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Apartment Construction in State Far Short of Forecasts

Housing: O.C. shows slight decline in multifamily units, larger drop in permits for single-family homes.


Construction of much-needed apartments in California is falling far short of what the state had expected this year, according to September building-permit figures released Thursday.

Builders statewide pulled permits last month at a rate that would result in 34,000 apartments and condominiums constructed this year, according to the state Department of Finance.

But Ted Gibson, the agency's chief economist, said he had forecast that about 50,000 multifamily units would be built this year, based on a surge in permits.

"The housing shortage that much of California faces is getting worse rather than better," Gibson said. "The inability to build sufficient housing for the population is a major economic problem facing this state."

In Orange County, the tightest housing market in Southern California, multifamily housing permits dropped slightly to 71 last month from 73, according to raw figures compiled by the Construction Industry Research Board in Burbank. Those numbers are not seasonally adjusted.

The slow pace of apartment building dragged down the overall increase in housing construction last month. Builders statewide pulled permits that would lead to a total of 133,500 units, on an annualized basis, up more than 4% compared with a year ago, according to the state agency.

Gibson, who had forecast that permits for 156,000 units would be pulled this year, called the last three months of building activity a "disappointment."

To accommodate California's projected growth, the state would have to build at an annual rate of 220,000 to 250,000 housing units overall.

But builders are unable to keep up with growing demand, especially for large-scale apartment complexes. Among the reasons are greater opposition by homeowners to higher-density projects, more stringent approval processes at the local level and more challenges from environmentalists.

With construction falling short, record rents and housing prices will likely continue across much of the state, analysts said.

Supply simply isn't catching up with demand, said G.U. Krueger, an analyst at Institutional Housing Partners, an Irvine real estate venture-capital firm. "We're not getting much relief in terms of production from the emerging housing shortage in California."

The state's figures are seasonally adjusted from raw permit numbers compiled by the research board.

In Orange County, new single-family construction dropped 16% to 408 permits from 486, giving the county an overall drop in activity of 14%, the board found.

The bright spot for apartment renters was in Los Angeles County, where builders pulled nearly 24% more permits last month than a year earlier, according to the privately funded research board. A drop in single-family building permits, though, lowered overall county activity to an 11% gain, generated mostly by an additional 135 multifamily permits pulled last month over last September.

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