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Whether renting an apartment or seeking to purchase a home, Californians face very high housing costs in many parts of the state.

High Rents Are Unaffordable to Households with Low and Moderate Incomes

Typical rents for a modest two-bedroom apartment in the areas where nearly two-thirds of Californians live are $1,500 or more per month — a level that is unaffordable for residents with low and moderate incomes.[1]  Affordable housing costs are defined by the US Department of Housing and Urban Development (HUD) as costing 30 percent or less of household income. By HUD’s standard, a family would need at least $60,000 in annual income to afford a monthly rent of $1,500 — an income that would require 110 hours of work per week at the current state minimum wage of $10.50 per hour.[2]

However, rents vary substantially across California. Rents are highest in coastal urban areas, while rents in the Central Valley and in northern inland areas are significantly less expensive, in many cases less than $1,000 per month for a modest two-bedroom apartment. Nonetheless, even these more affordable rents are beyond the reach of many Californians. Rent that is affordable for a full-time minimum-wage worker can be no more than $546 per month — which is lower than HUD’s two-bedroom Fair Market Rent in every part of California.[3]  This means that a single parent working full-time at minimum wage cannot expect to afford a modest two-bedroom apartment for her family anywhere in California.

High Home Prices Put Ownership Out of Reach for Californians With Moderate Incomes

For many middle-income Californians, buying a home is an important goal and part of achieving the “American dream” — but home purchase prices are out of reach for many households with moderate incomes.

Two-thirds of Californians live in areas where the median sales price for a single-family home is $500,000 or more. To purchase a half-million-dollar home while keeping housing expenses to no more than 30 percent of income requires an annual income of roughly $145,000, well over twice the state median household income. In addition to the high annual income required to afford monthly ownership expenses, making a 20 percent down-payment on a home that costs half a million dollars requires $100,000 in savings. Furthermore, nearly 1 in 10 Californians live in a county where the median sales price for a single-family home is $1 million or more — only affordable to households with annual incomes of roughly $244,000 or more, with $200,000 in savings required for a 20 percent down-payment.

Like rents, home sales prices vary greatly throughout the state. In many inland areas of the state, typical home prices are less than $250,000. However, these less expensive areas tend to have substantially lower household incomes than the more expensive parts of the state. In fact, even in the county with the least-expensive median home price (Lassen County), the income required to afford the median-priced home is more than 150 percent of the local median income.

Policies That Slow the Growth in Housing Costs Can Help Families and the State Economy

California’s high housing costs create serious burdens for families and individuals with low incomes, who are likely to struggle to afford typical rents even when working full-time. Those with moderate incomes are affected by the state’s high housing costs as well, as high home sale prices put the dream of homeownership out of reach for many. High housing costs can also restrict the ability of families to relocate to access jobs or move close to family, and can push families to live farther from their jobs, leading to longer commutes, which cause increased pollution and reduced time with family. High housing costs also negatively affect the state economy by making it more difficult for employers to recruit workers and deterring individuals from moving to or remaining in California, thus limiting the available labor force and dampening economic growth.

Policy solutions are urgently needed to prevent housing costs from further escalating and to make more housing available that is affordable to lower-income households. Strategies such as subsidizing the development of affordable housing and facilitating more private housing production can help increase the supply of housing, including units affordable to residents with low incomes, thus reducing pressure on costs. These and other policy approaches need to be seriously considered in order to address the negative impacts of California’s high housing costs.


[1] Rents reflect Fair Market Rents (FMR) for 2017, published annually by the US Department of Housing and Urban Development. FMRs are based on the 40th percentile (in a few cases 50th percentile) of gross rents, or rent including utilities, paid by renters within a specific metropolitan area or rural county who moved into their housing units within the past 15 months. FMRs are broadly representative of typical rents paid within a metropolitan area, and are adjusted by HUD to account for expected inflation in housing costs, but they may be lower than the current asking rents for vacant apartments in particularly high-demand cities or neighborhoods within a larger metropolitan area, or in areas where asking rents have been increasing very rapidly.

[2] Minimum wage as of January 1, 2017 for employers with at least 26 employees. See

[3] Assumes 40 hours of work per week at the $10.50 minimum wage for employees of large firms as of January 1, 2017. See

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