03/28/2024

Closing California’s housing gap

Access to decent, affordable housing is so fundamental to the health and well-being of people and the smooth functioning of economies that it is embedded in the United Nations Universal Declaration of Human Rights. Yet in developing and advanced economies alike, cities struggle with the dual challenges of housingtheir poorest citizens and providing housing at a reasonable cost for middle-income households.

In a new McKinsey Global Institute report, A tool kit to fix California’s housing gap: 3.5 million homes by 2025, we look specifically at the US state of California and offer remedies for fixing a chronic housing shortage. Our objective is to provide rigorous, fact-based analysis on a charged issue, and to present a practical blueprint for how cities, state authorities, the private sector, and citizens can work together tounlock housing supply and ensure housing access.

To understand the nature of the problem, we built a quantitative model to identify California’s housing affordability gap by household and location. To do this, we segmented the state’s more than 12 million households into 34 housing markets and 16 income bands, and assessed each household’s ability to afford housing in their local market. We learned that 50 percent of California’s households cannot afford the cost of housing in their local market. Virtually none of California’s low-income and very-low-income households can afford the local cost of housing.

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