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McKinsey Report Weighs Solutions For California's Affordable Housing Crisis

While access to affordable housing may have historically been thought of primarily as a problem for low-income households, in California, it affects people from all incomes with most Californians spending more than 30% of their take-home pay on housing expenses, McKinsey & Co senior partner Jonathan Woetzel told Bisnow. But there are opportunities to encourage affordable housing through more development that includes infill and transit-oriented projects.

Downtown LA

"It’s actually as much of an average-income burden as it is a low-income burden," he said. Some Californians are spending more than 50% of their pay on housing.

Woetzel is one of the authors of a report by the McKinsey Global Institute entitled Closing California's Housing Gap.

Middle-income earners in cities with households earning up to 115% of area median income, or $69,800/year, can't afford local housing costs, according to the report. Those cities include L.A., Anaheim and Long Beach.

In San Francisco, a household earning $140k/year, or 179% of the area's median income, faces the same problem.


Woetzel (above) said a significant amount of what Californians are paying in rent and high real estate prices is driven by the lack of new construction.

While there's no magic bullet to solve the current housing crisis, the report offers some solutions.

Woetzel said it's possible to "fill up the gap" by looking at solutions that include single-family homes in suburban communities, infill housing in downtown areas already zoned for multifamily, or in transit-oriented developments.

With such solutions, the state could meet a 3 million-unit housing gap by 2030, according to Woetzel.

The land is available to make it work, he said.


L.A. Metro Transportation director Phillip Washington (above) said TOD's are a "critical tool" for addressing the current housing crisis.

Most transit is in commercial corridors "that can sustain denser development, so the TODs tend to be denser and provide more housing units than projects in lower-density areas," Washington said.

TODs are also beneficial for many developers of affordable housing "because most public financing sources provide extra points for affordable housing projects near transit," he said.

L.A. launched a grant program six years ago for cities to do land use planning to remove regulatory barriers to TODs. Washington said 35 grants have since been provided across L.A. County.

Both Washington and Woetzel are scheduled to be among the panelists at the upcoming Bisnow L.A. State of the Market event at 7:30 a.m. Feb. 14 at the Century Plaza Towers.