A Booming Economy and Skyrocketing Home Prices: Nick Vertucci Breaks Down California's New Problem

The lack of affordable housing in California is approaching crisis levels, and Nick Vertucci believes that a drastic legislative reaction from Sacramento is imminent. The problem is most pronounced at the coasts - hot markets like Los Angeles, San Diego, San Francisco, and San Jose have seen housing costs increase as much as 75% in the last five years. The entire state is feeling the pinch, however. The median cost to buy a home in California is $500,000, double the national average. The lower-earning half of the state's population has little chance of home-ownership in the near future, many of them millennials and set to be the tax-paying bedrock of the state.

The problem manifests as rows of RVs parked along the gilded alleys of Silicon Valley. Construction is booming in Los Angeles, yet search and you will find hidden garden communities of people living out of vans. Professionals earning six figures commute hours to work.

By most indicators, California is booming. Tax revenue has never been higher, unemployment is down, per capita income is the highest in the nation. However, California also has the highest adjusted poverty rate in the nation, and beachfront property has not become any less desirable. Nick Vertucci predicts a serious correction on the horizon if something does not give.

Sacramento agencies have set targets for new housing construction every year. Like clockwork, the cities fall short. Nick Vertucci estimates that the 311,000 housing units delivered will not even come close to meeting the state's needs. Short-sightedness abounds. Projects are stalled and canceled at the local level. Developments routinely fall below the number of housing units allowed by zoning, limiting the housing capacity of increasingly-scarce developmental land for decades to come. Some cities have even gone for broke on office and commercial development, all the while failing to build the housing units needed to shelter the workers attracted to the jobs in those offices.

State politicians want to act. A bill to encourage large-scale lower- and middle-income housing development has passed the state senate and is in negotiations with Governor Jerry Brown. Direct spending on the building of new housing units is likely. The bill also proposes the radical step of taking the review process out of the hands of municipal groups and governments, giving the state sweeping authority on the approval of housing development plans. Effectively, local interests would no longer be able to use zoning, environmental, or procedural tactics to shelve housing developments they find threatening.

The opposing argument comes from city planning boards, mayors, and local community groups anxious to preserve the natural beauty and character of their hometowns - the "Not in My Backyard" coalition. To them, the proposed legislation a swipe at their right to make decisions about their own towns, as well as a windfall for big developers. Nick Vertucci pointed out that California Proposition 13 of 1978, which put a cap on property taxes, exacerbates this trend by encouraging homeowners to hold onto their homes as long as possible, enjoying property tax rates well below the national average.

These community groups are also voters who send legislators to Sacramento, so under normal circumstances, those state senators do not want to bite the hand that votes for them. However, Nick Vertucci's opinion is that a tipping point is approaching. Grassroots "Yes in My Backyard" and rent control movements are pushing back against entrenched societies of homeowners. These activists vote as well. In the same way that the recent droughts gave politician political cover to enact sweeping water-use laws, anger and frustration over high housing cost gives the government political cover to take sweeping action on housing development.

About Nick

Nick Vertucci is one of the most successful and prolific real estate investors in the United States. He was practically broke when he started, having lost everything in the dot-com bust of 2000, forced to start from scratch to provide for his three daughters. Through trial and error, over a decade of hard work and constant education, Nick Vertucci built a multimillion-dollar business on a simple, straightforward, scaling method of turning real estate investments into big profits. In 2017 he founded NV Real Estate Academy to teach others to take control of their financial destiny, provide abundantly for their loved ones, and live a life of prosperity they only dreamed of.