February 1, 2001 - From the February, 2001 issue

The New Economy and Jobs/Housing Balance In Southern California – A SCAG White Paper

The American Dream, a pioneering spirit rooted in an almost undeniable willingness to sacrifice anything for a home in the ‘burbs. It is that ingrained aspiration that has brought us to our current situation of increasing commute times and a lack of affordable housing. TPR is pleased to excerpt the following paper, "The New Economy and Jobs/Housing Balance in Southern California," which encourages our region to prioritize job centers, not virgin land, as the crucial node for development.

By: Michael Armstrong and Brett Sears

Executive Summary

The continuing economic recovery of the SCAG Region has brought problems and challenges along with its economic benefits. Jobs are now plentiful, but housing is scarce and housing prices and rents have soared. Highway congestion has increased substantially and commute times have lengthened. Meeting strict air quality standards in the face of increased driving and congestion has become even more challenging. These problems largely result from a lack of new housing construction, especially near major job centers, and the inability of many workers to purchase the housing being produced.

Problems associated with inadequate and unaffordable housing in job-rich areas have become so pronounced throughout the state that they have galvanized the State Legislature to try to solve them. Assembly Bill 2864 (Torlakson) establishes the Jobs-Housing Balance Improvement Program that provides state funding to local governments for projects that will mitigate the imbalance of jobs and housing in local communities. This bill provides $110 million for projects and programs in housing-rich communities that will attract new businesses and jobs, and projects in jobs-rich communities that will increase the supply of housing.

An analysis of the current jobs/housing ratios in the SCAG region finds that jobs-rich areas are located primarily in Los Angeles and Orange Counties. Housing-rich areas are located on the periphery, primarily in the Inland Empire and northern Los Angeles County. Jobs/housing ratios are forecast to increase over the next 25 years in the western portion of the Inland Empire. Still, much of the Inland Empire and all of northern Los Angeles County are forecast to remain housing-rich in 2025.

Housing-rich areas, particularly in the Inland Empire, have seen substantial job growth over the last decade. This job growth is forecast to continue, which will result in increasing jobs/housing ratios for areas in the western portion of the Inland Empire. In fact, the Regional Statistical Area (RSA) around Ontario Airport is forecast to become very jobs-rich by the year 2025. Nevertheless, much of the job growth of the Inland Empire has been in relatively low-paying blue-collar sectors of the economy, and the gap in per capita income between it and the rest of the region has been increasing. The average wage of the job base of some areas in the Inland Empire is insufficient to purchase the average local house, and many local workers are forced to commute in from outlying areas where housing is less expensive.

The job growth of North Los Angeles County, another housing-rich area, has not been as robust as that of the Inland Empire. The new jobs created though have in general been higher paying, with the migration of white-collar professional jobs to Santa Clarita Valley and with the consolidation of the aerospace industry in the Antelope Valley. North Los Angeles County is forecast to remain housing rich in 2025. In fact, the Santa Clarita RSA is forecast to change from a balanced status to being housing-rich in 2025.

An analysis of land development needs for accommodating forecast housing shows that there is an insufficient amount of raw, developable land in Orange and Los Angeles counties to accommodate their forecast housing needs at current densities. Development strategies involving infill of currently vacant and underutilized lots, and developing at higher densities are necessary for these counties to meet their forecast housing needs and achieve the benefits of jobs/housing balance.

An analysis of the development capacity of 1993/1994 general plans and zoning shows that most counties have excess vacant land zoned for commercial and industrial uses, relative to existing land use ratios. From a jobs/housing standpoint, this could be justified in housing rich areas. However, this is contrary to achieving jobs/housing balance in jobs-rich counties like Los Angeles County where low-and moderate-income workers are having an increasingly difficult time finding affordable housing.

