California leads the nation in housing construction Pricelessness. In a healthy market, a family with an average income could afford an average-priced home. Not so in California. As estimated in a recently published estimate analysis from the Legislative Analyst’s OfficeA California family must earn more than twice the state average income to afford an average-priced home.
Really unaffordable!
The consequences are both financial and emotional. A June 2026 survey found that Californians “experience significant concerns about retirement security, which depends on the cost of living, particularly housing costs and taxes.”
This fear is driving away families and businesses that continue to leave California at record rates. Without a course correction, this exodus will impact the state’s economic vitality. A less prosperous economy means lower incomes, slower job growth and fewer resources for the government.
Unfortunately, Governor Newsom’s latest (and final) budget throws money at solving the problem rather than addressing the structural barriers that make housing so expensive.
For example: The governor is supporting a measure on the ballot that would allocate $11.25 billion in bonds to build affordable housing across the state, including the state’s multifamily housing program and home assistance programs for veterans and students. A complementary initiative asks voters to approve $25 billion in bond sales to finance loans for newly constructed single-family homes for middle-income families.
Without conducting a survey, we can determine that most Californians want affordable housing for families, veterans and students. That’s not a question. The relevant question is: How can California best promote housing affordability?
The governor’s main argument is that the state can build housing for less money than the private sector, thereby expanding the supply of affordable housing. The calculations for the November bond initiative suggest otherwise.
Accordingly Speaker Rivas“The bond is expected to help more than 40,000 Californians purchase a home by providing down payment assistance, affordable mortgage financing and other homeownership assistance.” The bulk of the bonds ($10 billion) would “finance the construction, rehabilitation, acquisition and preservation of affordable housing for low-income Californians.”
Yet California is already spending billions on affordable housing, and the state’s construction record does not meet the initiative’s goals. At $11.25 billion for 40,000 homes, the state expects to spend about $281,000 per unit. The problem is that it is an exception expensive to build all housing – including affordable housing – in California. The average is often around double the expected cost of the initiative, in some cases even reached $1 million per affordable housing unit.
Herein lies the problem. Putting billions of dollars into affordable housing programs does not reduce housing costs. When the past is over, these homes will still cost at least half a million dollars to build. The difference is that the cost has been shifted from the potential homeowner to the taxpayer. Housing in California is still unaffordable.
The speaker would probably disagree with this formulation. Finally, $1.25 billion of the bonds are earmarked to support the CalVet Home Loan Program. This program is supposedly “self-sustaining” because the costs are repaid through mortgage payments. This, of course, is the same argument that was used to justify undocumented home loans in the early to mid-2000s. And we all know how this story ended – in the financial crisis of 2008/09.
If the goal is to improve housing affordability, government programs must first address the fundamental deficiencies that cause the problems. These are due to overly strict regulations that limit the supply of housing and drive up the cost of building the available homes.
State and local regulations, including exclusionary zoning ordinances and the California Environmental Quality Act (CEQA), make building new homes difficult, costly and time-consuming. Because of these regulations, developers were unable to keep up with the growing demand for housing for decades, leading to an estimated high housing shortage 2.7 million units.
The impact of the supply shortage is exacerbated by regulations that drive up the cost of building a new home. These include labor regulations such as prevailing wage obligations and environmental regulations such as the requirement that all new buildings contain solar panels. Because of these regulations, the cost of building a new home in California is generally the highest in the country – more than twice the cost in Texas.
Since the problem is caused by regulatory burdens, the best way for the state to promote housing affordability is to implement comprehensive regulatory reform. To his credit, Governor Newsom has promoted faster permitting and streamlined regulatory reviews for CEQA, but these proposals are too narrowly focused.
Borrowing billions of dollars will neither reduce the cost of building new homes nor meaningfully expand the supply of housing. This spending is a feel-good policy that makes for good talking points, but will do nothing to improve housing affordability in the state. Instead of spending more and more government spending, the best way to make housing more affordable is to repeal federal guidelines that make California’s housing market the least affordable in the country.
Wayne Winegarden is a senior fellow in economics and director of the Center for Medical Economics and Innovation at the Pacific Research Institute. You can reach Wayne at: wwinegarden@hotmail.com
https://www.ocregister.com/2026/07/09/throwing-around-money-wont-make-housing-affordable-in-california/
