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BERKELEY, Calif. \u2014 A new white paper released by the Berkeley Economy & Society Initiative argues that California\u2019s affordability crisis is not simply the product of market forces or population growth, but the result of decades of policy decisions that made it increasingly difficult to build housing, transportation systems, energy infrastructure and other essentials needed to support a growing state.<\/p>\n
The report, To Make California More Affordable, Government Must Foster Sustainable Growth<\/a>, contends that the state\u2019s high cost of living is now the central driver of poverty, housing insecurity and out-migration.<\/p>\n \u201cThe primary driver of California\u2019s unaffordability and poverty is our high cost of living,\u201d the report states. \u201cAs we discussed in the series\u2019 first installment, California is the highest-cost state in the country.\u201d<\/p>\n The paper continues, \u201cCalifornia\u2019s metro areas are systematically higher-cost than similarly affluent metro areas in other states. This leads to all sorts of problems, including poverty and out-migration.\u201d<\/p>\n Authored by Samuel Trachtman through UC Berkeley\u2019s Political Economy of California program, the report argues that the \u201cforemost driver\u201d of California\u2019s high costs is a \u201cpolicy regime that makes it difficult to build the physical infrastructure we need to deliver housing, energy, water, and other essentials.\u201d<\/p>\n The report says, \u201cGrowth restrictions drive unaffordability primarily by reducing housing supply and increasing housing costs.\u201d It adds that those restrictions \u201calso contribute to high energy and transportation costs by increasing the price tag on critical public infrastructure \u2014 creating downstream costs for consumers.\u201d<\/p>\n According to the white paper, California\u2019s housing shortage is now the single biggest contributor to the state\u2019s affordability crisis.<\/p>\n \u201cHigh housing costs are the single-biggest driver of unaffordability in California,\u201d the report states. \u201cAnd the biggest driver of high housing costs is an acute shortage of housing.\u201d<\/p>\n The report argues that stabilizing housing prices will require California to dramatically increase home production after decades of underbuilding.<\/p>\n The paper traces the origins of the crisis back to California\u2019s postwar transformation. During much of the 20th century, the state aggressively embraced growth, investing heavily in highways, universities and water systems to accommodate a booming population.<\/p>\n \u201cIn his 1959 inaugural address, Governor Pat Brown characterized California\u2019s explosive growth as \u2018magnificent,\u2019\u201d the report notes.<\/p>\n But the report argues that mounting environmental concerns, congestion and backlash against rapid development in the 1960s and 1970s produced a political shift away from growth-oriented policies.<\/p>\n \u201cIn stark contrast to his father\u2019s pro-growth 1959 inaugural address, in 1975 incoming Governor Jerry Brown claimed that California was entering \u2018an era of limits,\u2019\u201d the report states.<\/p>\n The paper identifies three major policy developments that reshaped California\u2019s housing landscape: restrictive zoning practices, expansion of environmental review under the California Environmental Quality Act and the passage of Proposition 13.<\/p>\n According to the report, zoning policies evolved from simple land-use separation tools into mechanisms that slowed growth and limited housing density.<\/p>\n \u201cCities started using zoning more aggressively to control the pace of growth,\u201d the report states.<\/p>\n The paper notes that many California cities imposed caps on residential construction, reduced allowable densities and established urban growth boundaries designed to preserve open space and limit expansion.<\/p>\n The report also highlights CEQA as a pivotal turning point in California development policy. While the law was originally designed to ensure environmental review, the paper argues it gradually became a mechanism that enabled opponents to delay or block projects through litigation.<\/p>\n \u201cOpponents of growth quickly recognized CEQA\u2019s potential for blocking unwanted development,\u201d the report states. \u201cEven when they were a stretch, CEQA lawsuits were a vehicle for delay.\u201d<\/p>\n The report argues those delays often impose enormous financial burdens on housing developers, making projects unprofitable and reducing overall housing production.<\/p>\n The paper also points to Proposition 13 as a major structural factor contributing to California\u2019s housing shortage. By limiting property tax revenue growth, the report says the measure changed local government incentives and encouraged cities to discourage residential development while favoring commercial projects that generate sales tax revenue.