The state has been underbuilding housing for the last decade, ever since an overheated housing market collapsed.
Despite the ensuing recession, California’s population continued to grow by over 300,000 persons a year. Households, each with an average of almost three persons, continued to form.
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That created a need for 100,000-plus additional housing units a year, but California construction dropped to near zero during the meltdown, and we’ve only approached the 100,000-unit level in the last few years – not counting thousands of homes that are lost to demolition, fire and abandonment each year.
Overall, California built just 47 percent of the housing it needed between 2003 and 2014, the state has calculated, with the biggest gaps in poor rural counties.
The Department of Housing and Community Development contends that between 2015 and 2025, with California’s population growing by 3.4 million, it needs 1.8 million units of new construction to net the million-unit-plus expansion of housing population growth will require.
It would take even more – much more – to make up for lack of construction in the last decade – a dearth that’s driven housing costs to sky-high levels and given us the nation’s highest level of poverty.
Building an average of 180,000 new units of housing each year to meet demand and offset attrition in older units would require enormous investment – at least $60 billion a year, or about as much as we spend on the K-12 school system.
Brown’s new budget highlights the crushing demand numbers and points out that building “affordable” housing for low- and moderate-income families isn’t cheap.
It costs, on average, $332,000 to build one unit of affordable housing, ranging from $591,000 in San Francisco to $207,000 in Kings and Tulare counties.
Brown would compel local governments that control land use to streamline permitting for affordable and transit-oriented housing projects, and thus shave their costs, but faces stiff opposition from environmental and labor groups.
They and their legislative acolytes have offered support, instead, for putting more public money into affordable housing projects, but that runs afoul of the costs Brown cites in his budget.
Two new proposals, one imposing a new tax on real estate transactions and another abolishing state income tax deductions for second home mortgage interest, would generate perhaps $600 million a year for affordable housing – enough for around 1,800 units, or just 1 percent of the state’s overall need.
In other words, they are drops in the bucket and nothing more than feel-good gestures.
Only private and nonprofit housing developers can borrow and leverage the many billions of dollars in housing investment California needs, but they need regulatory streamlining and other structural reforms to make it work. That’s the harsh reality.