A recent report published by Bay Area think-tank Next 10 has confirmed what builders in California have been saying for years: the state is not building enough new homes to keep up with the demand. Not only is this a problem for those who are looking for a home in California, but the think-tank has also found that the state’s economy may suffer from some very real consequences if steps are not taken to address the issue.

Falling Housing Figures

According to the Next 10 report, there were only 21.5 permits issued in the state of California for every 100 people new to the state during the period spanning from 2005-2015. These figures appear to apply statewide, including both ownership and rental homes.

The North State Building Industry Association seems to agree with the Next 10 findings, with the association reporting that a typical homebuilding year for the Sacramento region is 8,000 to 12,000 new single-family units. Yet, the region has not been anywhere near achieving those figures since 2007 and current trends do not indicate a change is forthcoming for 2016.

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Impacting the Economy

Just as the state is facing a shortage of homes for its residents, it is also dealing with other economic issues. If the state continues to create jobs, for example, it may soon find itself facing a critical shortage in middle-income workers.

Unfortunately, the state may be caught in a vicious cycle where this is concerned, as 45 percent of the developers in the state’s urban areas cite costs, neighbor opposition or both as reasons why they do not move forward with infill projects. The California Environmental Quality Act has also been cited by builders as a roadblock to development, as the act presents them with challenges in terms of zoning and facing potential lawsuits.

To help address some of these concerns, Proposition 13 may help compel jurisdictions to approve retail projects by placing limits on property tax increases. In this way, the jurisdictions may be able to increase their sales tax dollars.

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Ultimately, the shortage of housing does appear to have had an effect on who chooses to stay in California and who decides to leave. Of the 625,000 residents who left the state between 2007 and 2014, data shows that 563,000 of them made less than $50,000 per year. Another 139,000 made between $50,000 and $99,999. During that same time period, the state brought in 5,200 people with bachelor’s degrees and more than 80,000 who earned $150,000 or more.  Since the state’s income tax structure tends to affect high-income residents more, this data seems to indicate that standard of living, which includes housing costs, may be pushing more people to leave than income taxes.

According to the report, the only area in a worse situation than California in terms of housing is Alaska. The state has fewer housing permits for every 100 new residents over the ten-year period spanning from 2005 through 2015.

There is no doubt that California is a state where housing is in demand. If you want to learn more about California real estate, particularly luxury real estate in Southern California, contact our team of high-end real estate experts.

  1. 3 beds, 3 baths
    Home size: 2,952 sq ft
    Lot size: 12,980 sqft
  2. 5 beds, 4 baths
    Home size: 3,623 sq ft
    Lot size: 6,243 sqft
  3. 4 beds, 3 baths
    Home size: 3,124 sq ft
    Lot size: 8,598 sqft
  4. 6 beds, 5 baths
    Home size: 6,185 sq ft
    Lot size: 7,440 sqft
  5. 4 beds, 6 baths
    Home size: 3,700 sq ft
    Lot size: 10,441 sqft

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(all data current as of 10/19/2017)

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