State's 'Progressive' Policies Blamed for Housing Market Crisis: Report

A 'for sale' sign is displayed outside a townhouse on September 22, 2022 in Los Angeles, California. Home prices in the state have soared since the pandemic.

Housing policies in California have contributed to making homes unaffordable in the state, stifling the ability of young people in the state, minorities and immigrants from moving up the income ladder, a report claims.

The Golden State has seen some of the highest home prices since the pandemic jolted the housing market as low rates sparked demand for homes which in turn escalated competition for homes and led to a rise in the cost of properties. In February 2020, the median listing price in California stood at $575,000. As of May 2024, that has soared by more than two hundred thousand dollars. Homes in the state now go for an average of $787,000, according to Federal Reserve Economic Data.

The Demographia International Housing Affordability report, which examines the cost of housing around the world, found that some of the least affordable areas were in California. Of the five expensive areas that the report looked into when it came to housing, four were from California—San Jose, Los Angeles, San Francisco and San Diego.

"The study also has grave implications on the prospects for upward mobility. High housing prices, relative to incomes, are having a distinctly feudalizing impact on our home state of California, where the primary victims are young people, minorities and immigrants," Joel Kotkin, director of the Center for Demographics and Policy at Chapman University, wrote in the report. "Restrictive housing policies may be packaged as progressive, but in social terms their impact could better be characterized as regressive."

Newsweek contacted Kotkin via his website for comment on Monday on what specific policies have struggled to help with affordability in California.

Kotkin wrote in the past that the state's focus on what he describes as "densification" has struggled to improve the supply of homes, which would be key to helping with affordability.

"The state's supposedly pro-development new housing laws have yet to produce more homes at a scale sufficient to address the affordability crisis, and recent data suggest an accelerating decline in housing production," he pointed out last year in a Los Angeles Times colunm co-authored with Wendell Cox, the principal of Demographia, a public policy consulting firm.

Overall, the report, which was prepared by Chapman and Canada's Frontier Centre for Public Policy, said the migration during COVID where people moved away from urban areas to suburbs or places outside the metro areas of the U.S. was a key driver of home prices.

"The result was a demand shock that drove house prices up substantially, as households moved to obtain more space, within houses and in yards or gardens," the report noted.

Remote work, which grew substantially at the height of the pandemic as strict stay-at-home rules forced employees to perform their jobs at home, also contributed to rising home prices.

"In the United States, the hours of work performed at home are now reported to be four times that of pre-pandemic 2019," the report pointed out. "San Diego estimated that nearly two-thirds of the U.S. house price increase in the demand shock could be attributed to the shift to remote work."

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