California Housing Package Launched January 1 with a Resolution to Ease Housing Costs, Shortage

Billions in funding, expediting development key to success

Sacramnto, CA – January 3rd, 2018 (BUSINESS WIRE) California’s far-reaching housing package went into effect January 1, 2018, launching a major breakthrough for funding and fast-tracking housing development, especially for lower-income residents in the state.

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California lawmakers approved the 15-bill housing package September 15, and Governor Edmund G. Brown signed the legislation two weeks later, building the foundation to help with the state’s fast-rising housing costs and easing local regulations that create financial hurdles and lengthy delays hurting low-income and middle-class families.

The California Department of Housing and Community Development is hosting a dedicated page of the department’s website, www.hcd.ca.gov as a one-stop-shop for the housing package, including summaries for all 15 bills and downloadable materials; frequently asked questions and implementation plans will be added soon.

“The housing package brings funding for more housing for low-income residents, requires that cities and counties follow their affordable housing plans, and removes roadblocks for much-needed projects,” said Ben Metcalf, Director of the California Department of Housing and Community Development. “The package will not solve the housing cost and the housing shortage challenges overnight, but provides a very solid foundation that we can build on in the years ahead.”

SB 2 is expected to generate an estimated $250 million a year to finance the construction of affordable housing and SB 3 places a bond measure on the November 2018 statewide ballot. If passed, the bond would provide $3 billion to finance affordable housing for low-income residents and another $1 billion for home and farm purchases for veterans.

Other bills streamline the approval process, fund planning and technical assistance to cities and counties, provide financial incentives for expediting certain housing developments, and provide one-time funding for homelessness programs.

“California’s housing challenges demand that everyone works together on solving the problem,” said HCD’s Metcalf.

Only 28% of the state’s households could afford to buy the median-priced home during the third quarter, the lowest percentage in a decade, according to a recent report from the California Association of Realtors.

The financial challenges are just as difficult for households that rent. More than 3 million households—the equivalent of the combined populations of San Diego, San Jose and San Francisco—pay at least 30% of their income on rent. And more than 1.6 million low-income households spend more than 50% of their income on rent.

The housing package will have a far-reaching effect beyond just affordable housing and expediting development. Infill, mixed-use and transit-oriented developments are part of the plan, allowing more low-income residents to live closer to work, which will ease congestion on roadways, improve air quality, and reduce health issues for many Californians.

About California Department of Housing and Community Development

The California Department of Housing and Community Development is dedicated to the preservation and expansion of safe and affordable housing so more Californians can have a place to call home. Our team works to ensure an adequate supply of housing for Californians and promotes the growth of strong communities through its leadership, policy, and program development. For more information, please visit www.hcd.ca.gov and sign up for HCD’s listserv announcements, follow us on Twitter, @California_HCD and Facebook.

Contacts

California Department of Housing and Community Development
Evan Gerberding
(916) 263-7408
evan.gerberding@hcd.ca.gov

Worsening Affordability Costs Renters $2,000 per Year

– Income growth stagnated as rents continued to climb, forcing renters to pay an increasing share of their income on rent

– The median U.S. rent requires 29.1 percent of the median monthly household income. In pre-bubble years – 1985-2000 – rent required just 25.8 percent of the median income.

– Renters in 34 of the nation’s 35 largest markets have to spend a larger share of income on rent now than they did in pre-bubble years.

– Homeowners spend $3,300 less per year on the typical mortgage payment than they would if mortgage payments required the same share of income as they did historically.

Seattle, WA – Nov. 29, 2017 (PRNewswire) Rising rents are eating up an increasingly large share of American incomes, costing the typical renter $2,000 per year.

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Currently, the median U.S. rental requires 29.1 percent of the median monthly income. However, in the years leading up to the housing bubble, renters spent just 25.8 percent of their income on housing. That means renters are spending $1,957 more on rent in 2017 than they would be if the percentage had remained the same.

By contrast, the typical homeowner spends less of their income on house payments than they did previously – saving about $3,300 per year on the typical home. Mortgage payments take up a smaller share of income now than they did historically – 15.4 percent in 2017 Q3, compared to 21 percent previously.

In expensive markets like San Jose, renters are spending nearly 39 percent of their incomes on rent, compared to 26 percent historically, which translates to $13,525 this year, more than any other metro Zillow analyzed. Renters in San Francisco are similarly affected by worsening rent affordability, spending $11,236 more on rents than they would have if the cost of rent had remained proportional to income.

While rent affordability has worsened in most U.S. metros, rents in Pittsburgh have remained mostly level over the past several years, allowing incomes to keep up and even outpace rent appreciation. Renters in the metro actually spend a smaller share of income on rent than they did in pre-bubble years, meaning they are spending about $3,400 less per year than they would have at the historical rate.

“In most markets, current renters are at a disadvantage compared to years past because paying the rent takes up a much larger share of their income than it did before,” said Zillow® Chief Economist Dr. Svenja Gudell. “For many people, that can mean less cash to put toward paying off student debt, building an emergency fund, or saving for retirement. For those hoping to buy a home, it could be a significant part of their down payment. For parents, it could mean additional childcare or a family vacation. This is another example of how much worse rent affordability has gotten.”

Younger generations want to buy homes, and have traditional views on the value of homeownership. However, with home prices climbing, first-time buyers have to save more than $100 a month for a down payment just to keep up with rising home costs[i]. Low interest rates mean monthly mortgage payments are relatively affordable, but the majority of renters cite that initial down payment as the main barrier to buying a home[ii].

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Zillow is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow’s Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Launched in 2006, Zillow is owned and operated by Zillow Group, Inc. (NASDAQ: Z and ZG), and headquartered in Seattle.

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[i] http://zillow.mediaroom.com/2017-11-09-Home-Buyers-Need-to-Save-up-to-600-a-Month-Just-to-Keep-Up-with-Rising-Home-Prices
[ii] https://www.zillow.com/research/down-payment-hurdle-zhar-14790/