Runaway rents and out-of-reach home prices typify California’s housing landscape.
To ease extreme costs, there are politicians who say they’re increasingly focused on boosting supply. Democratic Lt. Gov. Gavin Newsom is one.
At a forum on March 8, 2018 in Sacramento, Newsom said California must break down barriers to building because it ranks "49th out of 50 in the United States in per capita housing units. Only Utah can lay claim to being lowest in per capita production."
We know building homes in California can be a long, expensive process. But does the state really have the second lowest per capita housing supply in the nation?
We opened the door on a fact check.
Newsom is the frontrunner in a crowded race for California governor.
His campaign spokesman told us the statement is supported by an October 2016 report by the McKinsey Global Institute: "A Tool Kit to Close California’s Housing Gap: 3.5 Million Homes by 2025."
We found the report — which Newsom cited later in his discussion at the forum — confirms the lieutenant governor’s claim.
"California ranks 49th among the 50 US states for housing units per capita," the report said. "Benchmarked against other states on a housing units per capita basis, California is short about two million units. To satisfy pent-up demand and meet the needs of a growing population, California needs to build 3.5 million homes by 2025."
Johnathan Woetzel, a director at the McKinsey Global Institute, said researchers used 2014 data from the U.S. Census Bureau in their analysis.
He said the ranking cited by Newsom compares the ratio of people to housing units in each state. That specific ranking does not measure the pace of housing production over time, as the second part of Newsom’s statement might imply. Woetzel noted, however, that California’s pace of home building has significantly lagged behind other states.
The institute is the business and economics research arm of McKinsey & Company, a worldwide consulting firm.
Its report found California had 358 housing units per 1,000 people, much lower than the U.S. average of 419 but slightly ahead of Utah’s 347.
SOURCE: McKinsey Global Institute, "A Tool Kit to Close California’s Housing Gap: 3.5 Million Homes by 2025"
Not a new phenomenon
California has long failed to meet its housing needs, according to the report.
"Since the 1970s, the state has added 6.7 million households and 19 million people, but only 6.2 million homes. This means that over a 40-year period, the state added only 325 homes for every 1,000 additional people."
Two outside experts told us the McKinsey report is credible.
Carol Galante, professor of affordable housing and urban policy at UC Berkeley, said California’s low ranking "doesn’t surprise me."
She said California’s housing production is stymied by the state’s complex regulatory system, including the land-use discretion of local governments, combined with the high fees developers must pay and then pass on to buyers.
"The cost of building new housing in California is very expensive," Galante said. "New development has to pay for all of its new infrastructure. That didn’t use to be the case. In the 50s and the 60s and even through the 70s, we had a state system and a federal system that paid for the suburbs to be built through a public infrastructure."
There’s also a problem on the demand side, Galante said, noting that wages aren’t keeping up with the ability to buy new homes.
Jeffrey Michael, director of the Center for Business and Policy Research at the University of the Pacific in Stockton, added that Newsom’s statement "sounds accurate," and that the McKinsey report is credible.
Michael cited California’s regulatory climate as the biggest factor is slowing housing production.
More recent data?
The McKinsey report examined figures from 2014. We couldn’t find more recent data comparing per capita housing units by state.
But we did find the total number of housing units produced in California in each year from 2014 through 2016. And based on the totals, it appears California’s rank near the bottom of per capita housing supply is accurate given the relatively slow building pace, at least compared with pre-Great Recession levels.
For example, California added 69,000 units in 2014; 68,000 in 2015; and 89,000 in 2016, according to the most recent data available from the California Department of Finance, all while the state’s population increased by roughly 300,000 per year.
Those numbers are far less than California’s home building peak of 2005, when 205,000 units were added.
"Before the housing bust, the lowest year on record was 1995, during which just shy of 75,000 units were built," notes a report from the California State Association of Counties.
Lt. Gov. Gavin Newsom recently claimed California ranks "49th out of 50 in the United States in per capita housing units. Only Utah can lay claim to being lowest in per capita production."
Findings from an October 2016 report by the McKinsey Global Institute, using census data from 2014, support Newsom’s statement.
Two independent policy experts affirmed the report and its findings showing the wide gap between California’s housing demand and supply.
There’s nothing significant missing from Newsom’s statement.
We rated his claim True.
TRUE – The statement is accurate and there’s nothing significant missing.
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