My View: Latest Housing Crisis News Is Not Good and Getting Worse

Photo by Marcus Lenk on Unsplash

By David M. Greenwald
Executive Editor

The latest batch of articles this week on the California Housing Crisis, do not provide us with encouraging news.

MSNBC on Friday reported, “Immediate relief from California’s affordable housing crisis may not come next year even though a series of new laws is scheduled to go into effect Jan. 1, advocates and experts warn.”

They point out that efforts are “already underway to undercut legislation recently signed into  law by Gov. Gavin Newsom.”

Opponents have pushed back, arguing that the laws would strip cities of control over zoning while at the same time failing to ensure that new units will be affordable.

“We absolutely need to advocate for affordable housing,” said John Heath, a proponent of Our Neighborhood Voices, a proposed constitutional amendment that would undo several of the newly signed housing bills. “This is nothing but a blank check being handed to developers.”

The problem of course is to maintain the status quo which has generated the housing crisis in the first place.

“It took a long time for us to get into this hole, and it’s going to take a long time to get out,” said Michael Manville, an associate professor of urban planning at UCLA. “It’s going to take some time to see so much construction that rents are going to fall.”

Veteran Sacramento Columnist Dan Walters, now with CalMatters, noted this week that the housing crisis in California is both deep and wide.

“Simply put, we haven’t been building enough to meet the demand, even though the state’s once-robust population growth has slowed to a near-standstill, and the supply-demand mismatch drives up costs for both renters and would-be homeowners,” Walters argued.

High housing costs are a major reason, he noted, that California has the nation’s highest rate of functional poverty while having the second-lowest rate for home ownership (just ahead of New York’s).

Walters notes, “If anything, the pandemic has exacerbated the crisis. Distress among renters, many of whom suffered job losses, has increased while home prices have risen dramatically, with a median second only to Hawaii’s.”

A new report from the Public Policy Institute of California calculated that “the state added 3.2 times more people than housing units over the last 10 years. There are now 2.93 Californians for every occupied housing unit, behind only Utah (3.09) and Hawaii (2.93), and far above the average of all other states (2.53).”

“Though coastal housing is the most expensive, the biggest percent change in housing values has actually occurred in inland regions,” PPIC continues. “To avoid higher coastal prices, many residents have moved to the Central Valley, east of the Bay Area, and the Inland Empire east of Los Angeles. In the process, they have driven up prices in their new neighborhoods as well.”

“Average annual production has actually slowed, from 147,000 per year in the first decade of the century to just 71,000 per year since,” PPIC notes. “Construction dropped almost everywhere, but the drop was larger outside the expensive coastal counties (Los Angeles, Orange, and San Diego, as well as the Bay Area). And while the pace has picked up recently, it is not enough to overcome the years of lag.”

The state has increased its housing production goal to 180,000 units per year and also the budget has boosted spending to $10 billion for low-income families and another $7 billion for homeless issues.

“These changes signal a more pro-housing stance, but it remains to be seen whether they are enough to boost production to the levels many consider necessary,” PPIC concludes.

Finally, the San Diego Union Tribune’s columnist Chris Reed argues that the housing crisis may be permanent and the speculators are making the problem worse.

A report out of LA this week found, “In the Los Angeles area in recent months, more than half of home sales have been to investors, not to families which plan to move in.”

“It’s time to grasp that California’s housing crisis could be permanent. Our system is out of whack,” Reed argues.  “November’s statewide median home price was $699,000 — 18.5 percent higher than in November 2019. November’s average rent for a one-bedroom apartment in the Golden State was $1,670 — up 19.8 percent from November 2020. “

“Many economists thought the pandemic would reduce housing demand, and thus housing costs, because of lost jobs and a weakened economy. Instead, the housing crisis got worse in some ways during the pandemic,” he adds.

While Reed is in favor of the new laws – SB 9 and SB 10 “as gambles worth trying” – he also warned that the people with the money to pay for the new construction are not families, but “real estate speculators” who “have transformed California’s real-estate market this century because of their recognition that Golden State property has high and durable value.”

Last month, “a report came out showing that 51 percent of all home purchases in the counties of Los Angeles, Orange, San Bernardino and Riverside were by investors — nearly triple the national average.”

Reed argues, “it’s not just NIMBYs who should worry about speculator-driven gentrification transforming neighborhoods, often to the detriment of renters from less affluent communities of color.”

About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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26 Comments

  1. Keith Y Echols

    The proposed measure, sponsored by a bipartisan group of Southern California mayors and neighborhood associations, would give cities and counties the power to override state law and prevent the Legislature and local government from passing laws that invalidate zoning initiatives approved by voters.

    Proponents are gathering signatures to qualify the initiative for the November ballot.

