July 2, 2020 #1 Local News, Forum, Information and Event Source for Venice Beach, California.

Time For Realistic Housing Goals

By Tom Elias, Yo! Venice Columnist

Build 3.5 million new dwelling units across California by 2025 and this state’s housing shortage will be solved, Gov. Gavin Newsom prescribed during his campaign last year and many times since.

But it’s not happening, and the problems of affordability and homelessness have grown no easier to solve under Newsom than before his election, despite many months of talk and a slew of new laws designed to make permitting and building new units easier and less bureaucratic.

If there’s a culprit here, it appears to be market forces. For years, the common nostrum was that easier permitting and lower prices could solve the problems, which see more than 130,000 homeless persons around the state and many more who can’t afford the American dream of owning their homes, which in California has been a path to wealth for generations.

It appears not even a drastic measure like this year’s proposed (and later scrubbed) SB 50 can do the trick. The measure aims to mandate high-rise housing in job and transit centers and near the busiest bus lines regardless of what neighbors or local officials desire.

SB 50’s likely failure was implied last spring, when the Irvine-based real estate information firm MetroStudy reported that 3,700 newly-built homes went unsold in Orange, Los Angeles, Riverside and San Bernardino counties during the first quarter of this year.

That left unsold housing inventory up 22 percent from last year and 37 percent above the five-year average. It caused a slowdown in construction at the very time Newsom and others wanted more building, with new home development in the state’s most populous region down 18 percent year over year.

That reduction in housing sales and construction would hardly get California 3.5 million new units in the next six years. It might generate one-sixth that many, at best.

This was market forces at work: Even though builders dropped the price of new housing below the regional median price, they could not drop it below the $425,000 average cost of building an apartment or condominium in a typical 100-unit project. Instead, most new units must be sold for about $600,000 in order to push the price of “affordable” new units in each development down to $350,000 or less.

Such numbers are needed for developers to make any profit, a prerequisite if anyone expects them to build anything. But at those prices, there aren’t enough buyers to sustain the kind of building boom California needs.

That was the Southern California situation, and things were similar in the Central Valley, where prices are significantly lower – but so are average incomes.

Now a similar market-driven malaise affects the San Francisco Bay area, the state’s employment leader thanks to Silicon Valley. That area’s sustained success has driven up the average cost of Bay area housing.

The steady upward drive of housing prices in the region began to flag earlier this year, with prices stabilizing at least for while. That now has developers in the entire region leery of building very much, according to a new study of California builders by UCLA’s Anderson School of Management and the law firm Allen Matkins. The report focused on multi-family housing, as well as new office and retail construction.

Essentially, builders think the economy will be worse in 2022 than today, and 2022 is about when construction whose planning starts now would be ready to occupy. Developers thus have pulled back on some new apartments and condos over the last six months and more than half those surveyed said they planned no new multi-family home project starts over the next 12 months.

Survey authors said this was due in part to a rise in new Northern California housing inventories, similar to what began earlier in Southern California. Essentially, if rents and home prices are stable or falling, developers won’t risk their capital.

But at the same time, California needs home prices and rents to drop if it’s to resolve the housing crunch.

It adds up to a plain need for the state to adjust its goals and tactics to reasonable levels. For no one knows just yet whether or how the state can maneuver or legislate its way past this problem.

Email Thomas Elias at [email protected]. His book, “The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It,” is now available in a soft cover fourth edition. For more Elias columns, visit www.californiafocus.net

Related Posts

Newsom Shuts Down Los Angeles Dining Rooms

July 1, 2020

July 1, 2020

Earlier this week Los Angeles County’s public health director said that almost half of restaurants and bars were not following...

Venice Beach Scores High Marks on Water Quality Report

July 1, 2020

July 1, 2020

Heal the Bay releases annual report By Sam Catanzaro Venice Beach scored high marks in Heal the Bay’s annual water...

Video: West Los Angeles VA Tent Row

June 30, 2020

June 30, 2020

What is the deal with the row of tents outside the West Los Angeles Veterans Affairs campus? Learn more in...

County Directs Closures of Beaches During 4th of July Weekend

June 29, 2020

June 29, 2020

Fireworks displays also banned in county By Sam Catanzaro After reporting the highest single one-day COVID-19 case count, Los Angeles...

Newsom Orders Bars in LA County to Close

June 28, 2020

June 28, 2020 1

Countywide COVID-19 cases approaching 100,000 By Sam Catanzaro California Gov. Gavin Newsom has ordered the closure of Los Angeles County...

Closing Abbot Kinney on Weekends for Pedestrians?

June 26, 2020

June 26, 2020 2

Venice Neighborhood Council June meeting recap, part 2. Read part 1 HERE. As businesses adapt to the novel coronavirus (COVID-19)...

One Venice-Area Sexual Assault Suspect Still Sought by Police

June 24, 2020

June 24, 2020 1

LAPD arrest one suspect on suspicion of forced sexual penetration By Sam Catanzaro After arresting one suspect, Los Angeles police...

Second Victim Dies in Venice CVS Shooting

June 23, 2020

June 23, 2020 2

Double homicide occurs at Lincoln Boulevard CVS Monday night By Sam Catanzaro A second victim has died following a shooting...

Fatal Shooting Occurs at Venice CVS

June 22, 2020

June 22, 2020 2

Update: https://yovenice.com/2020/06/23/second-victim-dies-in-venice-cvs-shooting/ Two men shot at CVS on Lincoln Boulevard By Sam Catanzaro A shooting at a Venice CVS has...

Video: Housing LA’s Homeless Under Freeway Underpasses

June 22, 2020

June 22, 2020

As ordered by a federal judge, Los Angeles will provide housing for almost 7,000 homeless individuals, especially those living under...

New Bethel Stained Glass Windows, New VNC Board Members, Speed Bumps?

June 19, 2020

June 19, 2020 2

Part 1 recap of the June 16 Venice Neighborhood Council Meeting By Angela McGregor The June 16th meeting of the...

Newsom Orders Statewide Mask Wearing

June 18, 2020

June 18, 2020 1

Los Angeles County reports highest daily COVID-19 Wednesday By Sam Catanzaro Governor Gavin Newsom has ordered all Californians to wear...

Suspects Sought for Venice-Area Sexual Assaults

June 17, 2020

June 17, 2020 1

LAPD say two men sexually assaulted up to 13 women By Sam Catanzaro Los Angeles police are on the lookout...

Schwarzenegger Skips Venice Gold’s Gym Workout Over Face Mask Policy

June 17, 2020

June 17, 2020 1

Gyms in Los Angeles County reopen By Sam Catanzaro Bodybuilder and former California Governor Arnold Schwarzenegger skipped a workout at...

Venice Family Clinic Resuming In-Person Appointments

June 16, 2020

June 16, 2020 1

By Staff Writer Venice Family Clinic has announced that it is resuming in-person appointments for routine health care after relying...