Economists Debate Merits of Building New Cities to Solve California's Housing Crisis

Proposals for entirely new urban centers face criticism over costs and feasibility, but some see potential benefits.

Published on Feb. 20, 2026

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California is considering ambitious plans to build entirely new cities to address its persistent housing shortage, with proposals for developments of up to 400,000 residents. However, these plans have faced criticism from economists who question their financial viability and whether they would truly solve the state's housing crisis. While some experts see potential benefits in creating new, transit-oriented communities, others argue the focus should be on improving conditions and development in existing urban areas.

Why it matters

The debate over new cities in California highlights the state's struggle to find solutions to its severe housing shortage and affordability crisis. The proposals represent a radical approach, but their success would depend on overcoming significant logistical, financial and political hurdles. The outcome of this debate could shape the future of housing and urban development in the state.

The details

California is considering plans to build entirely new cities, including a proposed development of 400,000 people north of San Francisco and another in Sonoma County. Proponents argue new cities could bypass constraints often faced in existing urban areas, but critics warn the projects would be costly 'boondoggles' given the state's projected population decline. Economists are divided, with some seeing potential benefits in creating transit-oriented communities, while others believe the focus should be on improving conditions in existing cities.

  • California's population growth has plateaued and may decline due to stricter immigration policies and slowing birth rates.
  • The proposals for new cities in California have emerged in recent years as the state grapples with a persistent housing shortage.

The players

Caroline Freund

An economist at UC San Diego who argues new cities are costly and require extensive coordination, suggesting the state should focus on improving the investment climate for existing businesses and housing.

David Ely

An economist at San Diego State University who believes new cities can foster economic growth, but only if infrastructure is feasible and businesses are willing to locate there.

Ray Major

An economist who cautions that investment in new cities would be a 'boondoggle' given projected population declines.

Alan Gin

An economist at the University of San Diego who points to the lack of affordable housing and the challenges of overcoming 'NIMBYism' in existing cities as reasons to consider new, transit-oriented developments.

James Hamilton

An economist at UC San Diego who welcomes new approaches to affordable housing, even if the success of a new city isn't guaranteed.

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What they’re saying

“We must not let individuals continue to damage private property in San Francisco.”

— Robert Jenkins, San Francisco resident (San Francisco Chronicle)

“Fifty years is such an accomplishment in San Francisco, especially with the way the city has changed over the years.”

— Gordon Edgar, grocery employee (Instagram)

The takeaway

The debate over new cities in California highlights the state's struggle to find solutions to its housing crisis, with experts divided on whether radical new developments or improving existing urban areas is the best approach. The success of any new city proposal would depend on overcoming significant logistical, financial and political hurdles, underscoring the complexity of addressing California's housing challenges.