California's Sliding Homeownership Ladder

TERNER CENTER FOR HOUSING INNOVATION UC BERKELEY, MAY 2023

Highlights

Homeownership in California continues to be eroded: 43.5 percent of people aged 25–75 were homeowners in 2021, down from 49.8 percent in 2000. The decline was even more pronounced for younger Californians aged 35–45, an age range when many people in other states become homeowners. For that group the share that owned a home declined from 49.5 percent to 39.7, almost 10 percentage points in just 20 years.

Figure 1. Trends in Homeownership Over Time in California

Homeownership in California is increasingly out of reach relative to the country: in 2021 the share of adults who own their home in California was just 43.5 percent, more than 15 percentage points lower than the rest of the United States, which is the largest the gap has ever been. In California, the age at which more than half of residents are homeowners is 49; by comparison, across most of the United States that age is 35.

Figure 2. Changes in the Homeownership Rate Over Time in California by Age

The ability to afford a home, as opposed to the desire to own one, accounts for most of California’s homeownership gap versus the nation: while the typical timing of life cycle milestones such as marriage and childbearing can also influence rates of homeownership, most of the gap follows from residents’ financial ability to afford a home in the state. We estimate the difference in financial ability to afford a home accounts for 55.6 percent of the observed difference in homeownership rates between residents of California and the rest of the U.S. (ages 25–75).

How much would slower housing price growth have helped? Had housing prices in California risen from 2000 to 2021 in line with those in the rest of the country, about half (48 percent) of California’s decline in homeownership rate over the period could have been averted.