Unease about the cost and availability of housing is palpable in The Golden State. An October Pew Research Center survey shows that 40.6% of California households, including over half (54.1%) of renters, are “cost burdened,” meaning they spend more than 30% of their income on housing.
Just 10 years ago, the U.S. had a housing shortage of just over 430,000 units. Since then, that deficit has grown dramatically. Zillow estimates the shortage to be 4.5 million homes. Some research places it as high as 20 million. California alone is facing a staggering 3.85 million-unit shortage.
Economist Edward Glaeser of the American Enterprise Institute recently told the U.S. Senate committee on Banking, Housing, and Urban Affairs, “We are producing fewer single-family homes at the start of 2025 than we did at the start of 2021, and 38 percent less than we did twenty years ago.”
To dismiss the housing supply issue, some California state legislators and numerous leaders at the local level have opted to pin the blame for high housing costs on market analytics tools used by property managers.
In fact, San Francisco and San Diego recently banned the use of algorithmic software for assessing rental housing demand, inventories and current rent levels to offer pricing suggestions appropriate for each respective market.
Politicians blaming new software for a problem that has been ongoing is absurd. The aggression against property management software has left even former antitrust advisors and state Attorney Generalsscratching their heads.
Pointing the finger is a misguided approach getting in the way of real solutions that would ultimately deliver more choices for consumers.
The housing market might be large and complex, but history gives us clear guidance. The lack of housing supply drives up prices. What shrinks prices, no matter the type of good or service? Increasing supply to meet demand.
In California, my home state, excessive regulation is the obstacle to making housing more plentiful. The facts and data amplify this commonsense point.
Economist Jason Ward, co-director of the RAND Center on Housing and Homelessness, points out this dynamic: “A considerable body of evidence suggests that the root cause of upward pressure on rents is scarcity driven by barriers to housing production and that new housing production directly reduces rental prices.”
The National Association of Homebuilders estimates that excessive regulations by government at all levels accounts for nearly 25% of the price of building a single-family home and more than 30% of the cost of a typical multifamily development. Glaeser‘s testimony also cites data showing that places with more regulations have much higher prices.
Banning market analysis software will not magically produce more housing or drive down prices.
Concrete and positive steps for cities and states to help grow the housing supply include addressing convoluted building permit processes, modernizing land-use frameworks, supporting public private-partnerships, and providing property tax abatements and density bonuses. There are other options to improve housing affordability that can get bipartisan support as well.
Just as there are downstream effects of over-regulation, a less restrictive environment for home construction will help Americans at all economic levels, including underserved communities. Research in the Journal of Urban Economics shows that “migration ripple effects of new housing will affect a wide spectrum of neighborhoods and loosen the low-income housing market.”
Homeownership is a cornerstone of American prosperity and upward mobility, and unfortunately, it’s currently out of reach for many.
Crusading against phony boogeymen, like warranted business practices, might generate headlines for politicians, but Californians deserve practical solutions that actually address housing concerns. More than half of renters in California shouldn’t be “cost burdened” just to keep a roof over their heads.
Mario H. Lopez is the president of the Hispanic Leadership Fund, a public policy advocacy organization that promotes liberty, opportunity and prosperity for all.
