The high cost of housing is leaving California families locked out of homeownership and contributing to persistent homelessness, says RAND economist Jason Ward.
Yet, local policies and politics keep the Golden State from building enough homes to make housing affordable.
Obstacles range from regulation to resistance among residents who fear added housing will make overcrowding worse.
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“From a policy perspective, we treat housing as a societal bad,” Ward said.
Yet, standing in the way of new housing is not really in California’s best interest, he said.
“What we’ve really done is made it so expensive here that it’s not really a feasible or even desirable place to live for a lot of people. And along with that comes major problems like homelessness,” Ward said.
A better policy would make the state accessible to a diverse range of people.
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“You know,” said Ward, “everyone moved here at some point.”
We recently discussed the housing crisis with Ward, who joined the Santa Monica-based think tank in 2019. His comments have been edited for space.
Q: What’s the most pressing housing issue in California today?
A: Lack of affordability is, to me, the issue that links everything.
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Both theory and evidence point to high housing costs being the result of a lack of supply. Housing underproduction relative to demand leads to higher rents and higher home prices. … (And) the high cost of producing housing has rendered the production of middle-income housing mostly infeasible without substantial public subsidies.
Rapidly escalating home prices now exclude most Californians from having any realistic path to homeownership. It has also raised the stakes for existing homeowners to oppose anything that threatens the huge valuation of their homes, be it a new multifamily building next door or anything that might, say, increase traffic or change a view or potentially affect anyone’s perception of the value.
In the rental market, underproduction has led to millions of households doubling and tripling up in units too small for them and to ballooning eviction rates as COVID-era protections are expiring. As housing eats up a larger share of household budgets, any financial shock can be a fatal blow to remaining housed and this, ultimately drives people into homelessness.
Q: Has any progress been made in addressing the state’s homelessness issues?
A: If progress means reducing the number of people experiencing homelessness in any meaningful, measurable way, then no.
RAND’s ongoing survey of unsheltered Angelenos shows that nearly three-quarters of people on the streets have been there continuously for more than a year and around half have been on the streets continuously for three years or more.
So we aren’t even making meaningful progress in housing people who have spent literally years on the streets.
And we haven’t done anything to address the flow of people into homelessness due to very high housing costs. We will never solve homelessness in a setting where it costs $2,000 to $3,000 per month to rent a basic one- or two-bedroom apartment and you need a $4,000 to $6,000 security deposit to even have the opportunity to try to pay those rents.
Q: Many residents say they want their communities to remain as they are. Is the push to build more housing a threat to the quality of life?
A: You know, we spent decades building millions and millions of homes, and people moved into those homes. And then it’s like, now I live here, so now nothing else should change.
The only thing you can really do to make people stop coming here is make it a really undesirable place to live. But that’s not really a great policy.
I think in some sense, we’ve kind of done that in California already. We’ve made this a much less desirable place to live. Even college-educated people are now beginning to migrate out of California.
So, the question is, (wouldn’t it be better) to simply accommodate the demand for housing and try to make this a place that is accessible to a wide range of people in the future? … You know, everyone moved here at some point.
Q: What programs have been the most effective so far?
A: LA’s Transit Oriented Communities (TOC) program — a voluntary, incentive-based program that includes large increases in density, exemption from parking minimums and other regulatory forbearance — has been a remarkable success story and is the kind of thing that should just be extended.
… You should not worry about whether (housing is) near transit and just let people build housing with less parking and more units anywhere that they would like.
Q: Under Senate Bill 9, California property owners can subdivide lots in single-family neighborhoods and build up to four units on those parcels. Is that having an impact on the housing shortage?
A: It has yet to have any meaningful impact, and I do not believe it will until we remove exclusions that prevent professional builders from using this pathway.
Developers are the people who build housing. Saddling a property owner with living on their property or paying to move away for the years it can take to do even a duplex, let alone and lot split and two duplexes, automatically eliminates probably 95% or more of California households from possibly using this bill.
This restriction… (prevents) this bill from really having any meaningful effect on housing production.
Q: Californians voted down two ballot propositions loosening state restrictions on rent control. Will the third time be the charm when rent control is back on the ballot in 2024?
A: Time will tell. I believe most Californians realize that rent control without a substantial increase in housing production is not going to solve many problems.
Q: Do you think expanded rent control is a viable solution to the state’s soaring rent?
A: With sufficient housing production, rent control can do what it is intended to do, which is to prevent the worst excesses of some landlords.
But in an environment of unaddressed housing scarcity, rent control places the onus of the housing crisis completely on landlords, and most landlords are not large, corporate landlords. Inflation is real and many owners are struggling to make ends meet as operating costs outpace rental revenue. This can and does lead to some very perverse outcomes for housing affordability.
JASON WARD AT A GLANCE
Title: Economist, professor
Organization: RAND Corp. and Pardee RAND Graduate School
Residence: Los Angeles
Education: Bachelors, masters and doctorate in economics, University of Illinois, Chicago
Previous jobs: Recording industry audio engineer for nearly 20 years; teaching and research assistant through the National Bureau of Economic Research
