San Diego

California owes its statehood in part to the 300,000 people who rushed in more than a century and a half ago, seeking their fortune in the Sierra Nevada’s golden foothills. Today the Golden State’s nonimmigrant population is shrinking by that amount every two years as the middle class rushes out in search of affordable homes—a resource just as coveted and now nearly as rare. Restraining the rise of home prices has become a priority for policy makers throughout the state, whose choice of solutions could form a template for addressing similar price surges nationwide.

The problem is worst on the coast, where employees of the booming technology industry and related fields are bidding up prices of the limited supply of homes. Reflecting on the pace of change in his city, San Diego Mayor Kevin Faulconer nearly stutters over his words. “The average price for a San Diego house is about $590,000,” he tells me. “In 2013, it was probably, what—no that’s right: about $370,000.” That’s a 60% increase. Up north in San Jose, already lofty home prices nearly doubled in the same period, topping out at a median $1.1 million last summer.

“This affects everyone, at all levels,” Mr. Faulconer stresses. Home prices are out of reach of even the upper middle class, driving away families and making it tough for employers to keep talent. This year the mayor ramped up his campaign to bring prices back to earth, aligning himself with a growing movement of urban reformers.

Mr. Faulconer argues that the problem is worsened by intentional limits on the housing supply. From coastal metropolises to sprawling bedroom communities, cities and towns have zoning ordinances that prevent or slow construction. “I saw it early on, when I was on the City Council,” he remembers. “Good projects would be stopped for Nimby reasons, political reasons.”