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California Housing Is Even Less Affordable Than You Think, UC Berkeley Study Says

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A woman holding the hands of two small children walks down the street past a large home.
Residents of the 14-room Mission District house made an eviction-proof deal. (Jeremy Raff/KQED)

As California tries to claw its way out of its housing affordability crisis, policymakers have been asking the wrong question, according to a new study from UC Berkeley.

The study, published Thursday by researchers at the Terner Center for Housing Innovation, argues the classic question — “Is a place affordable?” — should instead be supplanted with a new one: “Who can afford this place?”

That might seem like a subtle distinction, said Issi Romem, co-author and founder of economics research firm, MetroSight. But its implications are enormous.

“The differences are just really stark,” Romem said. “We have been, on a grand scale, misleading ourselves with our current metrics to think they are much more affordable than they are.”

The problem, Romem said, is that those metrics don’t account for a simple truth: People who can’t afford rent or mortgage payments in a place often don’t live there.


“In other words, we’ve been saying Beverly Hills is perfectly affordable because the people who live there can afford it,” Romem said. “And we’ve been doing that for a broader geography than just Beverly Hills.”

To determine whether a given county is affordable, policymakers might look at how many people earning the area’s median income can afford to rent or buy a median-priced home. A home is considered “affordable” if the household’s earners are paying no more than 30% of their income on rent.

To craft a new definition of affordability, Romem, and co-author, Dan Shoag looked at responses to a Census questionnaire that asked whether people felt they could afford their expenses after paying for housing costs comfortably, were doing OK, just getting by, or having difficulty. They then looked at a broader set of Census respondents’ incomes and housing costs and used that as the basis for determining the affordability of each county for all Californians, including those not living in the county.

The result is an interactive map that shows how many Californians could afford to live in each county — which paints a much bleaker picture of the state’s most expensive areas than had previously been shown.

Take San Francisco, for example, where the median household income was close to $137,000 in 2022. Under the classic definition of affordability, 67% of renters are “comfortable” or “doing OK.” However, under the definition Romem and his colleagues created, only 23% of Californians would be able to rent there either comfortably or OK.

It’s an idea that resonates with 31-year-old software developer Nick Fallon. Until December, when he was laid off from his job, he was making $120,000 and paying $2,650 per month in rent for a one-bedroom apartment in the Castro District. He could afford it but felt like it was impossible to save any money.

“I can’t see a future where I could retire here,” Fallon said. “I don’t see a future where I could have children if I wanted them. Buying a house is completely out of the picture. Ever.”

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But rather than simply showing that expensive places like San Francisco are indeed expensive, the Terner Center’s new tool goes further. It allows users to add transportation and childcare costs and accounts for relative differences in incomes across counties, providing a more nuanced picture of rural areas than had previously been shown.

It shows that access to public transportation makes urban areas more affordable than they might otherwise be, and rural places — where transit is scarce and incomes are relatively lower — end up being less affordable than they would otherwise seem.

That’s something Colin Sanders experienced firsthand when he moved from Oakland to Twain Harte, a small mountain community in Tuolumne County. The 34-year-old mechanic had been splitting a master bedroom in a West Oakland home for $1,600 per month. In 2020, Sanders bought a 900-square-foot, off-grid home in Twain Harte for around $100,000.

Although he can afford the home, Sanders said he was forced to buy a newer, more reliable truck since public transportation is nearly nonexistent, and constantly repairing an older vehicle cost him work. He travels around the county, working as a handyman and electrician, and now pays around $1,100 a month in car payments and fuel, he said.

“I really underestimated how much I’d be driving and how much I’d be spending on fuel,” Sanders said. “I’m not making much more out here than I did there (in Oakland), and I thought that it would go further, but it’s not.”

If policymakers chose to adopt the new definition of affordability, publicly funded affordable housing developers would consider not just the incomes of people who live in the area but also those who might want or need to live there, Romem said.

It would help solve a problem Teri Baldwin said she sees in her role as a kindergarten teacher and president of the Palo Alto Educators Association. The union is currently working with a developer on a project to build affordable housing for Palo Alto teachers.

A fifth of the development’s 44 apartments will be available to teachers, making between 50% to 80% of Palo Alto’s median income, which was $214,118 in 2022. The remaining apartments will be reserved for people making between 80% and 120% of the median income. But what counts as an “affordable” rent for people within those income bands is still pretty expensive, Baldwin said.

“It’s still pretty high,” she said. “It’s a high percentage of your salary going towards rent.”

She said even this “affordable” housing is out of reach for many of the district’s support staff, who make even less than teachers. Baldwin is hoping the state can provide deeper subsidies to developers.

“I would like the state to give incentives, more tax breaks or something like that to developers who want to help,” she said, adding the state should look at ways to build housing that doesn’t tie rents to the median income.

Doing that will be difficult this year, as the state faces an estimated $73 billion deficit, said Matthew Schwartz, president and CEO of the California Housing Partnership, an affordable housing policy and advocacy organization.

Deepening subsidies to make it more affordable to some will mean providing less of that housing, he said.

“That’s a pretty Hobbesian choice, and I don’t think most of us would be in favor of it,” he said.

The state already saw affordable housing production shrink last year — dropping from more than 23,500 below-market-rate units in 2022 to just under 14,000 in 2023, according to the partnership.

Remedying the situation will require more money, he said. Schwartz hopes the legislature will support Assemblymember Buffy Wicks’ proposal to put a statewide $10 billion affordable housing bond on the November ballot. A separate $10 billion to $20 billion bond measure is also being proposed for the Bay Area.

“We saw production last year decline by almost one third,” Schwartz said, adding that a big reason for that was the exhaustion of an earlier statewide affordable housing bond.

Building more deeply affordable housing is not the only solution, Romem argues. Instead, he said the state should encourage developers to build more housing for people at all income levels, which will slow the growth in home prices.

But ensuring that the housing that gets built is actually affordable requires a different approach than one the federal government and California have taken so far, he said.


“We value what we measure, and that means that we want to be measuring the right thing,” Romem said. And that requires asking the right question, he said: “How affordable San Francisco or Beverly Hills or Los Angeles are — not just to the people who have been able to make it there — but to the people who would make it there if they could.”

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