Beginning in about 1970, however, the gap between California’s home prices and those in the rest country started to widen. While California's coastal counties do not have the vast stretches of flat, appropriately developable land that existed 50 years ago, building is increasingly prohibited on that which remains (for example, Ventura County, northern Los Angeles county and the southern San Jose metropolitan area).
Between 19, California home prices went from 30 percent above U. Demonstrating an understanding of economic basics not generally shared by California policymakers or the urban planning community, LAO squarely places the blame on the public policy limits to new housing construction: In other words, where the supply of a demanded good is limited, prices can be expected to rise, other things being equal.
Because new housing further from coast is also limited, options for a middle income living standard are also diminished. Notable and widespread trade-offs include (1) spending a greater share of their income on housing, (2) postponing or foregoing homeownership, (3) living in more crowded housing, (4) commuting further to work each day, and (5) in some cases, choosing to work and live elsewhere Each of these consequences is described below.
LAO Consequence #1: Spending a Greater Share of Income on Housing LAO models the market situation from 1980 to 2010 to estimate the prices that would have prevailed if the regulatory environment had permitted building sufficient to satisfy customer demand at previous lower price levels.
The median income Asian household would do almost as well, with about $50,000 left over.
The median income Hispanic household would have less than ,000 left, which is considerably less than is likely to be needed for other essentials.
Using the LAO estimates the median multiple (median house price divided by median household income) in 2014 would have been at least 40% lower than the actual level in each of the metropolitan areas (Figure 1).
Many California households already have been priced out of the market.
LAO indicates that California's overcrowding rate is well above that of the rest of the nation’s rate.
Among Hispanics, which were expected to exceed the White-Non-Hispanic population in 2014, to become the state’s largest ethnic group, California overcrowding is more than 2.5 times the Hispanic rate elsewhere.