Historically, the geographic imbalance between jobs and housing in the SCAG Region has been a problem that has been largely self-correcting. Jobs have moved from their original centers to housing-rich suburbs to take advantage of lower land and labor costs and provide shorter commute trips for their employees. The end result is the multi-centered urban fabric that characterizes the region today. This phenomenon also explains why average home-to-work commute times in the region have remained relatively constant over the last several decades.

However, there are several emerging trends that threaten to exacerbate problems associated with jobs/housing imbalance. The high-tech and knowledge-based New Economy has been extremely important to the economic resurgence of the region. New Economy firms, particularly those dealing with Internet content, tend to be collaborative in nature and tend to concentrate in urban core locations. They are relatively insensitive to traditional land and labor cost factors and locate in areas with a wide variety of cultural amenities so that they can compete for the young, highly educated information workers that are keys to their success. When housing is limited around high-tech nodes, these affluent knowledge workers displace low and moderate-income groups in a process of gentrification. It is very difficult to disperse New Economy companies to housing-rich areas because of their tendency to coalesce and their high priority placed on locating in culturally rich urban environments. In the SCAG Region, high-tech clusters are located predominantly in coastal locations.

The other trend that runs counter to achieving jobs/housing balance is the "fiscalization of land use." State tax law has created competition among cities for sales tax-generating commercial uses of land. Because of limitations on property tax revenues, cities place lower priority on accommodating residential development, and higher priority on sales tax generating uses. This has greatly contributed to a trend of housing production lagging job growth and population increases. In combination with community apprehension over multifamily housing, a shortage of vacant land for housing in urban areas, and construction defect litigation problems, the fiscalization of land use makes it very difficult to implement strategies for promoting infill housing that is affordable to low and moderate-income workers. Many service and blue-collar workers, along with moderate-income white-collar workers employed in and around high-tech nodes, are consequently forced to commute long distances from areas where they can find affordable homes.

To help alleviate problems associated with jobs/housing imbalance, policy makers can look to both conventional and New Economy mechanisms to spur housing development in job-rich areas, and well-paying job creation in housing-rich areas. To encourage housing production, this paper presents the following strategies for policy makers:

• Alleviate roadblocks [for] infill and [conversion of] brownfield sites

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• Encourage transit-oriented design

• Reevaluate zoning policies and rewrite zoning ordinances to make more land available for housing construction

• Institute appropriate state and local finance reform to help increase incentives for housing by reducing local government reliance on sales tax revenues

New Economy jobs in the high-tech fields pay high salaries. To encourage the development and growth of these companies in housing-rich areas, this paper offers the following strategies:

• Target education and research toward new economy jobs through research parks

• Institute community–based job training programs to train and retrain workers for new economy jobs

• Promote venture capital investment

• Sponsor business incubation programs

• Invest in telecommunications, specifically fiber optic investments

• Promote airport development

High technology companies demand educated employees. This may require colleges and universities to redirect their training efforts, and primary and secondary schooling to better prepare their students before they get to college. High technology companies also need access to venture capital investments and a place to grow. University-affiliated research parks and other incubation centers offer places to develop new high-tech businesses. Public investments in fiber optic cable can make areas more attractive to New Economy firms. High technology firms require reliable air travel, both commercial and air cargo, to move their employees and their products quickly throughout the world. Developing and expanding airports in outlying areas can help spread New Economy companies across the region.

Old economy jobs are expanding into the Inland Empire. Whether or not people living there will work in these jobs or continue to commute to jobs closer to the coast remains to be seen. New Economy jobs are beginning to move inland, but this change will take time. Meanwhile, the housing crisis is worsening.

There needs to be a two-pronged approach to addressing regional jobs/housing imbalance. Affordable housing is in desperate demand in northern Orange County and southern Los Angeles County. High paying jobs are needed particularly in the Inland Empire and other outlying areas where higher incomes are needed for workers to purchase the housing that is being constructed. Using a variety of conventional and innovative new strategies, policy makers can begin to address problems associated with regional jobs/housing imbalance.

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© 2021 The Planning Report | David Abel, Publisher, ABL, Inc.