Bills Hope to Ease Cal­i­for­nia’s Hous­ing Cri­sis

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As Septem­ber 2017 wound down, state leg­is­la­tors in Cal­i­for­nia rushed to pass a se­ries of bills to deal with its rapidly wors­en­ing hous­ing cri­sis.

The hous­ing cri­sis in Cal­i­for­nia is a stark one for those seek­ing to buy a house and is shock­ing to many who see the state as the place where peo­ple go to make their for­tunes. Ac­cord­ing to on­line hous­ing site Zil­low.com, the me­dian price of a Cal­i­for­nia home in July 2017 was $505,800, about twice the na­tional av­er­age. And for those want­ing to rent, things are also not en­cour­ag­ing. Zil­low showed a me­dian monthly rent of $2,452 for the state, com­pared to the na­tional av­er­age of $1,434. That means that Cal­i­for­nia’s ren­ters are pay­ing about 70% more per month for rent than the na­tional av­er­age.

These me­dian num­bers in­clude val­ues from across the state, in­clud­ing places such as Cal­i­for­nia’s Cen­tral Val­ley, where the econ­omy is nowhere near as “hot” as else­where. They are far worse in places like San Fran­cisco, with a me­dian hous­ing price of $1,104,000 at one end of Sil­i­con Val­ley and $822,700 in San Jose at the other end. In Oak­land, across the bay from San Fran­cisco, the me­dian price is “only” $619,800, but that is still a big num­ber for most peo­ple to han­dle.

A re­cent anal­y­sis showed that rent prices in Sil­i­con Val­ley’s Santa Clara and San Ma­teo coun­ties are also up in the clouds, with $2,783 as the me­dian rent. In San Fran­cisco, the me­dian rent is $3,888.

Far­ther south, Los Angeles clocks in with a me­dian hous­ing price of $585,100 and San Diego with $540,500. Sacra­mento, the state cap­i­tal, is con­sid­er­ably lower at $278,600, as is Fresno at $197,100.

The hottest mar­kets – in San Fran­cisco, Los Angeles, San Jose and San Diego – have also seen prices go up by 75% in the past five years. They are ex­pen­sive by just about any­one’s stan­dards, but many still won­der pre­cisely how ex­pen­sive these num­bers re­ally work out to be, es­pe­cially if one con­sid­ers the so-called “hot” economies present in those same ar­eas where the hous­ing prices are go­ing up.

The truth is sober­ing.

In San Fran­cisco, the me­dian price of a house is $1,104,000. A re­cent Mckin­sey study showed that

any­one even dream­ing of af­ford­ing such a house would need to earn a min­i­mum of $140,000 per year as well as some­how come up with the down pay­ment and other ex­penses nec­es­sary to live in such a house. That $140,000 per year works out to 179% of the area’s me­dian in­come, which means that the clear ma­jor­ity of those liv­ing in San Fran­cisco can­not af­ford to buy a house.

The sit­u­a­tion is not much bet­ter in the rest of Sil­i­con Val­ley. A May 2017 re­port, Sil­i­con Val­ley’s Hous­ing Cri­sis, pre­pared by the Cen­ter for Con­tin­u­ing Study of the Cal­i­for­nia Econ­omy (CCSCE), says that only 40% of first-time home­buy­ers in Santa Clara County (where Google and Ap­ple re­side) can af­ford to pur­chase 2016’s me­dian-price homes. In San Ma­teo County, only 29% of first-time home­buy­ers can af­ford their county’s me­dian-price of­fer­ings.

In Los Angeles, where the me­dian hous­ing price is lower – at $585,100 – the sit­u­a­tion might seem eas­ier to han­dle. Un­for­tu­nately, though, the in­comes there are nowhere near as high as they are in San Fran­cisco. There, ac­cord­ing to the Mckin­sey study cited above, the cut-off point for the to­tal house­hold in­come re­quired to af­ford to buy those $585,100 houses is $69,800 per year, which works out to be 115% of the area’s me­dian in­come. In that re­gion, there is a lit­tle less pain to find a place to live, but hous­ing is still out of reach for most res­i­dents in the area.

One con­se­quence of this is the ris­ing tide of what the CCSCE be­hind the Sil­i­con Val­ley anal­y­sis refers to as the “hous­ing cost bur­dened.” That kicks in when peo­ple end up pay­ing more than 30% of their in­come to­ward hous­ing costs, with hous­ing cost­ing less than 30% of to­tal in­come con­sid­ered “af­ford­able.” Those pay­ing more than 50% of their in­come to­ward hous­ing costs are con­sid­ered “severely hous­ing cost bur­dened.” In San Fran­cisco County, which cov­ers the city’s metropoli­tan area, an es­ti­mated 40% of those who live there are in that “severely bur­dened” cat­e­gory. In Santa Clara and San Ma­teo coun­ties, more than 50% of those who live there are sim­i­larly fi­nan­cially con­strained.

Oth­ers who work in those very ex­pen­sive cost-of-liv­ing ar­eas solve the prob­lem in other ways, some­times liv­ing as much as two hours’ com­mute time away from where they work in or­der to af­ford a house and earn the in­come nec­es­sary to pay for it. Many rent and/or share a space to save ex­penses. There is even a rapidly grow­ing group of peo­ple who buy vans or recre­ational ve­hi­cles and then park them – full-time – at the places where they work, as their “homes.” To save ex­penses, they then use on-site fa­cil­i­ties at their of­fices to shower and change. Be­cause so many peo­ple spend so much on hous­ing and re­lated ex­penses in the state, the lack of af­ford­able hous­ing costs Cal­i­for­nia over $140 bil­lion ev­ery year in to­tal lost eco­nomic out­put. That cov­ers lost con­struc­tion in­vest­ment if peo­ple could af­ford to build houses. It also in­cludes spend­ing dis­cre­tionary in­come for all kinds of things sim­ply be­cause the money is not avail­able. There are also lost taxes of many kinds for the state be­cause of lost spend­ing op­por­tu­ni­ties.

