It’s no secret that California is facing an affordability crisis. Even with the longest economic expansion in U.S. history powering our economy, more than 40 percent of California voters say they can’t afford to live in the Golden State. For too many, the California Dream is slipping out of reach. But with targeted tax policies and increased housing production we can make a real difference for millions of Californians.
In responding to our affordability crisis, it’s vital that we address the high cost of housing. In recent years, rents have increased between 25 and 50 percent in many of our urban areas, which are already among the most expensive rental markets in the nation. And those wishing to purchase a home in California must compete in a market where the average price is more than half a million dollars. In several Bay Area counties, median home values now exceed $1.3 million.
For many middle class families, the prospect of homeownership feels unattainable.
As policymakers, we can help ease some of the strain through targeted tax policies that offset rising rents and make homeownership a reality for more Californians. These include expanding California’s renter’s tax credit, which hasn’t been adjusted in four decades, and enacting a new tax credit to help first-time home buyers. The state Legislature is currently considering worthy measures by Sen. Steven Glazer and Assemblywoman Blanca Rubio that would extend such benefits and provide meaningful relief to millions of Californians.
At the same time, it’s essential that we use tax policy and other tools to increase our housing supply.
The Legislature and Gov. Gavin Newsom already have taken some important steps in this direction: The recently-enacted state budget includes $200 million to finance the development of moderate-income housing, $500 million in tax credits to build more affordable housing, $750 million to expedite local housing production and a carrots-and-sticks approach that incentivizes cities and counties to meet their housing goals. And the Legislature is also considering an important bill by Sen. Jim Beall that would leverage local property tax revenues to help fund more affordable and moderate income housing throughout the state.
But much more must be done to meet the governor’s goal of adding
over the next seven years. Among other efforts, we should encourage local jurisdictions to streamline the application and permitting process, reduce fees and remove unnecessary regulation, all of which discourage private investment and can add tens of thousands of dollars to the cost of each unit.
We also should enact measures – like legislation I introduced earlier this year – that would leverage new federal tax benefits to encourage investment in housing production in specially-designated “Opportunity Zones” throughout California.
It is clear that our housing affordability crisis is a direct threat to middle class families, the California economy and the freedom and opportunity at the heart of the California Dream. Solving this crisis is central to maintaining California’s economic competitiveness, reducing inequality, ending homelessness and minimizing lengthy commutes that pollute our environment and deprive workers of precious time with their families.
In short, one of the best ways we can tackle California’s housing affordability crisis is to implement a spectrum of new housing supply solutions coupled with targeted tax benefits that work for our state’s varied communities and neighborhoods. These measures should respect local control and protect low-income communities while also encouraging cities, counties and the private sector to be part of the solution.
We don’t need state policy that is one-size-fits-all, but we all have to get in the boat and start rowing in the same direction. The future of our middle class and the California Dream depends on our collective willingness to rise to the challenge.