California should focus on increasing housing construction rather than imposing more regulations to address the housing crisis.

California is facing an unprecedented housing crisis, with prices continuing to escalate uncontrollably. Recent data from Apartment List, referenced by the San Francisco Standard, indicates that asking rents surged by 14 percent between March and July, largely fueled by the influx of workers and capital from the burgeoning artificial intelligence sector. This sharp increase comes at a time when the state is grappling with an already constrained housing market.

While there are multiple factors contributing to the crisis, the issue of collusion among landlords has emerged as a concerning element. Reports suggest that some property owners and managers have utilized technology to share sensitive pricing and inventory data, thereby circumventing direct competition and further inflating rental prices. However, the central challenge remains the acute shortage of housing supply. California’s ambitious goal is to facilitate the construction of approximately 2.5 million new homes by 2030; yet, an analysis indicates that only five jurisdictions are currently issuing permits at a pace sufficient to meet state-mandated targets across all income categories. Alarmingly, less than one-third of municipalities are likely to meet their goals for market-rate housing.

The dynamics of supply and demand are at play here. When housing availability dwindles, existing property prices inevitably increase. Unfortunately, instead of focusing on building more homes, California’s policymakers have largely directed their attention toward implementing new housing regulations, particularly aimed at controlling rent-pricing algorithms utilized by landlords. This approach appears to have been ineffective. In 2024, San Francisco became the first U.S. city to prohibit certain rent-setting algorithms, yet reports indicate that no civil actions have been initiated under this law—while rental prices continue to rise unabated.

Proposed legislation aimed at banning landlords from pooling private data to coordinate pricing has missed the mark by targeting the tools used for pricing rather than addressing the underlying issue. Simply put, banning software that estimates market rents is akin to prohibiting weather forecasting because of the presence of rain.

To effectively tackle this housing crisis, California must prioritize the construction of new homes. This can be achieved by streamlining the approval process for new developments, alleviating regulatory constraints that delay projects, encouraging local governments to increase housing permits, and ensuring that zoning laws support the construction of homes in desirable areas.

There have been recent efforts in the state legislature to move in a positive direction. The 2023 state budget ushered in the most significant amendments to the California Environmental Quality Act in decades, allowing qualifying infill housing projects to bypass lengthy environmental reviews. Additionally, new zoning laws will facilitate denser developments near transit stops statewide.

Governor Gavin Newsom has also announced a substantial financial commitment, allocating nearly 9 million to expedite the construction of 1,700 affordable housing units. These initiatives reflect a growing recognition of the need for structural reforms that can expedite housing availability.

In order to resolve California’s housing scarcity, comprehensive and solution-oriented measures are essential. The state cannot rely solely on regulation to mitigate this issue; it must commit to a significant increase in housing development. As the situation continues to evolve, it is crucial for state lawmakers to embrace this mandate with the urgency it demands.

As California navigates this complex landscape, the necessary reforms and actions will only gain significance in addressing its housing challenges in the years to come.