<\/p>\n \u201cRevenue-hungry cities began imposing \u2018impact fees\u2019 on new development,\u201d the report states. \u201cThese fees add to the cost of producing new units, meaning fewer projects are profitable to build.\u201d<\/p>\n The report argues California housing prices sharply diverged from the rest of the country beginning in the 1970s as these restrictions intensified.<\/p>\n \u201cToday, California has the most expensive housing in the nation, and it\u2019s not close,\u201d the paper states.<\/p>\n The report cites federal data showing California housing costs were \u201c58 percent higher than the national average and 18 percent more expensive than the next most expensive state, New Jersey.\u201d<\/p>\n It also notes that many Californians can no longer afford to buy homes in the state.<\/p>\n \u201cAs of 2024, to qualify for a mortgage for a bottom-tier home a household would need an annual income of $136,000, about 33 percent higher than median household income,\u201d the report states.<\/p>\n The white paper argues that restrictive land-use systems and discretionary approval processes have created a culture of delay and uncertainty that discourages development even in high-demand regions.<\/p>\n \u201cDiscretionary review in turn introduces an avenue for public opposition,\u201d the report explains. \u201cIt also triggers CEQA review, which opens up a powerful legal avenue for project opponents to delay.\u201d<\/p>\n According to the paper, labor unions, nonprofit groups and neighborhood opponents frequently use those processes to negotiate concessions or halt projects entirely.<\/p>\n The report further argues that California\u2019s infrastructure challenges extend beyond housing into transportation and energy systems.<\/p>\n \u201cHousing costs represent growth restrictions\u2019 most pronounced contributions to California\u2019s unaffordability problem,\u201d the report states. \u201cYet by increasing the cost of building public infrastructure, growth restrictions also drive up the cost of other essentials like transportation and energy.\u201d<\/p>\n The paper cites rail expansion projects and electricity transmission systems as examples where permitting delays, litigation and fragmented approvals significantly raise costs and extend project timelines.<\/p>\n The report argues California must adopt a \u201csustainable growth\u201d strategy that lowers construction costs while increasing housing production and infrastructure investment.<\/p>\n \u201cIn short, California must foster sustainable growth,\u201d the paper states.<\/p>\n The report calls for reforms that would reduce impact fees, streamline permitting, expand factory-built housing and establish innovative financing systems for affordable housing projects near transit corridors.<\/p>\n \u201cCalifornia should adopt a holistic industrial policy to encourage the growth of factory-built housing in California,\u201d the paper states. \u201cIncorporating more manufacturing processes into homebuilding has great potential to reduce the cost to build.\u201d<\/p>\n The report also advocates for new state financing tools.<\/p>\n \u201cThe California state government could capitalize revolving loan funds that subsidize the cost of capital for developments that address core state needs,\u201d the paper states.<\/p>\n Politically, the paper argues California faces major obstacles because anti-growth coalitions have become deeply entrenched over decades.<\/p>\n \u201cThe legacy of growth restrictions has also empowered a set of organized interests that draw benefits from blocking growth,\u201d the report states.<\/p>\n Still, the paper points to recent legislative reforms as signs of momentum toward pro-housing policy changes, particularly measures enacted in 2025 to reduce CEQA barriers for some infill housing projects.<\/p>\n The report credits Gov. Gavin Newsom with aggressively pushing those reforms through the Legislature.<\/p>\n \u201cThe governor refused to sign the budget unless it included AB 130 and SB 131,\u201d the paper states.<\/p>\n Ultimately, the report concludes that California cannot solve its affordability crisis without substantially increasing growth and housing production while coordinating that growth with environmental planning goals.<\/p>\n \u201cCalifornia can and should decide how to grow,\u201d the paper states, \u201cbut choosing not to grow is a recipe for worsening unaffordability.\u201d<\/p>\n Follow the Vanguard on Social Media \u2013 X<\/a>, Instagram <\/a>and Facebook<\/a>.\u00a0 Subscribe <\/a>the Vanguard News letters.\u00a0 To make a tax-deductible donation, please visit davisvanguard.org\/donate<\/a> or give directly through ActBlue<\/a>.\u00a0 Your support will ensure that the vital work of the Vanguard continues.<\/p>\n Categories: Breaking News<\/a> Housing<\/a> State of California<\/a> Tags: Berkeley Economy and Society Initiative<\/a> California<\/a> California Housing Crisis<\/a> CEQA Reform<\/a> Gov. Jerry Brown<\/a> Governor Gavin Newsom<\/a> Housing Affordability<\/a> land use policy<\/a> Sustainable Growth<\/a>