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Housing Affordability in a Post-Brown California:
Policy Solutions for the Next Administration
By Jeanette Brown


The Economics of Housing Affordability
By Jordan Levine


Residential Real Estate Development and Affordability:
Supply, Zoning, and Land Use in California
By Roger Cruzen


California’s Housing Challenges: A Moment to Think Boldly
By Roger Cruzen


The Center for California Real Estate (CCRE) is an institute founded by the CALIFORNIA ASSOCIATION OF
REALTORS® (C.A.R.) dedicated to intellectual engagement in the field of real estate. Its mission is to
advance industry knowledge and innovation with an emphasis on convening key experts and influence-makers. CCRE reflects C.A.R.’s increasing role in shaping the future of the industry by advancing
innovative policy solutions and active dialogue with experts and industry stakeholders. The Association
works in conjunction with 102 local associations of REALTORS® throughout the state, as well as with the
National Association of REALTORS®. Serving nearly 185,000 members statewide, C.A.R. provides a wide
array of products and services to meet its diverse member needs. Additional background on CCRE and
C.A.R. can be found at centerforcaliforniarealestate.org.

Published By
Anne Framroze, CCRE Director, and Senior Vice President, CALIFORNIA ASSOCIATION OF REALTORS®
Erica Berardi, Communications Specialist, CALIFORNIA ASSOCIATION OF REALTORS®
Photographer: Dustin Snipes
All rights reserved. This whitepaper, or parts thereof, may not be reproduced in any form or by any means
without the permission from the CALIFORNIA ASSOCIATION OF REALTORS®.



ousing affordability continues to
be one of California’s most urgent
issues. Discussing the issue in depth
in terms of what might be done to
address it was the focus of The Real
Estate Summit: Housing Affordability
and California’s Future, a one-day gathering of
leaders representing government housing agencies,
academia, housing developers, homebuilders, and
housing advocates. Sponsored by the Center for
California Real Estate, an institute founded by the
serve as a nexus for diverse intellectual engagement about issues related to real estate, the

Summit featured panels on “Housing Affordability in
a Post-Brown California: Policy Solutions for the
Next Administration,” “The Economics of Housing
Affordability,” and “Residential Real Estate Development and Affordability: Supply, Zoning, and Land
Use in California.”
Calling housing affordability “one of the most
critical issues facing our industry and, indeed, the
state of California,” C.A.R. President Geoff McIntosh
articulated the goal for the day – engendering
substantive dialogue via convening diverse perspectives in order to advance solutions-oriented
strategies. McIntosh introduced California Bureau of
Real Estate Commissioner Wayne Bell, C.A.R. Chief
Executive Officer Joel Singer, and C.A.R. Chief
Economist Leslie Appleton-Young, all of whom
offered introductory remarks.
Currently, California ranks as the nation’s least
affordable state, where only 54 percent of Californians are homeowners, sharply lower than the
national homeownership rate of 64 percent. The
statewide median price of an existing, single-family detached home peaked at $594,530 in May 2007
and is poised to exceed that milestone in 2017. But
fewer homebuyers and working families will be
able to afford homes at that cost, especially if
mortgage interest rates climb as expected and
incomes fail to keep pace equal to the rate of
home price increases.
Fewer homeowners and homebuyers results in
more renters and higher rents. As an example,
Singer pointed to Oakland, where monthly rent is
$3,000, far above the $1,175 considered affordable

Geoff McIntosh, President,

CENTER FOR CALIFORNIA REAL ESTATE | Housing Affordability and California’s Future

to residents earning the city’s annual median
income of $47,000. For low-income families, and
middle-income teachers, nurses, first-responders,
and other needed community workers, there is a
chronic shortage of affordable existing and new
homes available near the communities where they
work. That means long commutes and less time
with families.
Singer added that housing affordability hasn’t
always been a significant problem: In 1976, California median prices hovered at four percent above
the national average. At the same time, the average
California household income was 7 percent above
the national average. “That was the last time we
were more affordable than the nation as a whole,”
Singer said.
Prior to the Great Recession, a surplus of existing
and new-home foreclosures caused homebuilders
to halt construction. As the economy recovered,
developers focused on building luxury homes
(rather than affordable ones) in California’s
coastal population center, where the state’s
jobs are concentrated.
Meanwhile, Californians who fared better than
their peers who foreclosed began to hang on to
their homes. Rather than move every seven years
as they had historically, Baby Boomers began to
“age in place” in order to maintain low property
taxes and mortgage interest rates and avoid
capital gains. As home prices recovered, selling
existing homes to trade down to less expensive
homes became less feasible.

