Middle-class workers can’t afford to buy homes in L.A. County; Future looks dim

Article/graphics courtesy of Kevin Smith Southern California News Group

Oscar Sol has spent the past five months searching for a home he can afford to buy.

But so far, he has struck out.

“I’m looking for a condo or town home, something in the price range of $300,000 to $350,000,” the 37-year-old North Hollywood resident said. “Homes are too expensive here so now I’m looking in Santa Clarita.”

Good luck with that. Santa Clarita’s median home price — the point at which half of the homes cost more — was $550,000 in December, up 17 percent from a year earlier, according to price tracker CoreLogic. And that’s not the worst of it.

Studio City’s median price rose 28 percent during the same period and other communities posted even bigger annual price hikes, including Montrose (up 34.4 percent), Tarzana (up 44.2 percent), South Pasadena (up 47.8 percent) and Malibu (up 52.6 percent).

MIDDLE-CLASS WORKERS ARE STRUGGLING TO FIND AFFORDABLE HOMES

Sol, who is married with three children and works as an event coordinator, is not alone. Scores of middle-class workers in Southern California are struggling to find homes they can afford. But their search has been hampered by prices that continue to rise. The price hikes have been fueled by tight inventories and the fact that developers are not building nearly enough homes to keep pace with demand.

Speaking Wednesday at a “Housing Our Workers” forum in Van Nuys, representatives from housing, urban development, city leadership, finance, public health, neighborhood councils and other organizations met to discuss the issue. The event was presented by the Southland Regional Association of Realtors and co-sponsored by BizFed Institute, The Valley Economic Alliance and the National Association of Realtors.

“We know there are challenges with the homeless and transitional housing, but we don’t give enough attention to our middle class worker,” Mel Wilson, Southland Regional’s government affairs director, told the group. “Middle-class workers are being squeezed. They don’t make enough money to qualify and purchase a home or a condo, and they make too much to qualify for some of these low down payment and subsidy programs. No one is standing up for the middle-class workers.”

DEVELOPERS ARE NOT BUILDING ENOUGH HOMES

Developers are building an average of 80,000 new California homes a year but that falls well below the 180,000 that are needed, according to recent figures from the California Department of Housing and Community Development.

When viewed through a longer lens, California will need more than 1.8 million additional homes by 2025 to keep pace with the state’s ever-growing population. The state housing and community development department and state Department of Finance based that on population projections and household formation data.

Holly Schroeder, president and CEO of the Santa Clarita Valley Economic Development Corp., attended Wednesday’s housing event and said builders are hampered by all of the fees and regulations.

“We have a general policy in California that people think of as being equitable, which is that housing has to pay its own way,” she said. “That’s a great sound bite, but I think we have to think through what the consequences are. That means that every house — before you put a shovel in the ground or put a piece of lumber up — is going to pay fees for roads, for schools, for fire stations, sheriff’s stations, parks and community centers … all of that, including water and sewer.”

And those costs add up quickly.

“All of these fees, cumulatively in a typical city, are between $80,000 and $100,000 per home,” Schroeder said. “There is also a lot of litigation that makes it hard to build. We’ve been under-producing, which contributes to it. And in addition to the financing, the housing often skews toward more upper income people.”

MIDDLE-INCOME WORKERS ARE LEAVING CALIFORNIA IN SEARCH OF AFFORDABLE HOUSING

Beacon Economics released a trio of reports last year that said the search for more affordable housing is sending low and middle-income workers out of state, while higher-wage workers continue to move in.

“California has an employment boom with a housing problem,” Christopher Thornberg, a founding partner with Beacon, said when those reports were released. “The state continues to offer great employment opportunities for all kinds of workers, but housing affordability and supply represent a significant problem.”

Aside from all the costs, the process of securing land for development can be lengthy.

THE APPROVAL PROCESS CAN BE LENGTHY

“The approval process can take years to get through, so a real estate cycle could have come and gone by the time you get your master plan approved,” said Bill Holman, vice president of land development for Christopher Homes and for Rosedale Land Partners, master developer of the 1,250-home planned community of Rosedale in Azusa.

The biggest constraint, Holman said, is a lack of available land.

“Southern California is pretty spread out and opportunities for large-scale developments are often far from where people want to live,” he said.

Glen Longarini, KB Home’s division president for Los Angeles and Ventura counties, said the development process varies from city to city.

“Some jurisdictions try to streamline it more than others,” he said. “But broadly speaking, the entitlement process can take months, and in some cases, years.”

KB Home has a variety of new homes for sale in such cities as Santa Clarita, Simi Valley, Van Nuys and Palmdale.

What needs to happen……

The groups that came together at Wednesday’s event agreed on several factors that would spur increased home construction:

• The development process needs to be streamlined

• Cities and developers need to engage with neighborhood councils and other community groups early rather than later when housing proposals are under consideration

• Elected officials need to lead with innovative ideas instead of being fearful of neighborhood councils and their constituents

• Housing needs to be looked at in a more holistic manner, taking into consideration how long commutes impact family life and people’s stress levels

• Planning processes should be updated every six years rather than every 10 years or even longer, which has been the case in some cities.

****Article/graphics courtesy of Kevin Smith Southern California News Group

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