California is in the midst of a housing affordability crisis. And whether you are renting or buying, “the salaries that people once strived for often are no longer enough,” reporter Steve Large with CBS News Sacramento said.
Household income levels — based on the latest data from California’s Department of Housing and Community Development — are used to determine eligibility for certain housing assistance programs.
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Some of those income levels at which people qualify for low-income housing assistance are “mind-boggling,” Chelsea Carmack, who recently moved to California, told CBS News Sacramento.
In the Bay Area, for instance, the low-income threshold for individuals is $111,700 in Santa Clara and $109,700 in San Francisco and San Mateo counties.
“I love the weather,” Carmack told Large, adding that when it comes to finding housing, “it’s been very challenging to adapt to the higher cost of living.”
Now her California dream is simply “to survive.” That applies to many Californians.
Why many Californians are cost-burdened
The U.S. Department of Housing and Urban Development considers homeowners cost-burdened if they spend more than 30% of their monthly income on housing, including utilities. They’re severely cost-burdened if that figure tops 50%.
These households “may have difficulty affording necessities such as food, clothing, transportation and medical care,” according to HUD.
In California, where homes cost about twice as much as the typical U.S. home, 41.1% of households were cost-burdened in 2023 — the highest proportion in the country, according to California’s Legislative Analyst’s Office (LAO) housing affordability tracker.
LAO also found that the annual household income needed to qualify for a mortgage on a mid-tier California home in March 2025 was about $234,000 — more than double the state’s 2023 median household income of $96,500.”
If you’re looking for a starter home, you’ll likely need to earn at least $142,000. And if you’re eyeing a two-bedroom place, your monthly payments could be nearly double what you’d pay in rent.
While the situation in California is severe, affordability is an issue across the country. In 2023, 41.8 million people — or 32.8% of all households — were cost-burdened. That includes just over half of renters (51.8%) and nearly a quarter of homeowners (23.3%).
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How to avoid being cost-burdened
Lenders generally require that your payments for principal, interest, taxes and insurance don’t exceed 25% to 28% of your gross monthly income. Combined with long-term debt, your total obligations usually shouldn’t exceed 33% to 36%.
These are useful limits, but it’s a good idea to stay well below them if you can. Consider your lifestyle and other financial goals.
For example, are you willing to skip dining out to afford a bigger home? Do you want enough room in your budget to max out your 401(k) and save for retirement?
Start with your take-home pay. Build a budget that accounts for your lifestyle, fixed costs and priorities, then decide what you can comfortably afford in housing costs each month. Factor in not just your mortgage but utilities, insurance and maintenance. Make sure you have wiggle room in case rates or costs increase.
Also consider upfront costs like legal fees, moving expenses and renovations. If you’re a first-time buyer, you may also need new furniture and household basics.
Saving for a larger down payment can help reduce your monthly costs. Paying down other debts could free up more income and improve your credit score, which may lower your mortgage rate. And don’t forget an emergency fund — aim to cover three to six months of expenses. That way, if you lose your job or face a financial setback, you can stay afloat without piling on more debt.
What if you’re already cost-burdened?
If you’re already house-poor, start by creating a budget and cutting unnecessary spending. You might need to boost your income with a new job, side gig or second job.
To ease housing costs, consider getting a roommate or renter. Downsizing, refinancing or relocating could also make a big difference. A move to another state might be worth considering if your job and lifestyle allow it.
Some states have high rates of cost-burdened homeowners — like California (31.9%) and New York (28.2%) — while others, such as North Dakota (15.6%) and West Virginia (14.6%) have much lower rates.
That said, avoid frequent moves, which come with added costs. And try to resist lifestyle creep — upgrading your home every time your income rises can trap you in a cycle of spending.
You need a place to live — but you also need to live. Make sure your housing costs align with your overall financial plan so you can still meet your other life goals.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
