California Housing Crisis Turns Working-Class Towns Into ‘Million-Dollar Cities’

The housing crisis in California is reportedly so bad that working-class towns have turned into million-dollar cities.

According to The Los Angeles Times, Placentia, Orange, Tustin, Bonita, Cerritos, and San Gabriel have substantially increased home values. Other cities that now have million-dollar homes hail from Orange, San Diego, and Los Angeles Counties. Once considered middle-class enclaves, these towns now have homes worth millions of dollars.

Real estate agent Tor Black told Fox Business that two factors are causing the increase in home value. First, because the aforementioned areas have very little undeveloped land, older homes are purchased and updated. Second, many homes are passed down through families, which doesn’t allow for new homeowners to move in.

Therefore, supply and demand constraints are leading to skyrocketing prices. California now has more million-dollar cities than any other state in the U.S. According to Zillow, “The U.S. has a record-high 550 ‘million-dollar’ cities — cities where the typical home is worth $1 million or more.” And out of these cities, 210 are in California.

California housing crisis: Once-modest towns are becoming 'million-dollar cities' https://t.co/vp2hS7oYab

— Los Angeles Times (@latimes) April 15, 2024

Harvard University’s Joint Center for Housing Studies reports that the highest price-to-income ratios were largely on the West Coast, including Honolulu, San Jose, and San Francisco. Declining affordability in these areas leaves all but the highest-income households unable to afford mortgage payments for a median-priced home.

In the second quarter of 2023, a homeowner needed an annual income of at least $99,600 to afford monthly housing payments, up from $52,600 just three years before. Nearly half of those potential homeowners required an annual income of at least $100,000 to afford payments on the median-priced home.

With many people staying put, fewer houses are on the market. Thus, instead of purchasing homes, many are renting, leading to an overabundance of renters and a slim market with sky-high rent prices.

The San Francisco Standard reports that California State Assemblyman Alex Lee has devised a plan that could help with the housing shortage. Proposal AB 2881 would allow the state to create a public agency to develop housing directly paid for by taxpayers. Lee calls this “social housing.” Rents and proceeds from home sales would be funneled back into the agency for further activity. This bill has yet to pass.