Inadequate building boom; housing ‘shortage’ persists

California’s top officials and the bureaucrats who back them up persist in telling us there’s a massive housing shortage in this state, amounting to something between 1.8 million and 3 million units (over five years, they’ve used varying figures within that range).

This means the state — with 14.6 million existing units as of mid-2022 — is about 10% short. If this shortage is real and not merely a figment of the imagination of officials at the state’s Department of Housing and Community Development, there should be few vacancy signs on the new apartment and condominium buildings that have proliferated around the state since 2021.

But there are many. It’s hard to find a 2015-or-later vintage market-rate building without huge signs advertising vacancies. Now comes a study that begins to show why: Even in the midst of the building boom, not enough units are going up to satisfy the shortage, while prices and rents remain too high for most of those who would like to move to new quarters, even for many so-called affordable units.

With rents around $2,700 per month for a two-bedroom apartment in the state’s largest cities, that’s easy to understand.

And that doesn’t even include the state’s 170,000-odd homeless, who can barely afford any rent at all, thus resorting to tents where publicly owned shelter is not available

A look at some of the state’s highest-demand housing areas provides details of what’s going on. That study comes from the RentCafe website, which reveals that construction in California’s densest ZIP codes does not match new development in other places like Dallas and Washington.

The 92101 zip running along the coastline of San Diego Bay features fabulous views, outstanding restaurants and 5,345 housing units built between 2017 and 2022, the latest building boom era figures available. That was a 46% increase in available units.

That large percentage of increase figured to bring some price relief, but did not: Median apartment rent there is $3,048 per month, or more than $36,000 per year. How many Californians can afford that? What’s more, the increase in 92101 housing ranked as only the eighth fastest growing ZIP in America, but No. 1 in California. ZIPs in Dallas and DC far outstripped this one, with ZIP 20020, near the White House, adding 10,098 units in the same time, or an increase of 73%. Even with the big new supply, rents there still average about $3,000 per month, little different from those on San Diego’s bay shore.

These figures go a long way toward making obsolete the old rule that a greater supply will bring lower rents.

New supplies also have not reduced rents in San Francisco’s 94103, California’s second fastest growing ZIP code in new housing with 4,379 new units and a 66% housing supply increase since 2017.

The ZIP includes the Civic Center. Apartment rents still average about $3,300, even though prices have dropped about 7% over the last year in the overall San Francisco Bay Area.

It all suggests there’s a new differential in housing between urban, suburban and rural. Rents of $1,000 or less are not very difficult to find in the lowest density ZIP codes among California’s 1,763 postal areas. But in the densest areas, places with high land prices and most likely to attract builders seeking high returns on their investment, prices are staying up while supply rises.

This suggests a determination among developers who own the new buildings to keep prices up even when demand is low, in order to avoid rent controls that could keep prices and profits low for decades if owners allowed rents to drop now.

It also suggests that housing shortage figures bandied about by HCD and its patron politicians may be vastly inflated products of their imagination.

One thing for sure: Even though density advocates in the California Legislature, led by Democratic State Sen. Scott Wiener of San Francisco and rubber-stamping Gov. Gavin Newsom, remain convinced high supplies equal lower rents even when reality says that’s incorrect. Perhaps the state should instead emphasize single family housing and less dense areas where history shows Californians actually want to live.