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California’s High Housing Costs: Causes and Consequences

Stashed in: Economics!, Awesome, California, economics, Homeless, San Francisco, Bay Area Housing

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I think this article puts too much emphasis on limited supply and not enough on increased demand due to booming economies. If you look at other cities with limited supply but NOT increased demand, you do not see anything like this graph.

You're right, demand is a big factor.

Fascinating article that attempts to explain why housing in California is so expensive:

First and foremost, far less housing has been built in California’s coastal areas than people demand. As a result, households bid up the cost of housing in coastal regions. In addition, some of the unmet demand to live in coastal areas spills over into inland California, driving up prices there too.

Second, land in California’s coastal areas is expensive. Homebuilders typically respond to high land costs by building more housing units on each plot of land they develop, effectively spreading the high land costs among more units. In California’s coastal metros, however, this response has been limited, meaning higher land costs have translated more directly into higher housing costs.

Finally, builders’ costs—for labor, required building materials, and government fees—are higher in California than in other states. While these higher building costs contribute to higher prices throughout the state, building costs appear to play a smaller role in explaining high housing costs in coastal areas.

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