House‑Poor, State‑Rich: Why California Has No Incentive to Drive Down Housing Costs

California politicians talk about “affordable housing” the way an arsonist talks about fire safety. They hold press conferences, pass new programs, and insist they care about working families. At the same time, they quietly build a political and financial system that depends on your home staying expensive, not getting cheaper.

The uncomfortable question I raise is this: what if California’s ruling class does not just tolerate high housing costs, but is structurally entangled with them? From zoning rules to environmental and coastal regulations, to shared‑appreciation schemes like the Dream For All program, the state and its institutional allies have put themselves on the side of permanently high prices. That is the big lie at the heart of California’s housing debate.

Scarcity By Government Design

If California wanted cheaper housing, it would do the obvious thing: lower the barriers to entry and let people rapidly build supply. Instead, the state has spent decades doing everything it can to stop that from happening, and the only real “relief” we have seen is families fleeing the state. Housing did not soften because Sacramento got smarter. It marginally softened because people finally gave up and left.

California’s own housing department estimates the state needs on the order of 180,000 new homes a year just to keep up, yet in recent years it has often produced well under 100,000 units annually. Local zoning freezes huge swaths of land into single‑family use, and makes multifamily and “missing middle” housing rare exceptions instead of the default near jobs and transit.

Layers of discretionary review, lawsuits, and process add years of delay and drive sky‑high soft costs, which scare off all but the largest and priciest projects. Scarcity is not an accident here; it is state and local policy. When you run a big, dynamic economy on a deliberate housing shortage, you do not get “charm” and “character.” You get bidding wars, rent burdens, and a generation locked out of ownership while insiders sit on appreciating assets.

House‑Rich Voters Must Stay Rich (On Paper)

Once scarcity pushed prices through the roof, a lot of ordinary Californians woke up “house‑rich” on paper. They did not engineer that outcome. They bought homes under the rules the state wrote, then watched those homes inflate because Sacramento refused to fix the supply side.

For many long‑time owners, their primary residence has simply become their retirement plan by default. It is the biggest line on their personal balance sheet because everything else in California is so expensive. Because Sacramento kept ratcheting up taxes and mismanaging costs, voters finally drew a line with Proposition 13, locking in predictable property‑tax bills and protecting themselves from being taxed out of their homes, even as their paper equity grows.

The tension that this creates is political, not moral. A serious price correction would still feel like a pay cut and a threat to their future plans, so of course people are wary of anything that sounds like it might knock down the one asset that seems to be working for them. Sacramento knows this, and it would be hard to pretend that it has no impact on how politicians think about housing.

These homeowners are not an organized bloc. They are a large share of normal voters who understandably protect the nest egg they built under a broken system. The part most politicians will not say out loud is this: you cannot make housing truly affordable for people who do not own yet without trimming the windfall created by decades of policy‑driven scarcity.

The tragedy is not that voters used tools like Prop 13 to protect themselves from an overreaching state. The tragedy is that Sacramento took that landscape and chose to paper over its failures with price‑supportive spins and gimmicks, rather than finally clearing the regulatory choke points that made housing scarce in the first place. Instead of owning its role in creating the shortage or putting real reforms on the table that would actually allow rapid, broad‑based new supply, it reaches for short‑term, crowd‑pleasing moves to massage voters and keep the current price structure intact.

Government Budgets Love High Values

California’s fiscal layer is rotten in a way that goes beyond bad spreadsheets. It is political, and it starts with the way the public sector treats high property values as a feature, not a bug.

California’s public sector has quietly grown addicted to expensive dirt. Local governments lean heavily on property‑related revenues and transaction fees; high nominal prices mean healthier assessed values and stronger‑looking tax bases, even under rate caps. Big housing bonds and local revenue measures are easier to float and service when property values stay elevated, because nobody selling debt wants to see the underlying tax base deflate. New housing finance authorities and “excess equity” concepts only pencil out if there is plenty of equity sitting in existing projects and stabilized properties, which depends on valuations that stay high and keep creeping up.

Underneath all of that sits a political structure that almost guarantees the taxpayer loses. Public‑sector unions have become one of the most powerful players in California politics, collecting an estimated 900‑plus million dollars a year in dues and directing hundreds of millions into campaigns and lobbying. It has always been odd to me that we allow those unions to bargain across the table from politicians whose campaigns and careers are so heavily supported by those same unions. The taxpayer is supposedly “represented” in that negotiation, but their only voice is a political class that is bankrolled by the other side. At some point, that starts to look worse than taxation without representation, because the people paying the bill are effectively locked out of the room while their supposed representatives answer to the funders across the table.

Once budgets, borrowing, and labor deals are built on the assumption that the property‑tax base will keep expanding, broad price relief is treated inside the system as a threat, not a victory. The class that runs California’s institutions would rather manage the symptoms of high housing costs than disturb the revenue streams and promises that ride on top of those costs, which is exactly why Sacramento keeps finding new ways to live off an overpriced housing market instead of allowing real, abundant supply.

