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California's Housing Supply Deficit!

Writer: Gene Duquette
Gene Duquette
22 hours ago
4 min read

California has the “largest concentration of severely unaffordable housing markets in the nation,” according to the California Senate Housing Committee’s (2025, p. 1) fact sheet. This is not a recent problem. It has developed over decades, with progress moving at more of a glacial pace than an avalanche.



There are several factors contributing to the undersupply of housing needed to meet Californians’ needs:

  • Insufficient land zoned and available for housing

  • Community opposition to neighborhood change (e.g., NIMBYism)

  • Complicated regulatory hurdles, including environmental review and permitting

  • Historic patterns of housing segregation and exclusion, such as redlining

  • Federal funding that has not kept up with need

  • High land, labor, and material costs

  • Expiring subsidies that put existing affordable housing at risk


These barriers have contributed to high housing costs creating an affordability crisis in the housing market. The average California home value is approximately $773,000, which puts homeownership out of reach for many buyers. The affordability issue also affects rental housing market as well.


As of 2022, the statewide fair market average rent is $2,028 for a two-bedroom apartment. A household staying within being able to afford that rent and utilities without spending more than 30% of income on housing needs approximately $6,760 per month, or $81,000 annually.

Assuming a 40-hour workweek, 52-weeks per year, that is approximately $39 per hour. Given minimum wage of $15 per hour and an average renter wage of approximately $30 per hour, this means many renters have to choose between shelter, food, child care, health care, and transportation, leaving very little room to save for the purchase of a home.


For example, a modest three-bedroom, two-bath home in Irvine rents for $4,900 per month. Using standard credit eligibility requirements of monthly income of at least three times the rent and a credit score of 680 or higher means a household needs $14,700 in monthly income, or $176,400 annually, to qualify. In fact, affordability was identified as the biggest contributor to homelessness, certainly not home ownership.


Recent state actions to spur housing development include:

  • Increasing the amount of land on which housing can be built

  • Expediting and simplifying local approvals, including those for accessory dwelling units (ADUs) and certain subdivisions

  • Increasing funding for affordable housing development (subsidize)

  • Creating and funding enforcement of state housing laws

  • Establishing incentives to increase construction-worker pay and rebuild the construction workforce


Some progress has been made, housing units increased from approximately 99,000 in 2022 to 112,000 in 2023, an increase of about 13%. There has been six consecutive years of construction growth through 2023 with the share of lower-income units in new development nearly doubling since 2018, reaching 19% of permitted units and 16% of completed units in 2023.


Additional factors include baby boomers and the anticipated “silver wave” of homes returning to the market as that generation ages. Nationally, boomers accounted for approximately 38% of homeowner households in 2022, despite representing about 21% of the population (Freddie Mac, 2024). Many are holding onto their homes, slowing the turnover that would otherwise create opportunities for younger buyers.


In California, Proposition 13 adds a financial incentive to hold property. It limits increases in assessed values, allowing longtime owners to pay substantially less in property taxes than someone buying a comparable property today. The Legislative Analyst’s Office (2016) found that these tax benefits contribute to homeowners moving less often. These protections also apply to rental properties, giving longtime owners including those holding multiple properties an incentive to retain them. This can keep homes off the sales market and make it harder for buyers to find available properties. The issue is partly access to homeownership and the turnover of existing homes, alongside the broader shortage of housing.


Proposition 19 may provide some relief as eligible homeowners age 55 and older can transfer their taxable value to a replacement primary residence anywhere in California. That reduces the tax barrier to moving, although the benefit does not generally extend to replacing investment properties (California State Board of Equalization, n.d.).


Still, homes held by older home owners tend to be larger, and downsizing leads to additional pressure for homes that newer buyers would be able to afford. And the expected "silver wave" may arrive gradually. Freddie Mac (2024) projects a slow decline in boomer homeownership rather than a sudden flood of available homes.


California’s statewide housing goal calls for at least 2.5 million new homes by 2030, including at least 1 million affordable to lower-income households (California Department of Housing and Community Development, 2023). This goal predates the 2025 fact sheet and there has been great progress, but decades of undersupply will take sustained effort to overcome.


At Rentegic, strategic property management means understanding the real estate market to help identify the best use for your property, ensure it's optimally positioned for rental, maximally profitable, all while maintaining the quality and value of the home.


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