WHAT ARE THE CAUSES AND CONSEQUENCES OF HOUSING AFFORDABILITY?
While housing prices keep many optimistic about California’s real estate market, the effects of the affordability crisis continue to mount and seem to be rather widespread.
The first, most obvious consequence is reduced homeownership; affordability is bad enough that a massive number of people are simply priced out. Beyond that, a decrease in housing options is forcing middle-class California’s to cross state lines in search of more affordable living. With blue-collar workers taking their trade skills elsewhere, it’s likely the economy will take a hit.
Unfortunately, the pricing problem has no clear or easy fix. California has yet to find a way to produce modest housing at a rate that can compete with the state’s constant population growth. While the economy has been growing concurrently, the distribution of wealth has done nothing to curtail affordability issues.
Meanwhile, the national economy is still being largely driven by the housing market. When compared to the California, most other states have nowhere near the same problems with affordability. Bad policies and faulty incentives have existed in the Californian housing system for too long, and now those issues are finally coming to a head.
While there are no simple solutions, there are actions that can help mitigate the crisis and hopefully reverse the affordability trend. Steps can be taken in both the public and private sector to potentially alleviate the situation.
One of the primary steps would be to ease up the roadblocks that often stall development. At the state level, the California Environmental Quality Act (CEQA) could be comprehensively reformed to curb overreach without leading to lax environmental regulations. This could open the door for increased permitting and project approval.
Another significant issue that could be rectified has to do with public opinion. The widespread attitude of “not in my backyard” is responsible for much of the opposition to any type of local building. Addressing this issue is much easier said than done, as residents are never quick to endorse change within their own neighborhoods.
In order to affect public opinion and lessen this resistance, California residents must be made to understand that an economic downturn is all but inevitable if the issues of affordability and inventory aren’t rectified. Even if measures to fix these issues are pushed by state officials, little can be done without the support of the consuming class.
A third, equally important step is to improve how people are educated about the housing market. While price tags are scaring middle-class families away, there are plenty of programs available to help first-time homebuyers. Surveys show that of the nearly 70 percent of millennials claiming they would buy houses with a low down payment, only 19 percent were aware of the Federal Housing Administration and other programs specifically meant to assist with financing.
If more Californians knew how mortgages and financing worked, the market would greatly benefit. If more people knew it was possible to buy a house in the state, they wouldn’t be relocating and taking jobs and revenue with them.
In addition to educating about finance, there are also banking solutions that could help prospective homebuyers. One change would be to find safe ways to extend funding to those who have weak credit or limited banking history. Steps could also be taken to make purchasing a home easier for independent contractors and people without traditional employment records.
It should be considered entirely possible for California, a state full of financial innovations, to implement these changes. Some strategic, outside-the-box thinking could allow for thousands of people with atypical careers to find affordable housing.
More people must recognize the affordability problem as an actual crisis. If that happens soon enough, Californians may be able to find solutions and avoid real economic issues. If solutions continue to be delayed by harmful policies and inaction, the state could see the problem get much worse.
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