Regulatory “Protections” Are Really Supply-Stifling Burdens

California loves to brag about its layers of “protections.” In practice, those protections turn into slow‑motion bans on rebuilding and new construction, which is great if you already own in a hot zip code and terrible if you are trying to get back into a home or build one in the first place.

Look at Los Angeles after the recent wildfires. The mess got so bad that Sacramento had to suspend some of its own rules. In 2025, the governor issued executive orders temporarily waiving portions of CEQA and the Coastal Act and fast‑tracking building codes so fire victims could rebuild homes that had already been there. State releases brag that fire‑rebuild permits were being issued in under three months on average, precisely because the state paused the very processes that slow normal projects to a crawl.

That is just to get people back into homes they already had. For new market‑rate projects, the timelines are even worse.

One multistate construction analysis found that taking a typical multifamily project from concept to completion in California now averages close to 49 months, with roughly 28 months eaten by predevelopment, permitting, and approvals, and about 21 months for actual construction. The same report put Texas at around 27 months total, roughly 22 months faster than California, with average impact fees under 1,000 dollars per unit in Texas compared to roughly 29,000 dollars per unit in California. On the ground, developers report that a builder in Houston can get permits in a matter of weeks and complete a project in under a year, while a similar project in California can spend a year or more just getting to permit issuance.

This is not because it somehow takes longer to pour concrete in California. It is because our process is designed to be a weapon.

Critics of California’s environmental review law argue that CEQA and related tools have been repeatedly weaponized against housing, adding years of delay even when projects comply with local plans. CEQA defenders counter that only a small fraction of projects are ever litigated, and that in one sample year, less than 10 percent of permitted housing units were subject to CEQA lawsuits. Either way, the combination of long predevelopment cycles, lawsuit risk, and high local fees makes many modest‑margin projects uneconomic and tilts the field toward high‑end product.

When you stretch predevelopment out to two‑plus years, pile on legal uncertainty, and jack up fees, you are not “protecting the environment” in any meaningful way on a burned‑out lot in LA. You are protecting existing values by making it painfully slow and expensive to add new supply.

The result is simple. In California, a normal family trying to rebuild after a fire or get a modest new home approved can get stuck in a 14‑ to 24‑month maze of predevelopment and permits before the first shovel hits the ground. In Texas or much of the South, the entire process from permit to move‑in can be shorter than California’s predevelopment timeline alone.

Sacramento calls this “process” and “protection.” On the ground, it functions as a value‑protection machine: it slows rebuilding, strangles new supply, and keeps land and existing homes in favored areas scarce and expensive, which is exactly what a government that is structurally long housing values has come to rely on.

Dream For All Makes Sacramento Long Your House

If you want one program that exposes California’s true position on housing, look at Dream For All.

On the surface, it sounds compassionate. First‑time and first‑generation buyers can get up to 20 percent of the purchase price (capped around 150,000 dollars) to help with the down payment and closing costs, paired with a CalHFA first mortgage. The marketing talks about “unlocking the dream” and “creating opportunity” for people shut out of ownership.

The fine print tells a different story.

The assistance is a shared‑appreciation loan. When the buyer sells, transfers, refinances into a non‑CalHFA loan, or pays off the first mortgage, they must repay the original 20 percent loan plus a share of the home’s appreciation, typically 15–20 percent depending on income. Program handbooks and CalHFA board materials describe it explicitly as a revolving fund: the agency recovers the original down payment plus its appreciation share, then recycles that money to assist the next wave of buyers.

That structure creates risk and dependence on high prices on both sides of the deal.

For the buyer, they are entering one of the most expensive housing markets in the country with extra leverage and a silent partner on their cap table. If the home appreciates strongly, they give up 15–20 percent of the upside to the state; if it stagnates or dips, they still carry the first mortgage and must repay the original assistance when they sell, leaving them with much less equity than they might have expected. These are exactly the households that did not have the financial strength to buy on their own at current prices, largely because of the cost of living and housing inflation California policy helped create. A flat market or mild downturn can turn what was sold as a “wealth‑building” step into a fragile balance sheet with little cushion.

For the state, Dream For All is not just a grant program; it is an asset engine. CalHFA’s own materials describe a long‑term vision where the shared‑appreciation portfolio supports a revolving fund and, in early proposals, could even be paired with roughly 500 million dollars per year in revenue bonds and tens of thousands of assisted loans over decades. Each shared‑appreciation loan is a long‑duration claim on future cash flows: the state is owed its 20 percent stake plus its share of appreciation whenever those homes resell, refinance, or reach maturity, subject to caps. Collectively, thousands of such positions form an asset pool that becomes more attractive to investors or as collateral if values rise and turnover stays healthy.

The incentives are obvious. The more homes the state can pull into this structure and the more those homes appreciate, the larger and more tempting that pooled stream of future payoffs becomes as something Sacramento can budget around, borrow against, or eventually package for investors. A broad price correction, by contrast, would not just dent some abstract return; it would shrink the state’s claim on private property and expose how much of its “affordability” strategy depends on homeowners continuing to carry inflated values.