“Up until about five years ago, when you looked at
the 25-year trend on our unsold inventory index, I
would have told you that an average inventory in
California was about 6.5 months’ supply on the
market,” Appleton-Young explained. “But if you look
at the last four or five years, it’s closer to a three- or
four-month supply on the market.
“For now, I think it reflects the structural reality of a
state where boomers aren’t moving, and we’re not
getting enough new construction,” AppletonYoung said.
Housing affordability was identified as the No. 1
problem by REALTORS® surveyed in C.A.R.’s annual
survey. Increasingly, clients tell agents they plan to
move to more affordable locations. “One of the most
interesting findings that we had in 2016 was that 25
percent of them [REALTORS®] reported their seller
was moving out of state,” said Appleton-Young. “We
haven’t seen numbers like that in about 10 years.”
C.A.R.’s survey also found that 23 percent of clients
said they moved from a different county because of
affordability – a significant jump from 18 percent in
the year-earlier period, said Appleton-Young, who
noted that 25,000 people exited Los Angeles County
in 2014 for that reason.
The rental market, formerly a brief stop on the road
to homeownership, is also in crisis, said Singer. “If
you probe the reasons, it’s affordability; if you look
at it, lack of down payment, in particular, has
become much, much more of a problem,” added
Singer, who said debt is an additional and substantial obstacle for renters.


Moderated by Pete Peterson, panelists and discussants examine
practicable policy solutions.
Two-thirds of renters have student debt, but the
real problem is credit card debt, “which also
restricts the ability of people to transition from
rental to homeownership,” Singer explained. “It also
restricts the ability of people to get into rental
environments, because even the deposits and
initial payments to get into a rental are becoming
prohibitive in parts of urban California.”

enced just a few weeks ago, you’re going to have
pushed mortgage rates up more than $350 per
month, just for the median-priced home,” Singer
said. “We’re talking about a [qualifying] household
income of nearly $100,000 at 3.5 percent. But if you
get up to 6 percent, which, all in all, is a fairly
average interest rate in the long run, you’re talking
about an income requirement of $123,000.”

Meanwhile, interest rates, which Singer said have
preserved mortgage affordability, are expected to
rise near-term.

At that rate, home affordability becomes out-ofreach for average-earning Californians. And with a
vulnerable economy, Singer expects housing,
especially rentals, to become even less affordable.
Demand for affordable rentals will spike as homeownership becomes less attainable – exacerbating
the existing crisis.

“As you move up, you’re starting to have a major
impact in terms of monthly costs. If we get back to a
5 percent range from the 3.5 percent we experi-

CENTER FOR CALIFORNIA REAL ESTATE | Housing Affordability and California’s Future

Panelists and discussants converse during
“The Economics of Housing Affordability” session.
“The fact of the matter is California has an affordability issue,” Singer commented. “But we really
have a housing supply issue. Until we can get more
housing, none of this should surprise us.”

commutes and congestion, and the related
infrastructure problems with transportation; it’s
related to family stability and the broader wellbeing of families and communities.

Bell echoed Singer’s assessment and added that all
levels of government must work together to share
information and ideas on how to foster sustainable
growth of affordable housing.

“This issue requires all of us and others throughout the state to look at this issue, because it is so
important to the economic well-being, to financial stability, to families in the state of California,”
Bell summarized.

“Some people think of housing as an issue that is
separate from other economic issues,” said Bell.
“But housing is not a stand-alone issue. It’s
wedded to and interrelated to educational and
employment opportunities, physical and emotional health, economic development, traffic,



Policy Solutions for the Next Administration
By Jeannette Brown
he implications of the 2016 election and specific ballot outcomes
were a fitting backdrop to the
Center for California Real Estate
(CCRE) panel discussion “Housing
Affordability in a Post-Brown
California: Policy Solutions for the Next Administration,” which focused on policy solutions for
housing affordability. As uncertainty regarding
various financial and housing-related issues
lingers, there is little doubt that housing affordability will occupy a central position in terms of
challenges facing the state in 2017.

The panel noted that piecemeal approaches
advanced in local voting booths belie the urgency
of a state-level crisis that will require regional and
state-level solutions to solve chronic undersupply
and rampant unaffordability. Nonetheless, the
widely shared consensus on the need for more
supply and comprehensive solutions has been
stymied by competing interests from vested
stakeholders tied to housing – and the ties are
numerous in such a politically dynamic state as
California. “This issue is about a 48-sided Rubik’s
Cube, and every time you turn one piece, it pulls
on another side of the issue,” remarked Pete
Peterson, dean of public policy at Pepperdine
University and the moderator of this panel
discussion. Peterson led commentary on the
tough political realities symptomatic of an issue
fundamental to all Californians, whether in
relation to education, economic mobility, environmental health, or recreation—all roads, in a sense,
lead to housing.
Panelists challenged policymakers to reframe the
parameters of “housing” beyond a local municipality problem and, instead, examine it as a regional
and statewide issue that requires collaboration
between agencies and government at every level.