    Showdown shapes up in California over growing housing crisis

    I believe I predicted push back on these bills a few months ago when state legal battles over housing were supported in court.  The article says there are competing polls that show support for the housing bills and oppose state imposition of power over local land use decisions.   I’m also guessing there will be not only pushback by proposed measure but also on state congressmen.  The article says that it’s shaping up to be Southern California against the rest of the state.  But I’d argue you could also add much of the Central Valley t0 the NIMBY camp as well.

    If you read up on gentrification and affordable housing, you’ll see that many have come to the same conclusion that I have that most efficient solution are local, state and federal subsidize construction of public housing.  (I do not believe that manipulation of market rate housing construction is a viable solution to fixing the housing issues in CA).   This kind of thing  (public housing) was stripped away in the mid 60’s and gutted in the 70’s and 80’s in favor of trying to get for profit developers to create affordable housing.  Funds were pulled back from public housing and they became more and more “the projects”.  However if local and state governments become homebuilders and landlords, they can create homes not just for those with very low income but also just sub-median income or “workforce” housing too.  Like a for profit developer,  new home construction could be a mix of rental properties and units sold off at market rate prices to initially fund the subsidized portion of housing.   Cities that create and rent out BMR housing can also specifically assign some of it to their city workers, police, fire…something could be done with school districts to provide BMR housing options for teachers.  Units for these city workers (workforce housing) mixed in with very low income housing units and market rate units would help to keep the socio-economic mix of people from becoming “the projects” again.   Also, if the face of your affordable housing units are police, fire fighters, teachers, city workers..etc….along with those buying the expensive market rate units…it’s easier to sell to a community this kind of city owned project of mostly BMR units and not scare them with the boogie-men low income renters.

    So if you took a 100 unit project; 25 market rate units, 25 workforce units and 50 very low income units.  The rent collected from the city owned market rate units, the reduced cost city owned workforce units and portion collected the very low income units would be able better poised to financially sustain itself going forward.   A city could fund creating one of these kinds of projects every year or other year which would regularly add affordable housing.

     

    1. Alan Miller

      if local and state governments become homebuilders and landlords,

      What could possibly go wrong with that idea 😐 ?

      they can create homes

      Government can ‘create’ homes 😐

      not just for those with very low income but also just sub-median income or “workforce” housing too.

      And who gets screwed?  Those with income just above the subsidy line . . . who will now need subsidies . . . and so on . . . and so on . . . and so on . . .

      Units for these city workers (workforce housing) mixed in with very low income housing units and market rate units would help to keep the socio-economic mix of people from becoming “the projects” again.

      And the government administration of the program will make sure all the proper percentages of groups will be properly represented 😐

      if the face of your affordable housing units are police, fire fighters, teachers, city workers..etc….along with those buying the expensive market rate units…it’s easier to sell to a community

      Except as Pytel said, he and several of his officers bailed on living in Davis not due to the housing prices, but due to the hostility of the community towards the police force.  So there’s that 😐

      A city could fund creating one of these kinds of projects every year or other year which would regularly add affordable housing.

      And we’ll put it right HERE, where no one will mind 😐

    2. Richard_McCann

      you’ll see that many have come to the same conclusion that I have that most efficient solution are local, state and federal subsidize construction of public housing.

      Unfortunately this is likely to have a trivial impact on the state’s housing supply and housing prices in general. Even when funded, these programs met only a small proportion of the needs of that population. This is going to require a grander scale solution.

  2. Matt Williams

    A new report from the Public Policy Institute of California calculated that “the state added 3.2 times more people than housing units over the last 10 years. There are now 2.93 Californians for every occupied housing unit, behind only Utah (3.09) and Hawaii (2.93), and far above the average of all other states (2.53).”

    Why is 2.93 Californians living in every occupied housing unit a problem?

    1. Keith Olson

      Why is 2.93 Californians living in every occupied housing unit a problem?

      Good point.  If it’s a crisis as we’re being told then 2.93 per unit is a fairly small inconvenience in the overall scheme of things.

    2. David Greenwald

      Matt – I think the key point is the first part of the statement – the people to housing added over the last ten years, the second part is simply an indicator of the consequence of the first.

      1. Matt Williams

        How is it a consequence of the first?

        I grew up with 6.0 people living in our occupied unit.  My grandmother and grandfather’s home that they died in had an average between 4.0 and 3.0 people living in it, with death being the reason the number went below 4.0.  Our society changed its living habits and the number of people living in every occupied unit declined from close to 4.0 down to close to 2.5.  Was that change in people per occupied unit good for our society?

        Now due to new factors, our society is once again changing its living habits. Is that change in people per occupied unit good for our society?

