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Builders Say California Faces a Housing Crisis

Construction: Fast-growing population will send prices up, hurting low-income people the most, industry group says.

June 25, 1998|DARYL STRICKLAND | TIMES STAFF WRITER

Builders are constructing only about half of the houses needed to accommodate California's booming population, a trend that will make housing dramatically more expensive and could turn legions of families into permanent renters, according to a report to be released today.

The California Building Industry Assn. found the state's swelling population--1,700 new residents each day--requires at least 250,000 houses, condominiums and apartments annually to keep pace, a figure that hasn't been reached in more than a decade.

Unless more homes are built, prices will spiral higher, forcing many young people, immigrants, and low- and moderate-income families out of the market.

"This state is facing nothing short of a housing crisis," said Dennis Moresco, president of the 5,000-member trade group. "It's strictly a supply problem. The housing is not there to keep up with job growth."

The BIA study is the third in the last two weeks that highlights what housing experts believe is a growing affordability crisis in the nation's most populous state. California has the third-lowest rate of home ownership in the nation, trailing only Hawaii and New York.

The builders' report found that families earning California's median income of $44,700 fall $20,970 short of qualifying for the median-priced home of $199,000. That affordability gap is up 9.4% from the $19,167 gap in 1996.

"If we were building enough homes, the median price would not be that high," said Robert Rivinius, the BIA's chief executive.

Currently, 11 of the state's metropolitan areas--including Los Angeles, Orange and Ventura counties--appear on the National Assn. of Home Builders' list of the 20 least affordable markets in the nation.

The situation will grow more severe every year over the next quarter-century, Moresco said, as California attracts a projected 16 million newcomers.

Housing experts fear that sharply rising home prices eventually will strangle the state's booming economy.

"We are in the early signs of decay in the California economy," said Ken Agid, an Irvine consultant to home builders.

He expects double-digit growth in housing prices over the next 18 to 24 months, which could cause more companies to leave for states where living costs are cheaper.

"Without reasonable housing prices, we can't continue to support longer-term economic growth," Agid said.

Despite the need for more affordable housing, Moresco said an increasing number of local governments are adopting restrictive growth policies, such as limiting the number of housing units per acre, that make it difficult to keep up with growth.

When tighter restrictions were adopted in Napa County, for instance, housing production dropped 54%, Moresco said.

Some city planners in the state said their chief responsibility is to maintain quality of life and allow development that fits with a city's general plan.

"Are they suggesting that local governments should lower their standards?" asked Glen Worthington, a principal planner for the city of Irvine. "If there is not enough affordable housing, then why are they raising their prices?" A shortage of homes for lower-income families is especially problematic.

For example, to meet the projected demand for more than 33,000 low-income units, Orange County would require $300 million to $400 million--far more than it can afford, said Dan Miller, interim director of the Housing and Community Development Department.

His office gets about $6 million a year in federal money that goes toward developing low-income housing.

"If we can help finance 500 units in a year, we're doing pretty good," he said.

Such projects, however, often meet stiff resistance.

"The words connote some negative feelings," he said, adding that the department is most successful in programs for the elderly because those are "more acceptable."

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Price-Income Stretch

California's "affordability gap"--the difference between what a family must earn to buy a median-priced home and the actual median family income, has started to climb again:

AFFORDABILITY GAP

1994: $24,175

1997: $20,970

MEDIAN HOME PRICE: $199,000.

Source: California Department of Finance, Construction Industry Research Board, U.S. Census Bureau

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