Housing Costs and Higher Education

Owning a home has long been part of the American dream. But with the state’s high housing costs, homeownership is difficult for many Californians to achieve. In a recent PPIC Statewide Survey, more than half of renters say the cost of housing is making them seriously consider moving away from the part of California they live in now, with most of those indicating that they are thinking of leaving the state.

Homeownership rates are substantially lower in California than in the rest of the United States (54% vs. 63% in 2016, according to the American Community Survey). But one group in California fares relatively well with respect to homeownership: college graduates. Among heads of household with at least a bachelor’s degree, almost two-thirds own rather than rent, compared to less than half of high school graduates. The higher rates of homeownership among college graduates are a consequence of their economic success. As shown in other PPIC research, college graduates have much higher incomes and lower unemployment rates than other Californians, enabling many of them to purchase a home.  Owning a home, in turn, often leads to greater wealth. Indeed, the higher net worth of college graduates in California is strongly tied to homeownership.

Of course, housing markets are regional, and the coastal areas of California are less affordable for everyone. The five counties with the lowest homeownership rates are all in coastal areas with high housing prices. But even in those counties—with the notable exception of San Francisco—over half of college graduates own a home. At the other extreme, counties with the highest homeownership rates are primarily suburban counties, including some with high housing costs. About 70% or more of college graduates in these areas own a home.

California policymakers have recently enacted a series of measures designed to increase the supply of housing, with a focus on affordable housing units. Certainly, the state’s housing crisis cannot be alleviated without building more housing. But while higher education is not often considered part of a housing agenda, it has played an important role in shielding many Californians from the state’s dramatic increases in housing costs. Because of the labor market advantages experienced by college graduates, many have been able to purchase a home, giving them more stability in their housing costs and allowing many of them to build wealth.