Davenport Institute

Research Reports

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Rewarding Ambition: Latinos, Housing and the Future of California

Joel Kotkin, Thomas Tseng, & Erika Ozuna

September 2002

INTRODUCTION

California's housing crisis is partly the product of auspicious circumstances — rapid economic expansion and population growth have elevated California's international prominence and position. But this growth and success is also creating the conditions for the state's immense housing shortages and out-of-control prices.

Providing housing for its diverse, burgeoning population impacts every aspect of California life. It determines increasingly where workers go, companies locate, and how attractive our communities are. Despite the urgency of the housing crisis, it has remained relatively low on the public policy agenda. Relatively scant attention and limited resources have been dedicated to addressing this crucial concern in Sacramento. Yet left unaddressed, California's housing crisis could have detrimental consequences for the Golden State for decades to come.

Rapid Economic Growth and Record Immigration

Emerging from a debilitating recession during the early 1990s, California has since staged a spectacular resurgence — becoming the nation's undisputed linchpin of the New Economy. Driven by the state's economic diversity, technological ingenuity, and a resilient entrepreneurial spirit, California returned to a path of sustained economic prosperity, becoming a virtual job-making engine fueled by vast pools of human capital from around the world. Employment soared in California — as 2.8 million new jobs were produced from the beginning of 1993 to mid-2002.⁵

Even as California rose from the shadows of retrenchment into economic prominence, it continued to be a primary destination for millions of newcomers from around the world in search of improved opportunities. During this period, the country as a whole experienced one of the greatest immigration booms in its history — adding 11.2 million new immigrants over the previous decade, a record since the passage of the 1965 Immigration Act.⁶ No part of the country felt the impact of this surge more than California, which brought in one-quarter of all these newcomers.

Today, one in four California residents are foreign-born, the highest percentage of any state. About 9 million foreign-born people live in the Golden State, more than twice the number for second-place New York.⁷ A majority of Californians are now non-White. Latinos and Asians comprise the fastest growing segments of the state's population, representing nearly 80 percent of all new immigrants between 1990 and 2000. By mid-century, the ascending Latino population will likely become the majority ethnic group in the state.

California's Greatest Challenge

Yet, for all its economic vibrancy and impressive growth — and due to it as well — California confronts a severe housing crisis that jeopardizes its own long-term economic health as it struggles for ways to house this growing population of 35 million. Population growth demonstrates no immediate signs of slowing down and is projected to top 50 million by 2040.⁸ This growth, combined with a severe shortfall in new housing supply, has spurred a price spiral that may slow but not reverse in the foreseeable future.⁹ 7 Rewarding Ambition: Latinos, Housing, and the Future of California Introduction

The problem is most acute among lower wage workers, such as in manufacturing and service positions, who are least financially equipped to cope with the fast-rising prices. This population, according to Milken Institute demographer William Frey, is disproportionately Latino and likely to remain this way for the conceivable future.

There is much at stake. How California's new civic, business, and political leaders tackle this critical issue will likely determine the course of the state's economic future and quality of life for decades to come. So daunting is the challenge posed by this housing crisis, the very well-being of the California dream itself is seriously threatened.

In order for California to continue its ascendancy as a preeminent center for economic vitality, innovation, and creative vibrancy in the new century, difficult decisions and actions will be necessary. Otherwise, we may very well redefine how Californians conceive the American dream — leaving millions of residents, a disproportionate share of them Latino, on the outside looking in.