The wildfires sweeping through Los Angeles County communities have destroyed at least 10,000 homes so far and more are in the path of still-uncontrolled flames.

Obviously, the loss of so many dwellings, whether they be single-family homes or apartments, exacerbates what was already one of the nation’s most acute shortages of housing — a crisis that has worsened despite strenuous efforts by Gov. Gavin Newsom and legislators to make construction of new housing easier by removing local barriers.

State officials say California should be building 180,000 units of housing each year, but the trend is going the other way.

Newsom’s new budget says that due to rising interest rates, California’s residential permitting has “fallen substantially in 2024, with total permit growth in the third quarter falling by 13.5% from the previous year to an annualized rate of just around 102,000 permits,” after averaging nearly 121,000 in 2021.

The budget projects continued low housing production until interest rates decline later in the decade; it could hit 125,000 in 2028 “as the Federal Reserve decreases interest rates, making construction inputs more affordable and lowering mortgage rates.”

It’s a far cry from Newsom’s campaign pledge to build 3.5 million new units of housing. “As governor, I will lead the effort to develop the 3.5 million new housing units we need by 2025 because our solutions must be as bold as the problem is big,” then-Lt. Gov. Newsom wrote on Medium in 2017.

During his inaugural speech in 2019, Newsom announced a “Marshall Plan for affordable housing,” evoking the multi-billion dollar program to rebuild Europe after World War II.

However, at the current level of construction of roughly 100,000 units a year, Newsom’s governorship will probably end two years hence with less than a quarter of his announced goal having been reached.

California is not alone in having a housing shortage even though, in both absolute and relative terms, it has one of the worst. How did the state go from building as many as 200,000 units a year in 2005 to half that level today?

Millennials Face a Market With Few New Homes

The peak 20 years ago reflected some unusual conditions, such as the federal government’s program to expand homeownership that, in turn, sparked lower standards for mortgage applications —creating a bubble that spectacularly burst a few years later. It precipitated a global financial crisis and a severe recession that hit California and a few other states particularly hard, with lingering aftereffects, a new study of the nation’s housing shortage by University of Southern California researchers shows.

After the housing bubble burst, bankers and government officials tightened down on qualification for mortgages, but tighter credit led to limited supply, which didn’t match a new generation’s housing desires, the study found.

“These measures came at the worst possible time — just as millennials, the largest generation in 30 years, entered the housing market,” Dowell Myers, a study author who directs the Population Dynamics Research Group at USC’s Sol Price School of Public Policy, said in a USC announcement. “Young home seekers were welcomed with the lowest construction in more than 60 years.

“Housing policy needs to be better at planning for the needs of different age groups and their life stages to avoid mismatches between supply and demand,” Myers said in the release.

How about the impact of Los Angeles’ wildfires?

“A tightly constrained housing supply reduces resilience to absorb losses from unexpected disasters — fires, earthquakes, hurricanes and more,” Myers said. “In Los Angeles, this lack of flexibility could rapidly intensify gentrification as relocations strain the existing housing stock.”

About the Author

Dan Walters has been a journalist for nearly 60 years, spending all but a few of those years working for California newspapers. He began his professional career in 1960, at age 16, at the Humboldt Times.

CalMatters is a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters. For more columns by Dan Walters, go to calmatters.org/commentary.

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