If you follow California housing and population trends you have probably noticed two things. First, population growth has slowed in the past several years and even retracted in 2020. Second, housing prices remain historically high as California continues to grapple with a housing shortage.
So how can housing prices continue to soar while the population retracts?
Today, the LA Times published a piece entitled, “The California conundrum: Fewer people, more homes, but an acute housing shortage” tackling that question.
“People think the “sky is falling and everyone is leaving California,” said Hans Johnson, a senior fellow with the Public Policy Institute of California.
“That is not true.” Total population isn’t the only factor affecting the crisis.
That’s because when it comes to the desire for a house or an apartment, not everyone is created equal. A newborn baby doesn’t want their very own housing unit, but in 20 years they probably will.
If one particularly large generation enters their 20s at the same time, the demand for housing can soar even if the total population stays the same, or declines slightly.
That’s exactly what happened with the millennial generation over the last decade and a half, said Dowell Myers, a professor of policy, planning and demography at USC. Noticeably bigger than the preceding Generation X, millennials ignited demand surges that sharply lifted housing costs despite subdued population growth since the Great Recession.
Between 2009 and 2014, a very large cohort of millennials was in their 20s, a prime time for renting your first apartment, Myers’ research shows. In the years since, those millennials have increasingly entered their 30s, when many people in California buy a home for the first time.
Translation: after decades of unsustainable population growth there are still generations of Californians, including millennials who have still not entirely entered the housing market, which has kept demand and prices extremely high.
The truth is, California’s population effectively doubled since 1970. A modest slowdown or even retraction of population growth in the past several years has done little to alleviate the housing shortage and strain on natural resources like the supply of water.
Unfortunately, California will be dealing with the ramifications of decades of unsustainable population growth for years to come.