        1. David Greenwald

          It’s similar to Don Gibson’s finding from a few years ago that the consequence of housing scarcity and costs led to an increase in occupancy density in rental housing in Davis.

        2. Keith Y Echols

          It’s similar to Don Gibson’s finding from a few years ago that the consequence of housing scarcity and costs led to an increase in occupancy density in rental housing in Davis.

          That’s kind of like saying that imposing a night time curfew led to more daytime crime.

          If people increasing occupancy density beyond what is desired by the community, pass a city ordinance on occupancy density and apply fines and penalty taxes to enforce and encourage the desirable outcome.

        3. Ron Oertel

          David:  I’m a little confused by the focus on the indicator (density) rather than the actual problem (more new people than housing).

          You’re not “confused” at all, David.  You’re the one who cited the “indicator”, and provided no reason that it’s a “problem” – despite being asked multiple times.

          A new report from the Public Policy Institute of California calculated that “the state added 3.2 times more people than housing units over the last 10 years. There are now 2.93 Californians for every occupied housing unit, behind only Utah (3.09) and Hawaii (2.93), and far above the average of all other states (2.53).”

        4. Matt Williams

          David, when I was growing up, each year, year after year, we had more new people than new housing.  Was that a bad situation?  I certainly don’t think so.

          You are stretching way too far trying to impose a very specific meaning on a statistic that can, and does, have many different meanings, both as a snapshot and over time.

        5. David Greenwald

          I guess I could ask the question as before since it’s PPIC’s findings we are discussing, not my own.  You don’t see a fundamental difference between the situation from seventy years ago versus now?

        6. Ron Oertel

           You don’t see a fundamental difference between the situation from seventy years ago versus now?

          I see lots of differences.  A primary (but not the only) one being that seventy years ago, people weren’t very concerned about sprawl, the impact on the environment, etc.

          And a lot of houses weren’t built with the same quality or size that they are, today.  (Though they weren’t made out of ticky-tacky, back then.)

          At various points in time, relative salaries for the “middle-class” may have been higher, as well. Before globalization, etc.

          Are you a big fan of the 1950s?

          Not such a wide divide between those at the top, vs. those below them.

           

        7. Matt Williams

          I do see lots of specific granular differences, but no, I don’t see any fundamental difference between then and now … human beings choosing to amalgamate themselves into family units of varying sizes.

          Here in United States we have arrived at a point where we feel much more entitled than we felt seventy years ago, fifty years ago, or even thirty years ago.  Fifty years ago the typical undergraduate student lived in university/college supplied housing for three years before venturing out into more independent living, now students feel entitled to venture out after only one year in university/college supplied housing.

          Seventy years ago grandparents often lived with grandchildren.  Now not so much.

          Seventy, fifty and even thirty years ago fathers often lived with their children.  Now not so much.

          Lots of other granular changes as well.

          NOTE: This is my fourth comment in this thread today. I will restrict myself to only one more comment in this thread today.

        8. David Greenwald

          This is from the PPIC report: “ The state added 3.2 times more people than housing units over the last 10 years.“

          It is interesting that you focused on this point when In fact, we know that the Baby Boom inspired new forms of housing like the Levittown in order to keep with population growth.

        9. Keith Y Echols

          I’m a little confused by the focus on the indicator (density) rather than the actual problem (more new people than housing).

          I suppose that depends on to what degree you see more people than housing as an actual problem.   At some point in our overly entitled society people believed they had a right to live where ever they wanted to. But up until fairly recently, people lived where they could get a job and afford a home.  If you couldn’t afford to live somewhere, you didn’t live there and not as many people whined about it.

        10. Ron Oertel

          Here’s the statistic that I prefer from the article:

          the state’s once-robust population growth has slowed to a near-standstill, . . .

          High housing costs are a major reason, . . .

          This is actually the way it’s supposed to work, in a free market system. Strange, how the development activists “like” the free market, until they “don’t”.

          “Pick a lane”, as they say.

          And take those jobs with you on on the way out the door.  And housing costs will then level off in California, and increase faster in place like Austin – which they’re doing now.

          Zillow Home Value Index (ZHVI) for Austin is $606,319 through October 2021.
          Home values in Austin have increased by 40.6% over the last year.
          Over the past five years home values in Austin have increased by over 78%.

          https://learn.roofstock.com/blog/austin-real-estate-market

          And anyone advocating for more Levittowns can move to Texas. They love ’em, there.

    3. Richard_McCann

      The actual problem is the math that David didn’t do. The state current average is 2.93/unit. The marginal household addition is 3.2/unit (while family size is declining). If we assume that 2.93/unit is a tolerable level (and we need the historic trace of household size to determine if this is true), then we are underbuilding by 9.2%/year. In other words, demand is outstripping current supply by 9.2%.

