We hear it from our local, regional and state leaders all of the time. California has a housing crisis.
But when you crunch the numbers they seem to tell a different story.
California’s population has declined for the first time in recorded history, and large cities are shouldering the brunt of the impact. At the same time, new housing is being built at a rate not seen in decades.
According to the Public Policy Institute of California — a non-profit, non-partisan think tank — the state lost roughly 800,000 residents between 2020 and 2023. But there are now almost 800,000 more housing units.
So why do we still have a housing crisis?
“By some estimates, California was 3.5-million housing units short of what we needed to accommodate a population of our size,” said Hans Johnson, a Senior Fellow at PPIC. “So even though we are building more housing now, and losing population, we still have a lot of indications that we do have a housing crisis and we do have a housing shortage. ”
Johnson, an expert in domestic migration, housing in California, and population projections, joined CapRadio Insight to explain the state’s population shift and how that’s impacted the housing market and availability of new homes.
This interview has been edited for clarity and length.
Interview highlights
Why California is in the midst of an unprecedented demographic period
For the first time ever, the state is losing population. And it's kind of a perfect storm of demographic events that have led to that. We have the lowest birth rates ever recorded in our state. Birth rates are going down nationwide as well. The pandemic led to a dramatic increase in deaths. But in general, deaths have been going up because the population is aging, and so that's occurring apart from the pandemic.
And then finally, and most importantly, California had a large outflow of migrants to other states. At the same time, international migration slowed down dramatically during the pandemic. So it's that interstate outmigration that was the primary reason California lost over 500,000 people in the last few years.
What about in-state migration?
There are more moves within the state than there are out of the state. As everyone in Sacramento is probably aware, a large flow of people have moved from the Bay Area to the Sacramento region. And I would also now include the Stockton area and Lodi area, who actually are still commuting back to jobs in the Bay Area. Again, remote work allows some of that to happen. But in the Sacramento case, we also see a large flow of people who are moving to Sacramento and finding a job up there. In Southern California, the flow from Los Angeles to especially the Inland Empire is the longstanding trend as well.
How have households changed?
One of the conundrums of what's happened in California with this population loss is that at the same time that we've lost over 500,000 people, we added several hundred thousand new housing units over the last few years.
And those housing units aren't going vacant. It's not that no one's living in them. Instead, what's happening is that Californians are spreading out. We have fewer people living in more housing units. And there are lots of reasons for that. People are having fewer children, so of course that leads to a decline in the number of people in a household. The population is aging. And older people, especially seniors, are more likely to live alone or with just one other person. But we see that roommates, who prior to the pandemic might have had two or three roommates, are now having fewer roommates and spreading out that way.
And I should note that the nature of the new housing that we're building also has led to a decline in the number of people for housing units. Specifically, we're building a lot of multi-unit housing– large buildings with five or more units per building. And the number of single-family detached homes that we're building in California is actually declining.
Are we still in a housing crisis?
Certainly, we are. And the reason I say that is we still have low vacancy rates, lower than in the rest of the nation, in terms of places that are for rent or places that are for sale. That's a sign of very strong and continued housing demand. And for several decades, we had actually added more people than we had added housing units on a percentage basis. So we have a deficit of housing in California — an undersupply if you will.
By some estimates, California was 3.5 million housing units short of what we needed to accommodate a population of our size. So even though we are building more housing now, and losing population, we still have a lot of indications that we do have a housing crisis and we do have a housing shortage.
Having said that, it is the case that especially if these trends continue, we will start to cut into some of that housing supply deficit.
What about affordable housing?
The housing crisis is especially acute for people from low and middle-income families. We see it in all kinds of ways. For example, the share of income that Californians spend on housing is substantially higher than in the rest of the country and much higher for low-income and middle-income households.
We know from a PPIC statewide survey that a large share of Californians want to own a home. And many prefer a single-family home. So at the same time that we are building, and rightly so, a lot of multi-unit buildings in dense cities, you can accommodate more people in a taller structure with more units than a single-family house. But many people want to own a single-family home, and we're not building those to the same extent.
You do see these very expensive, new housing developments. Roseville is kind of an interesting example. So unlike most larger cities in California, Roseville gained population since the last census. And the vast majority of homes that were built in Roseville, and it had fairly robust housing construction, were single-family units.
So that was kind of the old pattern of California population growth — suburban sprawl, single-family units, families moving in, lots of people per household. Whereas in most large cities in California, including Sacramento, housing growth was fairly robust. But the vast majority of that housing growth was in multi-unit buildings that don't accommodate as many people per unit.
What happened to the “starter home”?
It is possible in some places. But what people are looking for is a combination of housing affordability and amenities. Certainly, a job, although with remote work, the job equation isn't quite as set to geography as it was in the past. But there are places that are less expensive. They tend to be rural, they tend to be more isolated– places like Redding or Eureka. But what many people end up doing is leaving the state to places like Phoenix, Seattle or Portland. And those flows have actually increased during the pandemic and over the last few years.
What do California’s population and housing projections look like?
We've never been in a situation like we are right now, where we've been losing population. So it's really hard to forecast. The Department of Finance, who I have a tremendous amount of respect for, just produced a new series of projections that suggest California is going to essentially have no population growth over the next several decades. I think that is a plausible scenario.
If that turns out to be the case, and at the same time we are able to continue to build new housing, eventually we should make a sizable dent in our housing crisis. I don't think any of us hoped that would be the way we would get out of our housing crisis, by not being able to accommodate population growth. But it's a possibility.
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