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Housing Crunch Seen for Southland Workers

Construction: Report predicts land scarcity will push companies to Riverside and San Bernardino counties.


With strong job growth expected to continue in Orange and Los Angeles counties this year, the Southland's biggest challenge will be to provide affordable housing, according to a report released Monday by E&Y Kenneth Leventhal Real Estate Group.

There simply aren't enough homes being built in Southern California to satisfy growing numbers of employees, a study found.

The report warned that, absent a recession, a growing scarcity of land will continue "to push companies and their employees to Riverside and San Bernardino counties, or out of state, as a lower-cost alternative."

"The biggest concern right now for Orange County is that housing is getting very, very expensive," said Gregory Gotthardt, a Leventhal senior manager, who wrote the report. "We cannot sustain double-digit increases in housing prices and sustain our growth."

The report predicts that prices of resale homes in Orange County will increase 10% over the next two years, and new-home prices by 15%. Those would be the strongest increases since the last housing boom--in the late 1980s and early 1990s.

Early in the decade, rising home prices were a key reason that businesses fled the state, helping push the economy into deep recession. Companies found they could not be competitive if they had to pay higher wages so employees could keep up with escalating home prices.

Echoing the conclusions of other Southern California economic forecasts, the Leventhal study found that job growth will come close to matching last year's 81,600 in Los Angeles.

In Orange County, the number of new jobs is expected to decrease about 20%, to 50,000, but that still would be the second-largest total of the past decade, Gotthardt said.

Despite the strong job growth, which is expected to continue for several years, housing production is falling far behind mid-1980s levels. A key reason has been a shortage of single-family lots in Los Angeles and Orange counties, where available land has become scarce.

Only the Antelope Valley in Los Angeles County can be easily and cheaply developed. Other available L.A. County property--in the western San Fernando Valley, or Agoura, or Santa Clarita, for example--is expensive to develop because the land is hilly.

In Orange County, a scarcity of available lots constrains home building as well. The typical new house costs around $350,000, and prices could rise even further over the next couple of years, beyond the reach of even well-paid workers.

Rather than undergoing a recurrence of last summer's big price spikes, this year's housing market will see more steady gains, the report said.

High home prices are shutting out thousands of entry-level buyers. The lack of new buyers, in turn, can prevent existing homeowners in the lower-price ranges from trading up to more expensive properties.

One indicator of the trend: Los Angeles apartment vacancies fell to 3% at the end of 1998, from 7% in 1995. But over the same period, rents increased 9%.

With few low- or moderate-rental units being built, the Los Angeles region is experiencing an housing shortage "that is getting progressively worse and may be hindering county job growth," the study said.

"The affordable-housing picture for first-time buyers is not going to get any better in the foreseeable future," Gotthardt said.

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