Many peo­ple in Cal­i­for­nia can­not af­ford to pay the high costs of liv­ing at all, which is why the state cur­rently shows a to­tal ef­fec­tive poverty rate of 20.6% as cal­cu­lated by the U.S. Cen­sus Bureau in its Sup­ple­men­tal Poverty Mea­sure Data Tables. That num­ber iden­ti­fies Cal­i­for­nia as the state with the high­est poverty level in the United States. Many of those peo­ple end up home­less, ei­ther liv­ing with oth­ers or on the streets, which is why Cal­i­for­nia is also seen as hav­ing one of the worst home­less crises in the coun­try.

This hous­ing cri­sis is not just about Cal­i­for­nia, how­ever. In The GAP: A Short­age of Af­ford­able Homes, a March 2017 study by the Na­tional Low In­come Hous­ing Coali­tion (NLIHC), there is a na­tional short­age of 7.4 mil­lion af­ford­able and avail­able rental homes for ex­tremely low in­come (ELI) ren­ter house­holds.

ELI ren­ter house­holds are de­fined as those with a to­tal in­come of less than the poverty guide­line, or 30% of their area’s me­dian in­come (AMI), which­ever is higher. Ac­cord­ing to the study, 71% of ELI ren­ter house­holds are cost bur­dened to an ex­treme ex­tent and pay more than half their in­come on hous­ing.

The NLIHC es­ti­mates that there are only 35 af­ford­able and avail­able rental homes avail­able across the coun­try for ev­ery 100 ELI ren­ters. The sup­ply varies from state to state, with Cal­i­for­nia hav­ing the worst sit­u­a­tion (only 21 af­ford­able homes are avail­able for ev­ery 100 ELI ren­ters in the state), fol­lowed by Ari­zona (26/100), Ore­gon (26/100) and Florida (27/100).

The NLIHC es­ti­mates that in Cal­i­for­nia alone there is a to­tal af­ford­able hous­ing short­fall of 1.1 mil­lion.

The bills brought to Sacra­mento to ad­dress these is­sues just a few weeks ago may of­fer some help with the com­plex mess Cal­i­for­nia has found it­self in.

The two that seem to have strong sup­port from Cal­i­for­nia Gover­nor Jerry Brown are Se­nate Bill 2 (SB2) and Se­nate Bill 35 (SB-35).

SB-2, pro­posed by state Sen­a­tor Toni Atkins, D-san Diego, adds a fee of $225 to some real es­tate sales, with the goal of rais­ing $1.2 bil­lion over the next five

years. Half of the money raised by that statute, if ap­proved, will go to lo­cal gov­ern­ments to help with hous­ing con­struc­tion. The other half of the money will go to­ward so­lu­tions to aid the home­less. SB-35, put forth by state Sen­a­tor Scott Wiener, D-san Fran­cisco, re­quires ci­ties to meet cer­tain goals for af­ford­able hous­ing.

Other re­lated bills in­clude the fol­low­ing:

SB-3, from state Sen­a­tor Jim Beall, D-camp­bell, au­tho­rizes the fund­ing of a $4 bil­lion state fund. It will go be­fore vot­ers in Novem­ber 2018. If ap­proved, it will re­place the monies for ex­ist­ing af­ford­able hous­ing agree­ments that were wiped out by the dis­so­lu­tion of re­de­vel­op­ment agen­cies. It will also – and im­por­tantly – pro­vide $1 bil­lion to the Cal­vet Home Loans pro­gram to help vet­er­ans and their fam­i­lies find hous­ing they can af­ford.

Al­ready lob­by­ing to make his case for SB-3, Beall says his bond mea­sure could pro­duce an in­cre­men­tal $23.5 bil­lion in eco­nomic ac­tiv­ity for the state. He also es­ti­mates that $8.5 bil­lion will be pulled in for in­come as a di­rect re­sult of the bill, plus another $1 bil­lion in other rev­enue gains for the state.

Other bills take a more puni­tive ap­proach to the prob­lem, pun­ish­ing ci­ties that do not de­liver on their man­date to prop­erly en­sure the avail­abil­ity of af­ford­able hous­ing in their com­mu­ni­ties. State Sen­a­tor Nancy Skinner, D-berke­ley, has had two bills like this al­ready pass in the se­nate. SB-167 fines ci­ties if they miss af­ford­able hous­ing quo­tas, with spe­cific steep costs for them if they will­fully fail to build af­ford­able hous­ing on ap­proved sites to avoid pos­si­ble neg­a­tive im­pacts on ex­ist­ing com­mu­ni­ties and their vot­ers. Skinner’s SB-166 re­quires ci­ties to have for­mal plans for mak­ing af­ford­able hous­ing avail­able.

Another bill, SB-540, sub­mit­ted by state Sen­a­tor Richard Roth, D-river­side, gives ci­ties the author­ity to de­ter­mine where hous­ing could most ef­fec­tively be built and thereby speeds up the ap­proval process for af­ford­able build­ing projects.

Will these bills make a dif­fer­ence? They are a start, at least, and, more im­por­tantly, they rep­re­sent an im­por­tant recog­ni­tion by law­mak­ers that some­thing must be done to deal with an in­creas­ingly messier hous­ing sit­u­a­tion – and high cost of liv­ing – through­out Cal­i­for­nia.

Photo by Raul Ocampo, cc

Photo by wood­ley­won­der­works, cc

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