Time for realistic housing goals
Build 3.5 million new dwelling units across California by 2025 and this state’s housing shortage will be solved, Gov. Gavin Newsom prescribed during his campaign last year and many times since.
But it’s not happening, and the problems of affordability and homelessness have grown no easier to solve under Newsom than before his election, despite many months of talk and a slew of new laws designed to make permitting and building new units easier and less bureaucratic.
If there’s a culprit here, it appears to be market forces. For years, the common nostrum was that easier permitting and lower prices could solve the problems, which see more than 130,000 homeless persons around the state and many more who can’t afford the American dream of owning their homes, which in California has been a path to wealth for generations.
It appears not even a drastic measure like this year’s proposed (and later scrubbed) SB 50 can do the trick.
The measure aims to mandate highrise housing in job and transit centers and near the busiest bus lines regardless of what neighbors or local officials desire.
SB 50’s likely failure was implied last spring, when the Irvine-based real estate information firm Metrostudy reported that 3,700 newly-built homes went unsold in Orange, Los Angeles, Riverside and San Bernardino counties during the first quarter of this year.
That left unsold housing inventory up 22 percent from last year and 37 percent above the five-year average.
It caused a slowdown in construction at the very time Newsom and others wanted more building, with new home development in the state’s most populous region down 18 percent year over year.
That reduction in housing sales and construction would hardly get California 3.5 million new units in the next six years. It might generate onesixth that many, at best.
This was market forces at work: Even though builders dropped the price of new housing below the regional median price, they could not drop it below the $425,000 average cost of building an apartment or condominium in a typical 100-unit project.
Instead, most new units must be sold for about $600,000 in order to push the price of “affordable” new units in each development down to $350,000 or less.
Such numbers are needed for developers to make any profit, a prerequisite if anyone expects them to build anything. But at those prices, there aren’t enough buyers to sustain the kind of building boom California needs.
Email Thomas Elias at tdelias@aol.com. His book, “The Burzynski Breakthrough, The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It” is now available in a soft cover fourth edition. For the rest of today’s Elias column visit www.appealdemocrat.com.