We won’t solve the housing crisis if it’s illegal to pick up a hammer

As 2026 begins, the economic story remains the same: The rent is too damn high, and the dream of homeownership feels increasingly out of reach for millions of Americans. New data reveals that the typical age of a first-time home buyer has climbed to an all-time high of 40 years. And although policymakers throughout the country are recognizing the need to turbocharge residential construction, many states – including California – are failing to adopt reforms that could have a meaningful impact on housing prices.

The consensus solution to the housing crisis has focused heavily on zoning reform. “YIMBY” (Yes In My Backyard) advocates correctly point out that restrictive land-use laws, minimum lot sizes, and NIMBY obstructionism have strangled housing supply. Addressing these barriers is important. But the focus on where we can build ignores a critical bottleneck: who is allowed to do the building.

Every acre of land in America could be re-zoned for high-density housing, but if there are not enough electricians to wire the units, plumbers to install the pipes, or HVAC technicians to ensure they are livable, those homes will never be built.

The U.S. faces a severe labor shortage in the construction sector. Hundreds of thousands of additional workers are needed to fill current vacancies. A report from late 2025 by the Home Builders Institute estimated that this scarcity of skilled labor is costing the economy over $10 billion annually in lost production and higher costs. In California, more than 8 in 10 building contractors report having open vacancies for workers.

Why are construction workers in such short supply? While demographic trends, immigration policies, and other factors certainly play a role, many states’ labor markets suffer from a self-inflicted wound: excessive and inefficient occupational licensing.

At the Knee Regulatory Research Center, we study the effects of these regulations. Occupational licensing requirements apply to more than 1 in 5 U.S. workers across hundreds of different jobs – including many in the skilled trades. Licensing is often sold to the public as a way to ensure quality and safety, but research shows that entry requirements are often disproportionate to the actual risks and serve primarily to limit competition, deter entrepreneurship, and ultimately raise prices for consumers.

The public safety rationale for licensing is difficult to reconcile with the inconsistency of licensing requirements across different states. For example, only 26 states license home inspectors; 21 states license septic tank installers; 15 states license plumbing inspectors; and 12 states license apprentice gas fitters. Too often, California belongs to the minority of states where unnecessary restrictions limit opportunities to work. One study estimated that California’s occupational licensing rules lead to 196,000 fewer jobs.

If licensing these occupations were critical to protect consumers, why have so many states declined to do so? The current licensing landscape strongly suggests that many of these laws could be eliminated without jeopardizing safety.

Overzealous licensing also drives up housing prices by restricting worker mobility. Construction labor is highly localized; we need workers to move to where the building booms are happening. Yet the maze of state-specific licensing rules creates significant obstacles. If a worker in Nevada or Oregon wants to take a construction job in California, they may face thousands of dollars in licensing fees, months of delays, and new training requirements. Our research suggests that occupational licensing reduces interstate migration by as much as 7 percent.

This fragmentation is a disaster for housing affordability. When labor is artificially scarce and immobile, it becomes expensive. Those costs are passed to home buyers.

Fortunately, there is a policy fix: Universal license recognition (ULR). Under ULR, professionals with a valid out-of-state license and no disciplinary history can obtain a new license in a different state without re-testing or additional education. This simple reform doesn’t lower safety standards — it merely acknowledges that the skills required to wire a house or install HVAC ductwork do not change when you cross a state border.

States like Arizona, Idaho, and Pennsylvania have led the way in passing ULR legislation, and nearly two dozen states have followed suit. Their economies are already reaping the rewards: Research shows that ULR states experience an influx of skilled workers.

As California’s political leaders look to ease the housing crisis, they must look beyond zoning reforms. We need a labor market that is as dynamic as our housing needs. If we want affordable homes, we need to tear down the regulatory walls that are keeping builders out.

Liam Sigaud is a research analyst at the Knee Regulatory Research Center at West Virginia University.