The Public Policy Institute of California released a report, "California Housing," last month as part of PPIC's ongoing Planning for a Better Future project. The four-page brief succinctly points out how critically important housing is for the state's economy and some of the things that should be done to help the industry rebound. Please share this important report with your industry colleagues!
Some of the highlights:
- The housing depression has caused large losses of construction jobs, "which accounted for 6% of California's jobs when housing prices were at their peak."
- Despite the drop in housing prices, they remain high in most of California, which helps make the state too expensive for many businesses and employees. "In both the short and the long term, California's economic performance and livability depend on its housing market."
- Rents in the parts of the state where most people live have actually risen in nominal terms during the recent crisis. "Five of the ten most expensive rental markets in the U.S. are in California: San Francisco, Orange County, San Jose, Ventura County, and Los Angeles."
- California is far from being the epitome of sprawl that many people contend it is. "(I)ts housing density is 35% above the national average and rising... the Los Angeles and San Francisco metropolitan areas have the second- and third-highest residential density in the U.S., after New York, while San Jose and San Diego are also in the top ten."
- As we've been saying for some time, there is still a shortage of housing, counter-intuitive though that sounds. "High housing prices indicate that California's housing market is tight; low vacancy rates confirm this." In fact, "the residential vacancy rate in California remains among the lowest in the country. Even in the San Joaquin Valley and Inland Empire, residential vacancy rates are near the national average." Unlike Arizona and Nevada, where foreclosure often leads to abandonment, "in California, foreclosure more often means turnover."
Finally, the report lists three key recommendations: policy makers need to help resolve the foreclosure crisis, fund affordable housing construction, and remove unnecessary barriers to expanding housing supply. Here's what the PPIC says about government barriers:
"Why is housing so expensive in California? Many people and industries are willing to pay a premium to be in California, keeping demand high. At the same time, the supply of new housing is constrained both by geography and regulation. Most of populated California is nestled against the ocean, the Bay, or the mountains - natural barriers to construction. And California has unusually strong land use and building regulations, especially in the major coastal cities, which curtail construction and keep prices high. California cannot move the mountains or fill the ocean, but it can tackle some of the regulations and related rules and fees that contribute to high housing prices (emphasis added)."