California's Housing Crisis Fuels Nation's Second-Highest Poverty Rate

High housing costs are a significant driver of poverty in California, contributing to the state's second-highest rate of housing-driven poverty in the nation, behind only Hawaii. According to an analysis by the Pew Research Center, housing costs account for 30% of all poverty and 36% of childhood poverty within California.

This places California second only to Hawaii, where housing costs are responsible for 34% of overall poverty and 42% of childhood poverty. The study, conducted by Zachary Parolin, a professor at the University of Oxford, examined the impact of housing costs on poverty in the ten states and Washington D.C. with the largest proportions of poverty attributed to housing expenses.

Nationally, a substantial portion of income is dedicated to housing. A 2025 Harvard study indicated that half of all renters spend at least 30% of their income on rent. California's median gross rent stands at $2,104, making it the third-most expensive state for housing costs, according to a July report from Investopedia.

Parolin's research suggests that a reduction in housing costs could significantly alleviate poverty. In California, a hypothetical 20% decrease in rent would lower the state's overall poverty rate by 21% and child poverty by 26%. This reduction would effectively provide residents with an additional $5,061 in annual income.

Across the ten states examined in the study, a rent decline would lead to a poverty rate reduction of at least 18%. Parolin noted that the impact of such a decrease would be comparable to the 2021 expansion of the child tax credit, which provided a substantial financial boost to families with children.

The study also identified contributing factors to high housing costs, including restrictive land-use regulations, stringent building codes, and parking mandates, all of which can impede the construction of new housing and inflate prices for existing properties. Conversely, cities that have updated zoning codes and permitting processes, such as Austin, Minneapolis, Houston, Raleigh, North Carolina, and New Rochelle, New York, have seen improvements in housing affordability.