\n
![](\"https:\/\/fortune.com\/img-assets\/wp-content\/uploads\/2024\/06\/GettyImages-1309218211-e1718555498587.jpg?w=2048\")
<\/p>\n [ad_1]
\n<\/p>\n
There are unaffordable housing markets, and then there are \u201cimpossibly unaffordable\u201d markets, four of which are in California, a recent study said.<\/p>\n
The housing crisis represents an obstacle to upward mobility, and the Golden State risks suffering from especially acute stratification, according to the annual Demographia International Housing Affordability<\/a> report, which was produced by Chapman University in California and the Frontier Center for Public Policy in Canada.<\/p>\n \u201cHigh housing prices, relative to incomes, are having a distinctly feudalizing impact on our home state of California, where the primary victims are young people, minorities, and immigrants,\u201d wrote Chapman\u2019s Joel Kotkin. \u201cRestrictive housing policies may be packaged as progressive, but in social terms their impact could be better characterized as regressive.\u201d<\/p>\n The report points to \u201curban containment policies\u201d that are meant to limit sprawl and increase density. Those have resulted in higher land prices, which have translated to dramatically higher home prices, it explained. <\/p>\n The trend toward increasing density was geared toward reducing reliance on cars and freeways, improving gridlock, and making neighborhoods more walkable. But the report said while such policies were well intentioned, they resulted in land prices being eight to 20 times higher in urban containment boundaries than outside of them.<\/p>\n In determining affordability, the report looked at 94 markets in Australia, Canada, China, Ireland, New Zealand, Singapore, the U.K., and the U.S., comparing the median home price in each location against the median income. <\/p>\n A price-to-income ratio of 3 and below was deemed affordable, with higher ratios corresponding to worsening levels of unaffordability. A ratio of 9 or above was labeled \u201cimpossibly unaffordable.\u201d Of the 11 cities in that category, four of them are in California.<\/p>\n The report also warned that the housing crisis poses an existential threat to the middle class, noting that high housing costs have reduced standards of living and increased poverty.<\/p>\n \u201cThe middle-class is under siege principally due to the escalation of land costs,\u201d it said. \u201cAs land has been rationed in an effort to curb urban sprawl, the excess of demand over supply has driven prices up.\u201d<\/p>\n The report pointed out that all of the \u201cimpossibly unaffordable\u201d cities follow urban planning policies favoring more density, and recommended that cities open up the availability of land to reduce housing costs.<\/p>\n In the U.S. housing market, the worsening affordability problem has been exemplified by the disappearance of the $200,000 starter home<\/a>. That\u2019s left many millennials trying to upgrade to bigger homes to accommodate their growing families out in the cold. <\/p>\n But prospective buyers have been revolting against high home prices<\/a>, resulting in more properties sitting on the market unsold and lower asking prices.<\/p>\n That dynamic has played out during the critical spring selling season<\/a>, which is winding down with a whimper amid weak demand.<\/p>\n<\/div>\n\n
Subscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. Sign up<\/a> for free.<\/div>\n