Demographics and Policy director Joel Kotkin.

Cox concludes that the intensity of the housing affordability crisis suggests that we must reorient current policies on land use and focus on the most fundamental objective: what is good for people.

To read the full Demographia International Housing Affordability report visit http://www.demographia.com/dhi.pdf