According to a new and more comprehensive report issued by the U.S. Census, the three-year average poverty rate in California was 23.5 percent, the highest in the nation among the 50 states and District of Columbia. The new measurement statistics added 7.3 percent, or 2.7 million people, to the estimates of Californians living in poverty. How did this increase come about?
The bureau’s “official” ranking still has California tied with Indiana for the fifteenth highest poverty level, 16.3 percent, but that rate, like the official unemployment rate, has serious problems. The official poverty threshold is based on 50-year old formula that leaves out critical items such as payroll taxes, in-kind public benefits, expenses necessary to hold a job including transportation, the costs of child care, variation in medical costs, and, most of all, geographic differences in the cost-of-living across the nation – in particular for housing. There are a few more, but that’s enough to give you an idea. In other words, if you leave out the cost of everything but food we are fifteenth, if you include things most families need we are first – and in this case first is worst.
Recognizing that an official measuring stick was less than useful, the Census published a new Research Report in November, 2012 titled “Supplemental Poverty Measure: 2011” that took those benefits and expenses into account. D.C. was a close second at, 23.2 percent, followed by Arizona, Florida, and Nevada. The national average was 15.8 percent, but this is skewed by the states with larger populations – fully 40 states had recalculated poverty percentages below the national average. With a few exceptions, the new calculations lowered the poverty rate in states with lower costs of living and raised the rates in states with higher costs of living.
The problem in California is obvious – the cost of living is driven by the cost of housing. According to the California Association of Realtors, 80 percent of the families making a median income nationwide can afford to become first-time homebuyers; however, that number is closer to 50 percent in many parts of California, especially near job centers. Moving farther away reduces the cost of housing but increases the cost and time necessary for transportation.
Housing costs take a big bite out of local budgets too; the 3-year average shows that 46 percent of the households with a mortgage in San Benito County have owner costs exceeding 35 percent of income. And rentals’ costs had similar numbers. California only approaches national affordability rates in the Central Valley and the Inland Empire.
The state poverty level exists in spite of the significant public and in-kind aid. California’s cost for Health and Human Services alone is approximately $28 billion annually or 29 percent of the entire state budget second only to K-12 Education.
The key question is why is housing so unaffordable in many areas of California? The answer is that every aspect of the development process is expensive and eventually the cost must be borne by the homeowners and renters, which is everyone. Many of those costs are elective – in other words, we have chosen to put them in place via taxes, impact fees, environmental fees, location restrictions that limit supply, high overhead costs and even higher costs for government processes.
We made discrete decisions in all those areas and many more and the state’s poverty rate is primarily the collective consequences of all those choices.
Marty Richman is a Hollister resident.