According to a recent housing study released by Harvard University, purchasing a home in California in 2023 has become increasingly unattainable for many residents, especially in urban areas where housing prices are ten times the annual income.
The report titled “The State of American Housing in 2024” highlighted that the areas with the largest income-to-housing price disparity are in Northern California’s Silicon Valley, including cities like San Jose, Sunnyvale, and Santa Clara. In 2023, the median home sales prices in these three cities were 11 times the average local annual income, which is close to $113,000.
In Southern California, in cities like Anaheim in Los Angeles County and Orange County, where the average annual income is around $98,200, the median home prices are approximately 10 times the annual income.
Moving further south to cities like San Diego and Carlsbad, where the average annual income is $76,000, the median home prices are 9 times the annual income.
The authors of the report stated in the summary, “Rising housing costs are a struggle for both homeowners and renters.”
The report also mentioned that millions of potential homebuyers in the US are being squeezed out of the market due to increasing house prices and interest rates, along with rising costs of home insurance and property taxes. Housing insurance costs have risen by about 35%, disproportionately affecting low-income homeowners.
In recent years, California has implemented several measures to make homeownership more accessible. The state government has relaxed permit and environmental review requirements to streamline and reduce the cost of construction projects.
Additionally, in 2023, California rezoned land owned by religious institutions and universities to facilitate the development of affordable housing, resulting in an additional 171,000 acres of developable land. California also introduced a new assistance program providing up to $40,000 in construction grants for low-income individuals and up to $150,000 in down payment assistance for first-time homebuyers.
However, the US, including California, continues to face challenges of sharply rising rents and housing prices since the COVID-19 pandemic. One of the lead authors of the report, Dan McCue, stated during a press conference on June 20th, “Not only are prices rising, but they are rising again… it’s really adding insult to injury.”
He highlighted that the combination of high housing prices and interest rates has led to housing inventory plummeting to its lowest point in 20 years.
“We are concerned that more and more families, except the highest-income ones, are unable to own homes,” McCue said. “In over half of the cities, the opportunity for homeownership has truly been severed.”
McCue estimated that the Generation Z, aged between 12 and 27, added 8 million households in the past four years. Additionally, the influx of immigrants has also added pressure to the existing housing market. “This is a significant increase, and it has significantly increased the demand for housing,” McCue noted. #