The constantly rising prices in home rentals and properties in California has prevailed since the 1970s during which a number of constraints were placed on new home development by means of court ruling and progressive legislation. The California Environment Quality Act, which was enacted in 1970, is one of the Acts that greatly affect housing development, requiring state and local authorities to consider the probable negative effects of housing development projects on the environment, while deciding whether to grant approval, without needing to take into account the subsequent benefits that the projects will yield.
In 1971, the California Legislature passed regulations dictating that a city’s zoning and subdivision approval must be aligned with an adopted general plan. After 1971, the general plan was considered to be the constitution for future development with the California government controlling the use of land instead of allowing the citizens to meet their own housing needs. This caused the housing prices to double. In addition, the Federal Endangered Species Act, enforced in 1973, has caused the removal of millions of acres of land nationally from the available land of evolving metropolitan areas, restricting housing development and significantly driving up the prices of land. This continual introduction of land use and development regulations resulted in the occurrence of a situation in which homebuilding has been unable to keep up with housing demand, creating a housing shortage, which in turn has been driving property prices and rent to the extent that California is now one of the USA’s least affordable housing markets.
The increase in property rent in California is due to the state having a large number of people who have opted to rent houses instead of becoming a homeowner themselves. The homeownership rate in the state was equal to the national rate from 1950 into the 1960s. However, by 2005, the state’s homeownership rate was 13.3 percent below the recorded national average rate, and in the second quarter of 2018, the rate was 54.3 percent, which was 10 percent below the national average rate. As late as 1970, the median single-family home price in the state was very close to the national average. Due to the regulatory constraints, the median home prices started to exceed the national average. In late 2018, the median home price in the state was $535,000 and the national average was found to be only $275,000.
California is ranked first among the states in terms of poverty, which is due to the perpetual high costs of housing. In addition, housing affordability has also been a problem in the state when incomes are compared to housing costs. These housing costs are shelter costs, including house rents and mortgage repayments. Renters in the state are more likely to struggle more in comparison with homeowners with and without mortgages. A research conducted in 2017 showed that 82.3 percent of the renters, 54.1 percent of the homeowners with mortgages and 25.6 percent of the homeowners without mortgages were cost-burdened. Those who couldn’t bear the costs of housing were forced to live on the streets. Currently, there are approximately 130,000 homeless people in California, and more than 47 percent of the total homeless people in the nation live in the state.
To control this widespread housing crisis, a rent control bill, known as Assembly Bill 1482, will be enacted by the California government to control housing rent within the next few weeks, although the government has yet to make any major regulatory reforms to increase the supply of housing. After the enactment, the government will regulate housing rent by limiting the increase of rent by the property owners. Property owners will only be able to increase their rental by 5 percent every year, plus the local inflation rates.
However, there has been a discussion regarding the effectiveness of the bill once it is enacted. Based on a recent study that examined the results of rent control regulations, rent control reduces the supply and mobility of rental housing. A reduction in rental housing supply will likely drive up the market rent, doing the opposite of what the regulations were intended for. It has been suggested that the California government should instead reform the relevant development regulations, making changes to the land use laws by eliminating unnecessary restrictions.
Taking into consideration such housing crisis with no end in sight, homeowners in California should have wills written up to ensure that their residential properties will be correctly passed down to their heirs. In California, the assets of a person who has died without a will in place will either end up with the State or get distributed contrary to the person’s wishes. Therefore, homeowners should engage estate probate lawyers to have their wills written according to the laws. On the other hand. the state government should come up with a better solution that actually considers the root of the crisis instead of just reducing the extent of the consequences.