The case for more housing in Contra Costa County

​There’s a very simple lesson in economics: scarcity drives price. Take a good that most people need, like food, water, or even flashlights, and if there’s a run on that good causing a shortage, price will shoot up.

That’s what’s happening right now in real estate throughout the Bay Area but particularly in Contra Costa County. As you can see in the graph above, median home prices right now are near the all-time high set in 2006. This is driven by a shortage of housing, low interest rates, and the very desirable area we’re so lucky to live in. People want to live here, and many can pull the cash together to buy in, but there’s not a lot of housing inventory so prices continue to go up.  

If you’ve tried to buy a house here recently then you know what it’s like. You go to an open house, you see a bunch of other young families pull up in BMWs and Teslas, and you shudder to think how much more over asking you’re going to have to offer just to make it to the next round of bidding. Homes don’t sell for asking anymore. In fact, savvy real estate agents will list at a “reasonable” price simply to create a bidding war between desperate buyers. Low mortgage rates and high paying jobs exacerbate the problem. 

Predictably, as these prices are increasing, the rate of home ownership has fallen from 72% in 2009 to 64% in 2016.

Not everyone gets a high paid tech or medical job. These are competitive too, so a lot of couples decide to rent rather than buy and wait for the market to cool down. That trend is clear in this chart above. What’s less clear is what we can do to fix it. New housing permits have been steadily rising since 2008 but we need to do more.  

This statistic from the San Jose Mercury News should raise an alarm:

“In California, the percentage of residents able to buy a single-family home has hit its lowest point — 26 percent — since the first quarter of 2008, when the residential housing industry was beset by inflated prices and the subprime mortgage crisis.” 

The median home price in the Bay Area is now over $1M. That means a household needs $220K of income in order to afford the $5,500 mortgage payment and still have money left over for other necessities. Add on top of that school debt, a car payment, and child care, and you’re looking at more like $350K of household income — just to make ends meet. It’s crazy. 

Fixing the housing problem on the supply side 

We need more high-density housing near transportation. A portion of new units should be affordable, but more importantly we need to increase the supply of housing so pricing pressure gets some relief. 

Not everybody will be able to afford to live in Contra Costa County, much less the Bay Area. It’s an unfortunate consequence of living in a very desirable area: good climate, good jobs, and a lot of natural beauty. We can’t create a utopia here but we can certainly do a better job of making our county more accessible to families outside the top 10% of incomes. 

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