Recently, Southern California Newsgroup financial columnist Jonathan Lansner asked how to fix California’s housing mess through a series of questions. Mr. Lansner kindly allowed us to reproduce some of his questions. They appear below, with my answers.

Housing “affordability” essentially means falling prices for purchases and renting, no?

Yes, it does.

There are two challenges regarding California housing affordability. One is that very few households can afford mortgage interest, principal, insurance, and property taxes on the median California home, whose price is about $900,000. In the second quarter of 2024, the California Association of Realtors estimated that only 14 percent of California households could afford these payments. In contrast, the median California household, which has an income of about $90,000, can afford a home valued around $340,000. Out of 59 California counties, only about six have median home values near this price point, and most of those counties are sparsely populated areas near the Sierra Nevada mountain range.

The other challenge in home affordability, which traditional affordability statistics do not account for, is scraping together the down payment on a home. For example, a traditional 80/20 loan (80 percent loan-to-value ratio) requires a down payment of about $180,000 on California’s median home. In contrast, median net worth of renters in the US is about $10,000. There are only a few renting households who can come close to a California-sized home down payment.

California has passed more than 100 laws since 2017 to facilitate housing construction, and the state has spent billions on housing as well. But despite this, less new housing is being developed, with current construction at only about 50 percent of its level of years ago. The state’s current approach to housing policy is moving us backwards.

If the state is an insurance company for earthquake and fire risks, why not be a homebuilder, too?

Government agencies don’t have a good track record when it comes to housing affordability. California state and local government involvement in homebuilding is associated with remarkably higher building costs. Affordable or low-income housing development throughout the state significantly involves government, because the funding for these projects uses federal, state, and local subsidies and financing. The cost of building these units is nothing short of astronomical. A single apartment unit in an affordable housing........

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