  3. Alan Miller

    The latest batch of articles this week on the California Housing Crisis, do not provide us with encouraging news.

    . . . that we won’t have 3-4 articles per week on housing here forever.

    “Immediate relief from California’s affordable housing crisis may not come next year . . . “

    No S Sherlock.

    Opponents have pushed back, arguing that the laws would strip cities of control over zoning while at the same time failing to ensure that new units will be affordable.

    Define ‘affordable’.

    “We absolutely need to advocate for affordable housing,”

    Do we?  Or does everyone just have to say that?

    “This is nothing but a blank check being handed to developers.”

    It’s not nothing nor blank, but point taken.

    The problem of course is to maintain the status quo which has generated the housing crisis in the first place.

    The problem of course with the above sentence is it means nothing.

    “It took a long time for us to get into this hole, and it’s going to take a long time to get out,”

    We’re never getting out, nor are we reversing climate change.

    It’s expensive to live in California; it’s going to be warmer and the sealevel will rise.

    Deal with it . . . or try to legislate your way out of it . . . if you can.  Your choice, peepsies.

  4. Ron Oertel

    Figures from the New York Times explain the regional housing dilemma in one sentence: “In the past eight years the San Francisco Bay Area has added 676,000 new jobs and 176,000 new housing units.”

    The lack of “affordable” market rate housing is due to the unwillingness of California’s state Legislature, allied big businesses and building trade unions to address the demand side of the supply-demand equation. That’s a major factor fueling the Golden State’s jobs-housing imbalance.

    There’s been much agonizing over stories about technology firms relocating to Texas, particularly to Austin. Tesla’s Elon Musk is the marquee example. Musk’s departure may be a positive move for both California and Texas.

    Instead of complaining, Californians should applaud that migration.

    That job migration is beneficial for everyone except California real estate speculators and development interests.

    https://www.marinij.com/2021/12/04/dick-spotswood-demand-for-coastal-california-housing-will-never-be-met-by-supply/

  5. Keith Y Echols

    I just reread my initial comment and I now realize that I went a bit sideways from my intended point.  I started off by mentioning how opposition is mounting against the new housing mandates and laws.  Then I went off spit balling my ideas about public housing.  But my real point is that maybe the political strategy of ramming solutions down people’s throats isn’t ultimately a productive or efficient long term strategy.  It seems like right now there’s political will to get these new housing laws passed and push for new housing mandates.   But how long will that last?  At some point will enough political opposition mount and eventually seek to undo what the progress the YIMBY’s have made.  For this comment, I’m not advocating for one side or the other but it does seem to be an inefficient if not out right waste of people’s time and political and financial resources.

    It seems to me that a more efficient long term strategy would be to incentivize cities to plan for affordable housing .   I’m again spit balling ideas here….I know some of us have discussed cities getting a greater share of property tax that it shares with the county.  But maybe instead of a straight increased percentage cut of the property tax; maybe additional funds from the county’s portion of property tax could be given back to cities with affordable housing projects.  Essentially like the old RDA but instead of nebulous spending on planning for development the funding would have to go directly to the development and construction of specific affordable housing projects….also no use of eminent domain.   Something like this was tried a couple years ago with AB 11 which was kind of like the RDA lite 2.0.  But it stalled in the assembly.  The problem is the idea of redirecting property tax dollars from schools to affordable housing.

    Another possibility is to use some of those funds to guarantee affordable home builder loans.  That would go a long way towards helping affordable housing get built and have less of an impact on actual cash the city has to dole out.  I think Matt has brought up a transfer tax (which  I think would require Charter city status?).

    1. Don Shor

      I think Matt has brought up a transfer tax (which  I think would require Charter city status?).

      Yes, it would require charter status. My understanding is there is a subcommittee of Dan Carson and Will Arnold discussing a housing trust fund, a housing ballot measure, and more.  Voters would have to approve charter status first, then the various taxes that would need to be implemented to fund the proposals.

      http://documents.cityofdavis.org/Media/Default/Documents/PDF/CityCouncil/CouncilMeetings/Agendas/2021/2021-07-20/04K-2021-2022-Focus-Items-Amended.pdf

       

      1. Matt Williams

        Tonight’s PBS Newshour Weekend (beginning at 15:00 in the video) had a report on a number of California housing issues, including information about California Housing Trusts    It is well worth watching.

        From the City website, here are some links relevant to Local Housing Trust activities in Davis:

        Potential Revenue Sources for Housing Trust FundsCompiled by Greg Rowe, Chair – City of Davis Housing Element Committee – January 5, 2021

        Housing Trust Fund Strategy – Recommendations of the Social Services Commission

        NOTE: This is my fifth comment in this thread today. I will not be commenting further in this thread today.

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