Since about 1970, California has been experiencing an extended and increasing housing shortage, such that by 2018, California ranked 49th among the states of the U.S. in terms of housing units per resident. This shortage has been estimated to be 3-4 million housing units (20-30% of California's housing stock, 14 million) .See the section on Estimated_under-supply_of_housing_units for additional sources. In 2018, experts said that California needs to double its current rate of housing production (85,000 units per year) to keep up with expected population growth and prevent prices from further increasing, and needs to quadruple the current rate of housing production over the next seven years in order for prices and rents to decline.See the section on Increase in housing production needed for sources. In 2025 the shortage was still estimated at 3 million housing units.
The imbalance between supply and demandSee the section on Causes for the references supporting that "supply and demand" is the fundamental cause of this shortage. resulted from strong economic growth creating hundreds of thousands of new jobs (which increases demand for housing) and insufficient construction of new housing to meet demand. From 2012 to 2017 statewide, for every five new residents, one new housing unit was constructed. In California's coastal urban areas, (where the majority of job growth has occurred since the Great Recession), the disparity is greater: in the Bay Area, seven times as many jobs were created as housing units. By 2017, this resulted in the median price of a California home being over 2.5 times the median U.S. price. As a result, less than a third of Californians can afford a median priced home (nationally, slightly more than half can), 6 percentage points more residents are in poverty than would be with average housing costs (20% vs. 14%), homelessness per capita is the third highest in the nation, the state's economy is suppressed by $150–400 billion annually (5-14%), and many Californians have long commutes.See the section on Effects for a more thorough explanation of these issues with all sources cited.
Several factors have together caused constraints on the construction of new housing (see 'California studies' under Growth management): density restrictions (e.g. single-family zoning) and high land cost conspire to keep land and housing prices high; community involvement in the permitting process allows current residents who oppose new construction (often referred to as NIMBYs) to lobby their city council to deny new development; environmental laws are often abused by local residents and others to block or gain concessions from new development (making it more costly or too expensive to be profitable); and construction costs are greater because of high impact fees and required use of union labor in some projects.See the section on Causes for a more thorough explanation of these issues with all sources cited. The discretionary and burdensome regulatory framework for housing construction in California has created a fertile environment for political corruption, as local politicians take bribes and favors to help actors navigate the regulations.
In recent years, the California legislature has passed several bills: some reduced the fees and bureaucracy involved in creating ADUs, while others have added fees to real-estate document recording to finance low-income housing; others required localities to allow higher density development close to public transit.See the section on State Responses for more detail about the above-mentioned legislation, with all sources cited.
Background Issi Romem, an economist at the Terner Center for Housing Innovation at the University of California, Berkeley said: "...as long as abundant new housing was built to accommodate those drawn to California, housing price growth was limited and the state's allure was channeled into population growth: From 1940 to 1970 California's population grew 242 percent faster than the national pace, while the growth of its median home value was only 16 percent faster than the nation's."
Starting in 1970, three major forces caused housing prices to increase dramatically: land use restrictions limiting housing density (zoning many areas to single-family homes, or to at most two stories), increased concern for the environment (which led to environmental laws and designating land for preservation and not development), and community involvement in the development process (which allows current—but not future—residents a say in land use decisions.)
The result of these policies was that from 1970 to 2016, California's population growth (relative to the US average) slowed to a third of what it was during the previous three decades (70 percent faster than the national pace by 2016), while appreciation of median home prices (relative to the US average) more than quadrupled to 80 percent greater than the national rate.
By 2016, the median price of a home in California, at $409,300, was more than twice the median price of a home in the U.S. as a whole, more expensive than any state other than Hawaii. The shortage is statewide; from 2010 to 2017, the state added one new housing unit for every five new residents, and is pronounced in employment centers such as the Bay Area and Los Angeles. In 2023, housing affordability in California reached a 16-year low, with only about 16% of homebuyers able to purchase a median-priced single-family home, as per data from the California Association of Realtors. In San Mateo and Santa Clara counties, buyers would require a minimum income of $504,400 and $451,200, respectively, to purchase median-priced homes of $2.01 million and $1.8 million.
