California’s Housing Crisis: New Construction as a Solution?

Remember the good old days when you were ready to buy a home, you simply determined what you could afford and went through a stockpile of listings that met your price point criteria? From there, you could whittle it down to the features you wanted, ultimately put your offer in and eventually close the deal. Doesn’t sound familiar or seems too good to be true? Not surprising in Bay Area real estate where it feels like the housing market has remained in a perpetual state of low inventory and demand that borders on frenzy.

For perspective, California counties have the highest average housing price in the country, and in nine counties in the Bay Area, the average sale price is $900 thousand. In San Francisco County, that number is $1.7 million – a 35.6% increase over last year. As a result, the lack of available properties is staggering: California has a deficit of 3.5 million in available homes, representing 50% of the total deficit in the U.S.

There are a number of factors fueling the problem but one that strikes close to home is the fact that homeowners are holding onto their homes; although they could get top dollar for their property, they can’t afford to buy something comparable in their next home because of sky-high prices. Professionals and homebuyers alike are questioning how this problem will ever resolve itself. The answer is surprisingly simple: build more affordable homes for the middle to lower-income buyer. Last year California passed a robust housing package that provided for funding affordable housing development, streamlining building approvals and providing for more accountability to ensure that local communities are approving new construction.

The California Association of REALTORS® is taking this one step further by introducing a new affordable housing initiative called “Pathway to Homeownership.” The organization is seeking to redevelop the site of its Los Angeles headquarters to build affordable workforce rentals and for sale housing. The project would develop up to 181 residential units at affordable workforce housing rates. These units would be available to individuals and families earning 60 percent to 150 percent of the area’s median income.

The problem won’t be solved overnight and buyers hoping to get into home ownership will still find the market frustrating, but these efforts prove that there is light at the end of the tunnel.