ECORP Consulting, Inc.
Chair, Metro Chamber Land Use and Natural Resources Committee Chair.
& Michael Strech, North State BIA
A recent report from Next 10, a left-leaning San Francisco-based think tank, warns that the state’s growing housing crisis may lead to major economic challenges ahead. Due to a long-standing lack of supply and strong demand for a place to live, housing costs continue to skyrocket.
In the Bay Area, the median price of a home in March hit an astronomical $955,000. In the short run, that’s probably good for the Sacramento region where the median price was “just” $365,000 in Sacramento County and $475,000 in Placer County. (All figures from the California Association of Realtors.)
While housing here is still affordable by Bay Area standards, it’s getting less so. In just the past year, prices climbed by 11.7 percent in Sacramento and 8.1 percent in Placer. As F. Noel Perry, Next 10’s founder, put it, “California is sinking deeper into a housing crisis, and this raises questions about the sustainability of the state’s overall economic growth.” The rich are doing fine, but many low- and middle-income residents are leaving California for states where buying a house isn’t a fantasy.
Why are prices so high? It’s simple. Our industry has not been building enough homes and apartments to keep up with population increases. Statewide, we should be building about 180,000 housing units a year. We’re building less than half that amount.
The same is true in our region. Production here is a bit better than the statewide average, but SACOG states the region needs between 10,000 and 12,000 new units a year, and we’re building less than 60 percent of that.
Why? Reasons include government agency policies preventing development, high development fees imposed by many local governments, regulatory hurdles, the ability of housing opponents to file environmental lawsuits, and union prevailing wage requirements – just to name a few. If that isn’t bad enough, efforts are underway to enact rent control in Sacramento and to greatly expand the amount of housing subject to rent control statewide. These steps would sharply reduce construction, which will amplify the shortage.
Last year, the Legislature took the first steps toward addressing the housing crisis by passing a 15- measure package that includes a $4 billion housing bond to be voted on this fall, giving cities incentives to allow for more housing, and making it easier for developers to prove a city acted in bad faith by denying a project.
But these are just first steps. Even proponents of the package acknowledge that some 14,000 new housing units a year, at most, might result from these bills.
The good news in our region is that most land-use decisions are still made at the local level, and our local officials generally understand we need to keep building fees under control and push back against NIMBYs who want to put a halt to development. Our industry will continue working closely with them to find win-win solutions that will keep Sacramento housing affordable and grow our region’s economy.
The next issue of eNews will explore in more detail collaborative solutions to the housing crisis.