June 2, 2000 - From the June, 2000 issue

A Statewide Affordable Housing Crisis With Little Relief In Sight

While booming economic growth and prosperity has increased quality of life for many Californians-it has exacerbated an already deficient housing market throughout the Golden State. The following report by the California Budget Project recounts the problems throughout Southern California and outlines what needs to be accomplished at the federal, state and local levels to correct the growing crisis. TPR is pleased to present this excerpt of "Locked Out! California's Affordable Housing Crisis."

While the lack of affordable housing is the most widespread problem facing low and moderate income California families, the nature and intensity of housing problems varies significantly around the state, and certain groups of Californians experience distinct housing problems.

Problems Vary Throughout State

The diversity of the state's local economies [has] give[n] rise to a diversity of housing problems. Homeownership rates, land costs, prevalence of substandard conditions, and overcrowding all vary throughout the state.

Los Angeles

Los Angeles County's housing affordability problems are an outgrowth of the region's large low wage workforce. Fueled by expansion in service industries, half of the county's new jobs pay a full-time worker less than $26,000 per year. Yet, housing prices remain among the nation's highest. While public policies attempt to meet the needs of a variety of special populations, there is virtually no assistance for the "plain old poor." As a result, 79 percent of the county's very low income renters and 46 percent of all Los Angeles County renters pay more than half of their incomes for housing.

While home prices in the Los Angeles area have risen more slowly than in most parts of the state, they remain high in comparison to the incomes of county residents. At 48 percent, the county's homeownership rate is the lowest of the state's metropolitan areas. Los Angeles also lags the rest of the state in terms of housing production as a percentage of projected need. Between 1997 and 1999, the county produced just 39 percent of the units needed to meet the demand projected . The most acute need is for low cost rental housing, where there is a 301,400 unit gap between the number of low income renter[s] and low cost rental units.

Orange County

Orange County's affordable housing shortage is the worst in the nation. Low income renters exceed low cost rental units by a ratio of 4.6-to-1. This disparity results from a large, low wage workforce and an extreme shortage of affordable housing. Over the past several decades, the role of Orange County in the regional economy has shifted from that of a bedroom community for Los Angeles County to an economic center in its own right. An imbalance between job growth and the county's housing stock, has led a number of workers and their families to move to the lower cost Inland Empire and commute to Orange County jobs.

Advocates for affordable housing identify the prevalence of "NIMBYism" and a general reluctance of many local communities to support affordable housing The shortage of multifamily housing translates into prices that are out of reach to much of the county's workforce. A full-time worker would need to earn $17.13 an hour to afford a [market rate] two bedroom apartment in Orange County.

The Inland Empire

Riverside and San Bernardino Counties have become the new bedroom communities for Southern California, leaving many residents with lengthy commutes to jobs in Orange and Los Angeles Counties. Lower land costs and rapid growth in housing stock allow the Inland Empire to fill a portion of the region's housing gap.

While homebuyers fare relatively well, the Inland Empire has a scarcity of rental housing. Multifamily housing accounted for only one out of fourteen units issued building permits in San Bernardino County in 1999. The situation was only slightly better in Riverside County, where 14 percent of permits were for multifamily housing, but still lower than the statewide figure of 27 percent.

One problem unique to the Inland Empire is that of vacant single family housing. The recession of the early 1990s came on the heels of a significant building . When the economy turned down, a number of homeowners lost their homes and many remain vacant. The San Bernardino-Riverside metropolitan area vacancy rate for owner occupied housing was twice that of the state as a whole in 1999 . Many of these units now need significant renovation and rehabilitation to become habitable.

San Diego

San Diego's housing problems are characterized by a lack of affordable units for both renters and buyers. With demand outstripping supply, vacancy rates are plummeting and costs are rising. The median home price in San Diego rose by 35 percent between 1995 and 1999. San Diego enjoyed relatively affordable housing, at least compared to other coastal communities, during the early 1990s. Rising prices have forced many families to move farther from the urban core, and even to adjacent Riverside and San Bernardino Counties in search of affordable housing, increasing commute times and congestion on area freeways.

