By David M. Greenwald
A year ago with housing prices rising and a shortage of new housing, California’s housing crisis was the biggest problem facing the state. A year later, however, with the COVID pandemic, we see a heavily disrupted market for a lot of different reasons.
First, with college students staying home in large numbers, places like Davis are seeing high vacancies in apartments as students are distance learning.
Second, the pandemic has forced many to work from home and telecommute. For some, that might become a permanent or more permanent relationship—changing the need for office spaces and also the need to commute.
Third, the high cost of housing in California is for the first time stopping population growth and may lead to a decline.
Trying to predict the future is always dicey, and never more than now. A big question is going to be how permanent these changes are likely to be.
Of the three points mentioned here, I think the college students staying home in large numbers is the most likely scenario to be temporary. Distance learning doesn’t work well for a lot of study, it truncates the college and even the networking experience, and even with a cost savings on housing, the tradeoffs suggest this is likely to be a short-term shift rather than a long-term trend.
The area that is more likely to change is work from home and the telecommute. This one bears watching because there are in fact a lot of advantages to telecommuting. It saves the need for expensive physical space. It reduces time spent commuting, which leads to a better live-work balance. It reduces the need to put dense housing near transit and live-work arrangements. And it reduces VMT which can help us better a better handle on GHG emissions.
In the long term, companies will need to worry about some things: (1) Is there a drop off in productivity working at home and can you overcome it perhaps with longer worker hours or other efficiency? (2) You lose some of your collaborative work—putting people into close contact leads to cultivating innovation, which you may lose remotely; (3) People are already getting stir crazy not leaving home, and therefore perhaps working from home is not ideal.
But at the very least you might do more hybrid or rotational models—having people come into the office or commute less. Given the severity of global warming, this is a way to solve the transportation side of that equation.
Finally there is the question of whether California’s housing crisis will abate because people are starting to leave the state. The problem with that view of course is that there may well be a causal relationship here—the high cost of housing and difficulty of buying new housing is likely a driver of this trend, and failure to address the underlying issue of affordability and scarcity will make this worse, not better, in the future.
In a piece a few weeks ago in CalMatters, Matt Levin, who writes on housing, posits three lessons he has learned covering California’s housing crisis.
First, Levin argues “there is not one housing crisis,” but rather, “three housing crises.”
“There are really three distinct housing crises roiling California. While often stemming from the same underlying problems, they impact different segments of the population and warrant different solutions,” he writes.
First is the homeless crisis, with 150,000 homeless people in shelters or living on the street.
Second is there are another 7.1 million Californians living in poverty “when housing costs are taken into account.” He writes, “While not homeless, 56% of these low-income Californians see more than half of their paychecks devoured by rising rents. Skewing Black and brown, these are the renters who face intense displacement and gentrification pressures, live in overcrowded and unsafe housing conditions, and have fled urban cores for cheaper exurbs over the past two decades.”
Third, it affects the younger generation of middle-class and higher-income California, as “the average California home [has been costing] about three times the average household’s income. Now it costs more than seven times what the average household makes. High rents make saving for a down payment that much more difficult. While lower-income Californians have struggled to afford the state for decades, the term ‘housing crisis’ and its attendant publicity really only came into vogue once richer Californians started seriously considering moving to Austin or Portland or Las Vegas.”
If this analysis is correct—and it seems reasonable—we can’t simply sit back and let the market adjust the problem, because this is likely to impact the future sustainability of the state.
Second, he believes that the rise of telework will “dilute demand to live in dense, urban environments.”
He is not certain about this.
“There’s a very dumb debate happening right now over whether the pandemic-necessitated rise in remote work will spell the death of major cities,” he writes. Instead, “The real debate is whether a meaningful number of households will eschew the priciest, densest parts of the state for cheaper, larger spaces once they’re guaranteed they’ll only have to commute two or three days a week.”
He believes, though, that this will cause enough to move, to cool the rents in places like San Francisco, Los Angeles and San Diego, but that “the price of single-family homes and larger rentals in mid-size cities, suburbs and exurbs will rise. “
He notes, “Smart people can disagree — we very well may end up right where we were in February 2020, before San Francisco rents plunged 25% and there was no cool bar around the corner to justify cramming four people into a two-bedroom. “
Finally, he argues, “The big dividing line in housing politics is whether you think one more unit of market-rate housing is a good thing or a bad thing. It is mostly a good thing, but it depends.”
This is a conversation that needs to happen in Davis. We are embarking on a General Plan and a Core Area Specific Plan. In fact, the Downtown Plan once again goes to Planning this week. But Jim Gray’s point from November is critical to take into account—while I don’t agree with the idea of pausing planning right now, we have to build our planning into a new reality.
How can we take into account change while not completely stopping the process of planning to build desperately needed housing? That’s a challenge that our leaders will have to address.
In the meantime, join us on Friday for a discussion on COVID and UC Davis.
—David M. Greenwald reporting
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