Last I checked there were about 450 hostels in the USA and Canada (source hostelhandbook.com). However, about 10 years ago I think this book listed about 600. I'm not sure why the numbers have fallen. While there is definitely more "red tape" than many countries - it's definitely possible. My hostel has now operated for over 20 years but it has also had a few speedbumps along the way. I'm currently working on a Hostel Professionals Library for HostelManagement.com that will contain lots of information for someone like yourself. Where are you planning starting a hostel in California? Please message me if you would like to meet sometime in San Francisco.
Pacific Tradewinds Hostel, LLC