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This is the second of a two-part series examining California’s affordability crisis under Governor Gavin Newsom. While this column goes into the specific policies supported by Newsom that have made California a much more expensive state than the rest of the continental United States, Part One details the actual car crash scene - how bad off we are compared to the rest of the country relative to affordability. You can read it here [ [link removed] ].
While afternoon columns at So, Does It Matter? are typically reserved for paid subscribers, today’s installment is being made available to all readers because of its national relevance and importance.
Gavin Newsom Did Not Inherit This Crisis — He Chose to Expand It
Gavin Newsom did not create every policy that drives California’s affordability crisis. The grounds for today’s cost structure predate his inauguration in 2019. Governor Arnold Schwarzenegger’s AB 32 launched the modern climate-regulatory state. Jerry Brown spent eight years accelerating it.
Where a new governor could have re-examined the direction, Newsom instead accelerated that policy trajectory. He did not slow, pause, or recalibrate the affordability machinery he inherited. He expanded it.
Today, Californians are paying the compounded price of that decision.
Energy Policy: From Climate Goals to Household Cost Shock
California’s modern energy cost structure began with AB 32, but under Gavin Newsom the state expanded and entrenched the cap-and-trade system at the center of today’s rate shock. Cap-and-trade functions as a state-controlled carbon market that requires utilities, fuel suppliers, and large emitters to purchase emissions permits tied directly to their energy production. Even after rebates, those compliance costs are embedded directly into rate structures and reflected in higher electric bills, gasoline prices, and the cost of transporting everyday goods.
At the same time, Sacramento has mandated that utilities rely on ever-higher percentages of renewable energy sources such as wind and solar while forcing oil and natural gas out of the system, even though natural gas remains far less costly and far more dependable for base-load electricity today. The cumulative effect has been a power grid that costs more to operate and is increasingly vulnerable to disruption.
Utility companies now operate within a policy environment where renewable integration, wildfire hardening, long-distance transmission buildouts, and regulatory compliance are loaded directly into customer bills. For many homeowners, monthly electric bills that once ran under $150 now routinely exceed $300 to $400 during peak months.
Fuel Policy: Why California’s Gas Prices Are Structurally Higher
California’s gasoline premium is not an accident of geography or global markets. It is the direct output of layered state policy: special fuel formulations, carbon pricing, a tightly constrained refinery system, and a tax structure stacked on top of all of it.
But during Newsom’s administration, the state leaned further into restrictions while simultaneously blaming oil companies and Washington whenever prices spiked. A governor who wanted to lower the cost of driving could have paused new mandates, encouraged refinery capacity stability, or temporarily suspended portions of the tax stack during price surges. Newsom chose not to.
Among the most consequential developments, Valero’s Benicia Refinery in Northern California is slated to shut down by April 2026. Phillips 66’s Wilmington Refinery near Los Angeles entered phased shutdowns in late 2025. Together, those two facilities represent a material portion of California’s in-state refining capacity. With that capacity removed from an already constrained system, gasoline supply tightens — and under California’s unique regulatory and fuel-blend regime, tighter supply almost always exerts upward pressure on prices at the pump. Californians live with the nation’s highest gasoline prices.
Housing Policy: Overregulation, Fees, Forced Density, and Locked-Up Land
For years, California’s housing market has been burdened by a growing tangle of regulation, fees, and state-imposed requirements that drive construction costs relentlessly higher.
During Newsom’s tenure, Sacramento adopted a far more aggressive regulatory posture toward housing development, attempting to force high-density projects into communities that do not want them while simultaneously making those projects dramatically more expensive to build. Developers face prevailing-wage mandates that raise labor costs well above market rates, along with inclusionary-zoning requirements that force them to subsidize below-market units by inflating the price of every market-rate unit they sell. Industry estimates routinely show that layered regulation alone now adds six figures to the cost of a single new housing unit.
At the same time, huge swaths of California remain open, underdeveloped, or not developed at all, particularly in inland and exurban regions. The state has made almost no effort to encourage responsible use of this available land for housing production. Driven largely by climate-based planning priorities, the state’s approach shifted toward forcing density into already built-out areas, regardless of market demand.
Insurance Policy: A Crisis Years in the Making, Now Ignored
California’s insurance crisis did not appear overnight. Years of suppressed rate approvals, expanding liability exposure, and wildfire-risk policy destabilized the market long before Gavin Newsom took office. Under his administration, the problem moved from warning phase to full-blown breakdown. Major private insurers sharply curtailed new policy writing across large portions of the state, especially in wildfire-exposed regions, forcing many homeowners into the state’s insurer of last resort at dramatically higher cost. In some areas, premiums have doubled or tripled in just a few renewal cycles.
The administration largely answered the crisis with press statements and advisory panels, without delivering a regulatory reset that would stabilize the private insurance market.
Regulatory Stacking: The “Everything Tax” Built Into California Life
One of the most under appreciated cost drivers in California is the cumulative layering of regulations signed into law and aggressively implemented during Newsom’s tenure. Environmental compliance, workplace mandates, permitting regimes, litigation exposure, insurance requirements, and reporting rules all carry costs embedded invisibly in rent, food, utilities, transportation, and insurance. A restaurant permitting delay becomes a menu price increase. A construction compliance mandate becomes higher rent. A delivery regulation becomes higher grocery bills.
None of these costs appear on a tax bill. All of them show up in consumer prices.
So, Does It Matter? The National Stakes of a California Model
In this two-column series, we first began by documenting just how much the basic cost of living in California has exploded during Gavin Newsom’s time as governor — from energy and housing to fuel, insurance, and everyday consumer expenses. This second installment finishes the story by laying out how the specific policy choices pursued under Newsom systematically drove those costs higher.
It is a case study in what happens when regulation, mandates, and centralized control outrun economic reality. The foundations of today’s affordability crisis were poured before Gavin Newsom took office. But where others laid the concrete, he built upward until the structure became too heavy for the middle class to carry. Now Newsom is asking a national electorate to evaluate him as a problem-solver.
Voters elsewhere should not evaluate Gavin Newsom on his ability to say what audiences want to hear. They should evaluate him strictly on his governing record and on measurable outcomes. Unaffordable California is the outcome.
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