That is what makes Dream For All so revealing. If California ever got serious about abundant housing and real price relief, it would be putting two sets of balance sheets at risk at the same time: the new homeowners who were invited to stretch into an already overpriced market, and a government that has deliberately built a portfolio of liens on private homes and come to depend on that pool for future cash flows. That is not neutrality; that is the state inserting itself into your deed and then needing your neighborhood to stay expensive.

So Dream For All does more than subsidize demand. It potentially turns thousands of individual houses into part of a state‑managed asset pool. The public line is, “We helped you buy into the dream.” The balance‑sheet reality is, “We tied your largest private asset into our financial machinery, and now we cannot afford for its value to come down.”

Real Price Relief Looks Like Self‑Harm To The System

Stack all the pieces together, and the pattern is not subtle.

California has a regulated shortage that keeps supply tight and prices high. Ordinary homeowners, pushed into relying on their house as a retirement plan, used tools like Prop 13 to protect themselves from an overreaching state, and now understandably guard that nest egg. Local budgets, bonds, and labor deals lean on an ever‑expanding property‑tax base, which is easier to maintain when assessed values stay elevated. Coastal rules, CEQA abuse, and permitting mazes work as value‑protection machines, slowing rebuilding and new supply in exactly the places where demand is strongest. And now Dream For All has turned thousands of individual homes into part of a state‑managed asset pool, where Sacramento holds equity‑like claims on future appreciation and quietly builds a balance sheet that benefits from high values.

Seen from inside that system, real price relief does not look like success. It looks like self‑harm.

Any serious package that actually unleashed large‑scale building, cut regulatory moats down to size, and allowed prices to normalize would shrink the policy‑driven windfall that prior buyers have seen, tighten local budgets and complicate repayment for bonds and obligations that assumed a growing property‑tax base, erode the value premium in protected coastal and high‑amenity areas that regulators spent decades locking in, and devalue parts of the state’s own housing‑linked portfolio, including shared‑appreciation claims under Dream For All that were built on the expectation of persistent appreciation.

So instead of confronting that tradeoff honestly, Sacramento does what it always does. It reaches for short‑term, crowd‑pleasing moves: lottery‑style down‑payment programs, one‑off rent interventions, new “protections” that add more process but almost no net units. It manages the pain of high housing costs while leaving in place the policies, revenue dependencies, and asset structures that require those costs to stay high.

That is why real price relief is treated like a threat. In a system where the state has made itself structurally long California housing, cheaper homes are not just a political headache. They are a direct hit to the very machinery Sacramento built on top of an inflated market.

In that world, Sacramento is just providing lip service to the very voters who need real house‑price reform and a lower cost of living, while the machinery of government quietly depends on keeping both as high as it can get away with.

California Must Choose Between Abundance And Asset Inflation

If you strip away the spin, California really does face a fork in the road. The good news is that there is a free‑market, pro‑owner, pro‑future‑buyer path out of this mess that can work for everyone, including today’s homeowners whose “wealth” is tied up in an illiquid asset that still needs a willing buyer on the other side someday.

One path is genuine abundance. That means legalizing a lot more building in the places people actually want to live and work, so new supply is near jobs and opportunity, not dumped on the fringes; slashing process abuse, defanging weaponized environmental law, and putting strict time limits and clear, by‑right rules on housing approvals so a normal project can be permitted in months, not years; and accepting that as supply finally catches up, prices may flatten or even fall in real terms, which trims some paper gains but makes it possible for the next generation to buy without state “equity partners” attached to their deed.

Critically, that path is not anti‑homeowner. In a free‑market, high‑production world, today’s owners still have valuable assets, but those assets are supported by real demand and a healthy economy, not by artificial scarcity and a government that has to prop up prices forever. And because housing is illiquid by nature, owners ultimately benefit from a market where there are enough future buyers who can afford to pay a fair price without being crushed by debt or needing Sacramento at the closing table.

The other path is permanent asset inflation, which means keeping scarcity entrenched, preserving regulatory moats, and relying on slow, expensive processes that choke new supply; layering on complex programs that help a lucky few climb onto an overpriced ladder, while the state quietly skims the upside and builds portfolios of claims on private homes; and pretending to fight high housing costs while budgeting, borrowing, and “investing” on the assumption that those costs, and the tax base they support, will never truly come down.

Right now, California’s political class has clearly chosen the second path and is trying to sell it as the first. It is a policy choice and a profitable lie.

The only honest way forward is to admit you cannot have both permanently inflated home values and broad affordability. California can keep pretending your house is a lottery ticket that props up the budget and the political class. Or it can finally embrace a free‑market, abundance‑driven approach that treats housing as a basic good to be produced at scale, so owners have real, liquid markets in the future and the next generation can buy without needing the state as a co‑investor.

It cannot do both.

In my next piece, I am going to lay out that abundance path in concrete terms: how a pro‑market California could protect existing homeowners from tax raids, unwind the worst regulatory choke points, and build so much housing that we get back to a world where buying a home is normal again, not a state‑mediated lottery. Stay tuned.