It is no secret that California is facing a housing shortage.
Elected officials in all levels of leadership, from city governments to the state legislature, have been trying to come up with solutions to cure the woes of local housing markets.
In the state spotlight, this legislative cycle has seen over 100 housing bills, the most proposed bills geared toward housing in years. Among this massive response from Sacramento, some of the bills with the most potential impact would seek to increase the supply of houses available, while others would help address the issue of affordability.
- Senate Bill 35, authored by Senator Scott Wiener (D-San Francisco)—with a coauthor from local Senator Andy Vidak (R-Hanford)—would create a framework in which a region that fails to build the number of houses deemed necessary to accommodate growth triggers a mechanism that then streamlines development projects in that region. In layman’s terms, this means any area that doesn’t build enough homes will have its more restrictive local controls essentially negated to produce growth.
- Senate Bill 2, authored by Senator Toni Atkins (D-San Diego), proposes raising fees on new developments and funneling the funds to affordable housing programs and local housing groups.
- Senate Bill 3, authored by Senator Jim Beall (D-San Jose), seeks to place a $3 billion general obligation before California’s voters on the November 2018 ballot. This bond would be used largely to fund programs to expand the availability of affordable rental housing.
Given the current state of the market, effective legislation cannot come soon enough.
Some critics argue that it is too late—that California’s homes have already become too expensive for many residents and have contributed to a glut of other problems that will take time to fix, from homelessness to migration away from the state.
A recent survey of nearly 6,000 students in the Los Angeles Community College District found that almost one in five students (18.6%) in the district had experienced homelessness in 2016, and that over half– 55%– had struggled to pay bills. 62.7% reported not having enough to eat.
Though other costs of living contribute, this study tells readers that high housing expenses have been the primary obstacle for these students.
Another example of the difficulties high housing costs present is the inability of civil servants, such as police officers, firefighters, and teachers, to live in the communities they serve, or even enter those professions altogether.
Eric Heins, President of the California Teachers Association, in response to a Redfin survey about housing affordability for teachers, said, “Costs associated with living in the Golden State make the teaching profession look less attractive to young people considering a career in education. We are facing a massive teacher shortage, and unless the state and local school districts do something to make education a more attractive and financially sustainable career choice, that shortage is going to get worse and negatively impact millions of our students for a long time to come.”
Clearly, in his position, Heins tends to focus on what can be done from the perspective of education policy. When considering complicated issues like these, solutions are always multifaceted, but, with the rapid rise of home prices so evident, it is obvious that proposals to improve housing options and affordability must be part of the equation.
Housing prices booming
In their most recent data release on local housing markets, CoreLogic, a real estate tracking firm, showed median housing prices in a number of major markets statewide have reached their highest nominal point ever.
In the San Diego, Los Angeles, Sacramento and San Francisco regional markets, median prices reached $530,000, $560,500, $330,000, and $818,000, respectively, in the month of May.
Though real prices (adjusted for inflation) are still slightly lower than those of the pre-recession boom seen a decade ago, the price explosion—the lowest annual jump among those cities was Los Angeles at 6.8%– still raises plenty of concern.
How does Fresno stack up to these markets?
Prices here still have a way to go before hitting the September 2006 median high of $279,000, but the median price currently sits at $249,000. However, this figure represents a 9.4% increase from May 2016, which is a faster rate of growth than any of the four major metro areas.
As originally reported by the LA Times, the San Jose Mercury, the San Diego Union-Tribune and the Sacramento Bee, the massive boom in prices has been created by the failure of supply to meet the demand of California’s ever-expanding population.
Demand has been driven further in recent months as the job market grows and more consumers are continuing to move out of the post-recession market of uncertainty and recovery. Additionally, interest rates remain low and, with potential hikes looming, mortgages are more attractive now than they may be in the coming months.
The coalescence of these market forces is now driving buyers to the housing market.
Unfortunately, the selection of houses for prospective customers is slim.
During the month of May, San Diego, Los Angeles, Sacramento and San Francisco, saw the months’ supply of houses dwindle to 1.5, 2.3, 1.5, and 1.4, respectively. Months’ supply is a measure used to track how many months it would take to sell all the homes on the market at any particular time, at the current rate of sale, without any new construction or new homes hitting the market.
Supply is similar to these other sparse markets in Fresno, with 1.7 months available locally.
Economists who deal with housing topics indicate that around five to six months’ supply is a balanced market.
“We just don’t build enough housing,” said Leslie Appleton-Young, chief economist with the California Association of Realtors, in her comment to the LA Times.
Reports like those in the state’s newspapers and legislation like SB 35, which targets specific areas that do not meet their goals, seem to suggest that local regulations that stall, complicate and preclude projects may be the primary culprit for the shortage.
This affordability crisis, and the publicity that comes with it, has local governments scrambling for solutions.
The Union-Tribune story pointed out that San Diego Mayor, Kevin Faulconer, has recently proposed plans for project streamlining, regulation rollback and cuts in development fees to spur growth.
While California’s regulations already create an environment with unfavorable conditions for growth, Fresno’s elected officials have done little to counteract the poor development climate.
A USA Today report from June 9, though nuanced in its interpretation, ranked Fresno as the tenth-worst large city in the United States in terms of availability of affordable housing. This story was based on a study by Raven Malloy, a Federal Reserve economist, and factored both general affordability and the amount of preventative regulation in cities to plot the most and least friendly cities for potential buyers.
Although the results can be disputed—USA Today chose to manipulate the data and highlight only those cities they considered “larger” in their final ranking—the signs still point to Fresno being a difficult place to build and buy.
Obviously, with prices skyrocketing and supply falling to such drastic lows all over the state, Fresno’s elected officials are not unique in their apparent lack of answers.
Perhaps, with reports advertising Fresno’s relative affordability, local leaders are feeling more comfortable with the housing situation than those in more expensive parts of the state.
However, with market experts predicting continued rise in prices for the foreseeable future, Fresno could do well by preparing to face struggles like its neighbors.
Who knows? Maybe with the right set of policies encouraging smart, sustainable housing growth, Fresno could serve as an attractive option for those priced out of the Bay Area and Southern California markets.
Contact Drew Phelps
Phone: 559-440-8321 / e-mail
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