Putting a roof over your head in the Golden State doesn't come cheap. Even with the second-highest unemployment rate in the country (after Nevada) and one of the highest rates of home foreclosures, California still remains among the most expensive states in the country to live in. The median home value here is 1.8 times the national average.

and the HUD-defined fair-market rate for a modest two-bedroom unit plus utilities is about $1,360 (compared to $960 nationally). The state has six of the top 10 most expensive home-buying markets in the country and five of the top 10 rental markets.

Why so pricey?

Much of it comes down to basic supply and demand: Despite its many economic and fiscal challenges, California remains a highly desirable location, and there are still lots of people and businesses willing to pay a premium to be here. And despite the high number of foreclosures in recent years, residential vacancy rates are among the lowest in the country. Meanwhile, a variety of factors restrict housing construction: strong land-use regulations and building codes on one hand and physical barriers like mountain ranges in Southern California and the Bay-Delta estuary in the North. The recession and collapse of the housing market led to a plunge in new residential projects. In 2009-10, the state recorded the lowest number of new housing permits since it began keeping records more than a half-century ago.

So we’re looking at a state where housing costs remain high largely because new construction isn't keeping up with demand. It's also a place where unemployment is high and wages have not kept pace with housing costs. On top of all that, state and federal subsidies for affordable housing have suffered big cuts. The Golden State can be a tough place to keep your head above water.

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And then there's the Bay Area. . .

With nine counties, 101 cities, and more than 7 million residents spread over 7,000 square miles, the Bay Area is one of the most expensive places in the United States to rent or buy a home. As of October 2011, the Bay Area median home price was $350,000, down from a 2007 high of $665,000. The HUD-defined fair market rate for a modest two-bedroom apartment and utilities ranges from about $1,260 in the Vallejo-Fairfield area to about $1,830 in Marin, San Francisco, and San Mateo counties. According to an analysis from the National Low Income Housing Coalition, more than half of all Bay Area renters spend more than 30 percent of income on housing—the upper limit of what HUD considers affordable.

To an even more dramatic degree than the rest of California, housing demand in the Bay Area outstrips supply, and the availability of affordable housing has sunk to a record low. Only about 15 percent of all are households able to afford a median-priced home here. This disproportionately affects lower-income families, many of whom work in the central Bay Area but have been forced to as far away as the Central Valley to find housing they can afford. The migration to cheaper areas carries its own steep cost. In 2009, the Urban Land Institute reported that Bay Area households spent an average of about $13,400 a year on transportation.
What is "Affordable Housing," anyway?
The U.S. Department of Housing and Urban Development considers a home affordable if a household pays no more than 30 percent of its gross income on a mortgage or rent and utilities. So, if you live in a one-bedroom apartment and your rent and utilities come to $900 a month, you'd need to be making a monthly wage of at least $3,000, or a yearly salary of at least $36,000, for your unit to be considered affordable. For a $2,000 monthly mortgage or rental payment, your monthly income would need to be $6,660 or about $80,000 a year.

Developments specifically intended as affordable housing are usually formed through a public-private partnership and generally created by a nonprofit developer using a combination of private funding, government subsidies, and rental income.

What do local governments need to do about affordable housing?
California law requires every city and county to adopt a housing element as part of its general plan and revise it every five years. The law aims to ensure that local governments plan for the housing needs of everyone in the community, whatever their income, and requires them to adopt land-use and other regulations to “create opportunities for, and … not unduly constrain, housing development. Regional planning councils use state housing need estimates to assign housing unit goals or allocations to each city or unincorporated area in their area. Noncompliance and weak enforcement of the law have been an ongoing issue in many jurisdictions.

In the Bay Area, the regional council is the Association of Bay Area Governments. In 2007 it released a Regional Housing Needs Allocation and made projections through 2014 (the projections will be revised next year). In the Bay Area as a whole, the report anticipates the need to create 214,500 new housing units by 2014. Of those, nearly 49,000 should be for those with very low incomes (household incomes 50 percent or less than median income); about 35,000 for low income residents (between 50 percent and 80 percent of median income); roughly 41,000 for moderate-income residents (80 percent and 120 percent) and just over 89,000 for above-moderate income residents (more than 120 percent).

What's the deal with "inclusionary housing"?

Certain city or county ordinances require that a specific portion of new housing construction be affordable to low and moderate incomes residents. Also called inclusionary zoning, the goal is to increase the supply and distribution of affordable housing by giving private market developers incentives that reduce their construction costs. More than 100 jurisdictions statewide have adopted inclusionary housing ordinances.

Affordable housing resources

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Why Is It So Darn Expensive to Live in California?