Pete Peterson, Dean, School of Public Policy,
Senior Fellow, Pepperdine University

The extent of the state’s housing problem is
evident in figures frequently referenced from the
McKinsey Global Institute’s recent report, “A Tool
Kit to Close California’s Housing Gap: 3.5 Million
Homes by 2025.” The report notes, “Access to
decent, affordable housing is so fundamental to
the health and well-being of people and the
smooth functioning of economies that it is
embedded in the United Nations Universal
Declaration of Human Rights.” Its research finds
that California’s high cost of housing results in
more than $140 billion per year in lost economic
output due to lost construction investment,

CENTER FOR CALIFORNIA REAL ESTATE | Housing Affordability and California’s Future

as well as foregone
consumption of goods
and services. The report
emphasizes that if cities,
state authorities,
businesses, and citizens
work together, then
the state’s major
housing shortage can
be addressed, particularly due to researchers’
identification of the
state’s capacity to
add more than five
million units in “housing
hot spots.”
Panelists emphasized
that the magnitude of
the state’s housing crisis
truly makes it a
statewide challenge.
The severity of the crisis
is demonstrated by
numbers cited by Matt Schwartz, president of the
California Housing Partnership Corporation (CHPC).
Schwartz noted that the state has lost 66 percent of
state and federal funding for housing production
and preservation between fiscal years 2008 to 2009
and 2014 to 2015.
Further, average production in jurisdictions
around the state shows problematic discrepancies
between income groups when housing supply fails
to be built. Schwartz called for renewed efforts to
establish a permanent revenue source of funding
for affordable housing and stressed that baseline
solutions need to come from the state when it
concerns financing so that all regions benefit in
proportionate ways. “While it’s absolutely indisputable that different regions have different
intensities of need, our study has documented

need for low-income households in every county.
So, we should be able to agree at least at a
baseline level that there is both a need and an
opportunity to create statewide political support
for that kind of a financing solution [housing bond
or new revenue source],” he stated.
The need for a regional approach along with
comprehensive, state-issued solutions was echoed
in remarks from Jennifer Hernandez, partner at
Holland & Knight. “I think it’s actually appropriate
to think of it as a regional issue, as a jobs market-based issue,” said Hernandez, whose comments followed Peterson’s prodding of the panel
to consider whether affordability should be
tackled on a geographic basis first. She posited,
“We’re living in a more regionalized world, and so
distribution within localized jurisdictions is for me
less important than meeting the needs of the

region.” Hernandez added that fiscal tools should
be utilized to compel recalcitrant jurisdictions to
play a part in the financial solution necessary to
spur more supply.
From the perspective of local government, Andy
Agle, director of housing for the city of Santa
Monica, also called for a regional approach
involving “carrots and sticks” from the state level
in order to ensure local officials feel the pressure
to actually meet their regional housing needs
assessments established by the jurisdiction’s
housing element. But he warned that the socalled “carrot” needs to be substantive enough to
reflect the dire state of supply. “[The carrot] needs
to go to the core of what I do as a city [so that]
I’m not able to do transportation projects or have
the revenue to pay for police and fire if I’m not
doing my share to support affordable housing and
housing generally,” Agle said.

should incentivize local officials to meet regional
housing needs and that cost/benefit incentives
should reflect dire consequences of undersupply.
“I think what we’re missing in this echo chamber of
people who care about housing is a really comprehensive statewide housing proposal,” said Pearl.
“There needs to be something where a jurisdiction
that wants to say ‘no’ to housing at all income levels
is essentially hammered by the state.”

In addition to the need for regional and state-level
action, what’s missing is a “comprehensive
statewide housing proposal,” according to discussant Ray Pearl, executive director of the California
Housing Consortium.

Panelists see ample opportunity to leverage state
transportation funding to motivate localities to
construct affordable housing - which would force
the interdependent interests of housing and
transportation to be considered holistically.
Pearl said the governor’s 2016 “by-right” development proposal provided key lessons moving
forward. The plan aimed at expanding housing
supply through a state-level framework that
streamlines local development by fast-tracking
eligible housing projects. Though the plan did not
pass, Pearl said it illustrated the importance of a
sense of shared purpose among government,
stakeholders, residents, and competing interest
groups to solve housing affordability.

Panelists called for state efforts to create permanent revenue sources to fund fiscal incentives for
local governments that address housing production shortfalls. Agle said that the state’s approach

Such an example is illustrative of a thorn in the side
of advancing supply in a state that has no shortage
of stakeholders and interest groups hovering
around the edges of policy. Perhaps thorniest of all

CENTER FOR CALIFORNIA REAL ESTATE | Housing Affordability and California’s Future

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