The housing situation affects individuals differently, depending upon their circumstances. A person who has long since paid off a home mortgage has much lower costs than a renter or someone buying a first home. , about 20 percent of California homeowners owned their homes free and clear, and 80 percent were still paying a mortgage. As is typical, homeowners without a mortgage tend to have lower incomes (e.g., due to retirement) than homeowners with a mortgage. California homeowners without a mortgage tend to spend almost 9% of their income on housing costs, including property taxes, which is slightly lower than the national average for homeowners without a mortgage. The Covid-19 pandemic led to people demanding more square footage, helping to keep rents and home prices high even as the state lost population and more apartments came online.
Causes
The imbalance between supply and demand resulted from strong economic growth creating hundreds of thousands of new jobs (which increases demand for housing) and the insufficient construction of new housing units to provide enough supply to meet the demand. Fewer housing units built in the urban and coastal areas relative to the demand created by economic growth in those areas resulted in higher prices for housing and spillover to the inland areas. For example, from 2012 to 2017, San Francisco Bay area cities added 400,000 new jobs, but only issued 60,000 permits for new housing units. (For California as a whole, from 2011 to 2016, the state added only one new housing unit for every five new residents.) This has driven home prices and rents to high levels, such that by 2017, the median price of a home across California was more than 2.5 times the median in the U.S. as a whole, and in California's coastal urban areas, (where the majority of job growth has occurred since the Great Recession), the shortages are greater.
In 2016, the California Legislative Analyst's Office published a report that showed an inverse correlation between new housing construction and displacement in low income neighborhoods in the Bay Area. The Washington Post wrote of this, "Particularly in the Bay Area since 2000, the researchers found, low-income neighborhoods with a lot of new construction have witnessed about half the displacement of similar neighborhoods that haven't added much new housing." The same Washington Post article also stated, "Importantly, the benefits of all this building aren't about inclusionary policies, which require developers to set aside some affordable units in market-rate buildings. There's less displacement in high-construction neighborhoods whether they have inclusionary policies or not."The poor are better off when we build more housing for the rich, Washington Post, February 12, 2016,
In February 2025, Bloomberg contrasted the situation in San Francisco with that in Austin. Bloomberg reported that rents in Austin had fallen by 22% since August 2023, after the city allowed increased density and taller buildings, made it easier to get building permits, and eliminated parking requirements. Bloomberg wrote of this, "... the Texas capital has become the poster child for advocates who say the only way out is by building more homes. And while other cities run by progressives including San Francisco and Chicago face criticism for onerous permitting processes, Austin has cut regulations to speed up development. It appears to have worked."Austin Rents Tumble 22% From Peak on Massive Home Building Spree, Bloomberg, February 27, 2025,
Several factors have together caused constraints on the construction of new housing.
Zoning laws With origins in late nineteenth century Germany and England, modern day zoning (laws) and land use place limitations on what can be built and where, whether for the better or worse in intention, such as to keep toxic chemicals from residential areas or out of racism to promote segregation. In its relation to single family homes, zoning laws are seen to often discriminate against the concept of affordable housing in that by constructing residential housing more sparsely and less compact, the costs of living are driven up, compared to if a multi family home was built, which is often seen in cities where there is limited space, and often needed and desired by minority groups who fall to poverty.
A study by Othering and Belonging Institute at University of California, Berkeley in 2024 found that 95.80 percent of total residential land area in California and 30 percent of all land (which includes commercial and park space) area is zoned single-family-only, severely constraining the spatial possibilities for denser and more affordable housing. When unincorporated regions (which include vast swathes of sparsely populated land) are removed from the calculation, the study finds that 82 percent of total residential land area in the state is reserved for single-family housing.
Community resistance (NIMBYism) NIMBY ("Not In My Back Yard") resistance by existing residents to new development is a major contributor to the difficulty of developing new housing in the state. People who already live in an area often perceive any new development or change as driving increased negative traffic and population impacts. Using various means (political pressure, protests, and voting power), NIMBYs try to keep newcomers out by defeating development projects in the local government permitting process, or slowing them down to the point that they become uneconomical for the builders.