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How bad is Orange County’s housing crisis?

It’s bad. California ranks 49th in the country for housing units per capita, which is not surprising given that from 2005 to 2015 only 22 new home permits were filed for every 100 new residents. Benchmarked against other states, we are short 2 million units. Make that 3.5 million to meet pent-up demand and future growth, according to McKinsey Global Institute. Further, California’s Department of Housing and Community Development just issued its long-overdue Statewide Housing Assessment 2025 demonstrating at least 1.5 million homes are needed.

Economics 101: When demand exceeds supply, price goes up. As of November 2016, the median home price in Orange County was $660,000 — near the highest in the country — renters pay more than 35 percent of their income toward rent, and overall homeownership rates are falling to levels not seen since the 1940s.

Thus, it came as no surprise that a few top home builders find their O.C. projects are the fastest-selling in the nation (“Local homebuilding success defies critics,” Jan. 8, 2017). Orange County is, indeed, a great place to do business. We’re on track to build nearly 150,000 new homes by 2040, but really the county needs to grow that to 250,000 to keep up with a projected 13 percent population increase and 24 percent jobs increase.

The lack of adequate housing is regularly raised as a top concern of O.C. employers. It causes workers to over-pay, over-commute by driving long distances between affordable housing and work, and over-crowd by doubling up in existing homes, impacting city services, local traffic, family health and educational attainment.

And while boomers are retiring in place, content with their ever-rising home equity in a constrained marketplace, Orange County is losing its young workers — millennials — faster than any region in the nation but Boston, in no small part due to housing costs and availability. According to Wallace Walrod, Orange County Business Council’s chief economic adviser, this county’s recovery from the Great Recession has primarily come from job creation in lower-paying, service sector jobs in industries such as leisure and hospitality, while better paying sectors such as manufacturing, IT and financial services are still well below pre-recession levels.

These trends do not bode well for Orange County’s future.

Even Gov. Jerry Brown’s proposed 2017-18 state budget released this past week highlighted the need for affordable housing — not to subsidize its rising costs, but to streamline approval processes and contain development costs, recognizing that local zoning and permitting decisions have contributed to low inventories, even as demand rises. Some studies show 40 percent of housing costs are attributable to government regulations but, sadly, there was no mention of modernizing California’s antiquated environmental regulations, or CEQA, used for leveraging labor agreements, stopping homeless shelters and bike lanes as well as housing. Lt. Gov. Gavin Newsom recently urged using CEQA to stop the proposed border wall. CEQA has become the cure-all/stop-all for everything and anything but its original purpose. In Southern California, 72 percent of anti-housing CEQA lawsuits are filed in wealthier, whiter neighborhoods, all “In the Name of the Environment,” according to Holland and Knight’s groundbreaking analysis. This equates to stopping 10,000 new family homes.

So, yes. Orange County is blessed. A great climate, skilled workers and good jobs — at least for today. But we have work to do. And a lot more home builders need to find success here.

Written by Lucy Dunn is president and CEO, Orange County Business Council, published in Orange County Register January 15, 2017.  


Posted on January 15, 2017


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