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Three Factors are at the Heart of California's Housing Crisis

•Job growth has exceeded housing growth in nearly every part of the state since the economic recovery began in 1994. The number of new jobs exceeded the number of new housing units in all but 12, primarily rural, California counties between 1994 and 1998. The state as a whole added 3.9 jobs for each new unit of housing, more than twice the 1.5-to-1 ratio recommended by housing experts.

•California's system of local government finance limits the amount of revenue generated by housing and encourages local communities to favor sales tax generating retail over residential or other forms of commercial development. The importance of sales tax revenue in relation to other revenue sources is generally cited as the main force driving what has become known as the fiscalization of land use. The added cost of paying for facilities that were once shared across the entire community increases the cost of housing, pushing homeownership further out of the reach of young families and others of modest means.

Housing Assistance at Federal LevelFails to Meet California's Needs

•Federal support for housing has declined since the 1970s. Modest increases over the past two years will be inadequate to meet California's needs. California received fewer federal housing assistance dollars in 1999 for each individual living below the federal poverty level than all but one of the ten largest states. While the federal government spent, on average, $286 on housing assistance for each person in poverty, California received only $171 per person in poverty.

•Demand for federally-support assistance is intense. A recent survey of twenty local housing authorities found 371,740 families were on waiting lists for Section 8 assistance, more than three times the 104,133 receiving assistance. The survey found 93,632 families wait listed for 25,268 units of public housing.

•A significant fraction of the state's federally subsidized housing units are reaching the expiration dates of their contracts to maintain affordability, putting California's affordable housing stock at risk of conversion to market rate housing . In the past three years, California has lost more than 15,000 affordable housing units to opt-outs and prepayments with most of the losses occurring in Los Angeles, Orange, San Diego, and Santa Clara Counties. The state Department of Housing and Community Development estimates that more than 180,000 units may be at risk of conversion over the next decade.

State Support for Housing: From Leader to Laggard

• During the late 1980s, California implemented a series of innovative housing programs and provided substantial funding for its housing efforts. Among the state's signature initiatives were creation of the first state housing trust fund in 1985; creation of a state supplement to the federal low income housing tax credit in 1987, and passage of three affordable housing bonds in 1988 and 1990.

•State housing spending dropped substantially during 1990s from 0.7 percent of total spending in 1990-91 to 0.2 percent of total spending in 1999-00. During the early 1990s,bond proceeds supported a substantial investment in affordable housing. However, as these funds disappeared only minimal state support was allocated to take their place. While the 1999-00 budget includes several modest initiatives, the absolute number of dollars allocated to housing and related programs is less than half that of decade ago.

Conclusion

California is facing a housing crisis of dramatic proportions. Record numbers of renters are paying far too large a portion of their limited incomes for rent. Californians face some of the nation's least affordable homeownership markets. While the poorest households face the most severe housing problems, millions of California's working households also face substantial problems. In vast parts of the state, middle income families with two full-time workers are not able to afford to buy a home.

The lack of affordable housing has widespread implications for families, communities, and the vitality of the California economy. High housing costs make it difficult for businesses to attract and retain workers. The search for affordable housing is driving many metropolitan-area workers farther from their jobs, creating ever-greater suburban sprawl and leading to growing traffic congestion and greater air pollution. Rising rents make it impossible for low wage workers to live in the communities where they work, forcing many to choose between a long commute and overcrowded, substandard housing. When families are forced to spend more of their earnings on shelter, they have less to spend on food, clothing, childcare, and other necessities. And the lack of affordable housing contributes to the stubborn challenge of preventing homelessness and helping those who are already homeless get off the streets.

Greater efforts at the federal, state, and local levels will be necessary to meet the housing challenges identified in this report. The federal government should resume its traditional leadership role in providing funding to make housing affordable for all. The state, too, should make greater efforts to enhance funding for new housing initiatives and to ensure that existing state and local resources are used to their full potential.

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