SAN DIEGO. California, with its attractive cities such as San Francisco and Hollywood, plentiful parklands, expansive Pacific Ocean and desirable year-round climate — can mesmerize vacationers and snowbirds alike. Wishing to escape harsh weather conditions or simply seeking a change of pace, the Golden State soon becomes a serious consideration for many who are desiring to relocate.
California dreaming? Not so much if you consider the state’s ginormous housing shortage. That shortage is so bad in California that it is creating a state of crisis.
THE HIGH COST OF HOUSING IN CALIFORNIA
But what is oftentimes overlooked by California dreamers is the state’s high cost of living. Overlooked as well: the high prices for housing and apartment rentals, some of the highest in the nation.
California wannabes might be determined to find a way to live the California lifestyle. But they are very possibly ignoring the underlying facts influencing what it might cost them to qualify to buy or to rent.
LOW HOUSING SUPPLY CAUSES ESCALATING HOME PRICES
For those who currently own a home, the increase in housing values is highly desirable. But for first-time home buyers, however, the California real estate market makes it nearly impossible for many to afford a home. Only around 29 percent of Californians today can afford a median priced home of about $518,500.00.
Qualifying for a median priced home requires a total household annual income of $81,690.00. The estimated monthly loan payment is $2,720.00 (depending upon loan terms, down payment and the effective interest rate), according to the California Realtors Association.
In 2017, California Housing and Community Development Department estimated 3.5 million new homes would be needed to meet population growth.
SOLVING THE SHORTAGE OF CALIFORNIA HOUSING
The California Housing and Community Development Department estimates that the state needs 180,000 new homes each year to keep pace with housing demand. It follows that California should be a builder’s paradise. With millions of new homes needed over the next 20 years, the building industry could also be a positive source for creating new jobs.
However, the supply of new housing is falling dangerously short. The reasons for this are many.
For example, in 2017, approximately 110,000-115,000 building permits were requested or granted permitting the building of new California homes, according to the Construction Industry Research Board. However, estimates report approximately 70,000 fewer homes get built each year than are actually needed.
An a recent interview with a member of the California Building Industry Association, revealed a surprising multitude of barriers which prevent building badly needed new homes in California. This is especially true for those within a range of affordability.
THE COST OF OVER-REGULATION AND OTHER BARRIERS
California’s current list of regulatory barriers and cost-drivers includes
- Slow permit processing
- California Environmental Quality Act
- Law suits from private citizens
- Lumber shortages creating increasing costs
- Rising materials costs
- Increasing labor costs
- -Prevailing wage issues
- -Impact fees at local levels
- -Inclusionary zoning ordinances
- -Construction defect laws
- -Project investor return on investment
- REGULATIONS THAT HAVE AN IMPACT ON HOUSING
As builders face regulation after regulation, all increased costs eventually have a bottom line impact on most housing developments.
The overall development and building costs force increases in the price of a each new home.
With increase in the cost of a median priced home, the potential impact resultantly is reducing the percentage of Californians who can afford to buy.
APARTMENT RENTAL MAY BE THE ONLY HOUSING SOLUTION FOR MANY
But the fact remains that for many Californians, it is simply not possible to purchase a home. In some California regions, apartment renters are outpacing the percentage of homeowners.
Though the monthly rent for a one-bedroom apartment is estimated at $1,350.00 to $1.500.00 per month, in many California regions the average monthly apartment rent is approximately $2,000.00 per month and up.
Some renters resort to multiple person and families sharing, enabling the monthly cost to be spread as widely as possible.
LACK OF AFFORDABLE HOUSING IS A CAUSE OF HOMELESSNESS
Homelessness is a 554,000-person nationwide phenomenon, and it continues to grow. California has the third largest homeless population in the country, accounting for approximately 134,000 homeless persons.
Three out of 4 homeless live in their cars, campers, and tents. Others reside in homeless shelters, abandoned buildings and on the streets.
Though mental illness and substance abuse are major causes of homelessness, a growing number of healthy, working homeless simply cannot keep pace with the economy. Working retail clerks, plumbers, janitors, teachers and the like are among the working homeless in California. Their hard work and multiple jobs simply don’t make it when it comes to affording to buy or even rent a house.
Homelessness skyrockets due to lack of affordable housing
With no available affordable housing or apartments, many join gyms, as members to enable not only exercise, but also access to shower facilities.
For those numbered among the state’s 1.7 million low income households, though they are not homeless, most spend more than half their income on housing.
California’s current solution, among many, puts funding for low income housing on the backs of the building industry by ordering increasing fees for required items such as permits.
Housing is fundamental to human existence, health, wellness and public safety.
As the Golden State tackles the variety of problems associated with the lack of housing, and affordable housing in particular, ideally there would be broad based policy-making and taxpayer involvement.
Providing funding for non-profit organizations and foundations for programs and housing/institutions and funding for businesses building a variety of housing options would be a holistic approach. It would be far better than burdening any one industry in particular.
Homelessness in America is unthinkable, inhumane and incongruent to the financial strength available in this country.
Lack of affordable housing due to increasing costs and bureaucratic red tape is counterproductive. Owning a home is fundamental to family life, whether comprised of one person, two persons or many. Most importantly, the heart of home ownership is personal freedom and the promise of the American Dream.
Until next time, enjoy the ride in good health!
—Headline image: Homeless woman. Image by Franco Folini via Flickr. CC 2.0 license.