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  • February 2022

    According to the Zillow estimates, the rent for a typical rental house in the Inland Empire was $2,469 in December 2021, representing a 28 percent rise from $1,931 in March 2020. Similarly, the value of a typical owner-occupied house in this region rose from $388,404 in March 2020 to $534,393 in December 2021, a 37.6 percent increase.


    Inland housing sales remain strong: The Inland Valley Association of Realtors most recent housing report shows that the median home sales price in the two combined counties for November stands at $530,000, about 20% higher than November 2020 ($440,000). Homes are being sold in an average of just 7 days (compared to 12 days a year ago). For the two counties, homes in Chino Hills had the highest average sold price ($864,000) and homes in Banning had the lowest average sold price ($375,000). Other median sales prices include Riverside ($582,000), San Bernardino ($425,000), Ontario ($582,500) and Temecula ($669,000).


    SCAG’s Preliminary Growth Forecasts depict aging population and smaller household size: The Southern California Association of Governments (SCAG) long term regional transportation plan (called Connect SoCal 2024) depicts a region that will grow more slowly than was anticipated in the previous plan. The Agency’s 2020 forecast called for the six-county region to grow to nearly 23 million people; Connect SoCal 2024 preliminary projections are for year 2050 growth to reach from 19.5 million to 21.9 million. As the region’s population grows, it will also be aging, which will result in anticipated household sizes to be considerably smaller (projections are from 2.64 to 2.69 persons per dwelling in 2050 compared to 2.95 today).  Riverside and San Bernardino Counties currently comprise about 24% of the region’s housing stock, but have been producing about 30% of the region’s new units since 2017. 


    Sales of existing single-family homes in California are expected to drop 5.2 percent in 2022. According to the California Association of Realtors, California’s median home price will increase 5.2 percent next year, to $834,400, the association predicted in its 2022 housing forecast, which it released Thursday. To put the median price forecast in perspective, one year ago the Los Angeles-based trade group was predicting a 20.3 percent increase. Also, housing affordability in California is expected to drop to 23 percent next year from a projected 26 percent increase one year ago. “A slight decline next year from the torrid sales pace of the past year-and-a-half will be a welcome relief to potential homebuyers who have been pushed out of the market due to high market competition and an extremely low level of homes available for sale,” said the association President Dave Walsh. “Homeownership aspirations remain strong and motivated buyers will have more inventory to choose from. They will also benefit from a favorable lending environment, with the average 30-year fixed rate mortgage remaining below 3.5 percent for most of next year.” The association also predicts 4.1 percent growth next year for the U.S. gross domestic product, and California’s unemployment rate to fall to 5.8 percent.


    Governor's budget incentivizes development away from fire-prone areas. A $2-billion package of grants and tax credits proposed in the budget would incentivize development in urban cores and steer housing construction away from areas facing high fire risks. The governor called it an effort to move development away from the "urban-wildland interface" where communities are increasingly affected by destructive fires. The proposal would build on the $10.3 billion state officials allotted last year to bolster mixed- and low-income housing in California; it also specifically supports infill housing in already developed areas. The plan would reduce the encroachment of residential development into fire-prone areas and ease pressures on the state's mounting housing crisis by providing more incentives for dense, transit-oriented, affordable housing development.


    Proposed bill would have eased conversion of public golf courses to housing in California.  Assembly Bill 672, proposed by California Assemblymember Cristina Garcia (D-Bell Gardens), would exempt municipal golf courses in high-density, park-poor areas from the Public Park Preservation Act and the California Environmental Quality Act, making it easier to rezone those areas into housing developments. Rezoned golf properties would be required to include 25 percent affordable units and 15 percent open-space, according to the text of the bill. The bill died in committee in April 2021 before being reborn as a two-year bill for the current legislative session. It died again in committee last week. Speculation was that most of the homes could be built as “FORE!plexes.” 
     


    Much ADU about nothing: How much new housing construction will SB9 actually bring to California? SB 9 was approved last year and requires, with a few exceptions, ministerial approval for certain housing development projects containing up to two duplexes (i.e. up to four total units) on existing residential parcels. After SB 9 was signed by the Governor, the Terner Center for Housing Innovation at UC Berkeley prepared an analysis of the potential impacts of SB 9. The study is available at https://ternercenter.berkeley.edu/blog/duplexes-lot-split-sb-9/ Terner’s study addresses both physical constraints – the size and/or suitable unbuilt area on parcels – and financial constraints – the market-based likelihood that the sale or rent price of a new unit would offset the cost to develop it. The study found that development would be realistic in only about 410,000 parcels in California at most, or 5.4% of land now occupied by single-family houses. That could add a total of 700,000 new units across California, if every single homeowner for whom the change made sense chose to develop. 

    Correspondingly, the study’s data indicated that approximately 300,000 new homes would be feasible in the SCAG region’s six counties (roughly 1 new unit for every 10 single-family parcels); however, due to data limitations related to city size, jurisdiction-level estimates from the original study were only available in 129 of the SCAG region’s 197 jurisdictions. While the above estimate indicates that SB 9 could result in a very small share of the region’s parcels becoming financially feasible to develop, the potential supply increase could fill a substantial share of the region’s housing need and is significant when compared to recent housing production. 

    SCAG previously collaborated with researchers at California State Polytechnic University at Pomona to analyze the physical constraints to ADU development following state legislation passed during 2016-2019. This study, available at https://scag.ca.gov/post/accessory-dwelling-unit-adu-potential-scag-region indicated that between 2.4 and 3 million parcels in the SCAG region could physically accommodate a detached ADU. 


    A group calling itself Californians for Community Planning Initiative has filed a proposed constitutional amendment for the November 2022 ballot to reassert local control over zoning and land-use decisions in opposition to the passage of bills such as SB9 and SB 10 which strip local jurisdiction of discretionary control over certain housing proposals  And in January, SCAG’s Regional Council voted to support the initiative. By a vote of 32 to 12 (with 3 members abstaining), SCAG moved to officially support the “Our Neighborhood Voices Initiative”, which needs to collect nearly one million valid signatures to qualify for the November ballot. If the initiative qualifies for the ballot and voters approve it, local governments could overturn new state housing laws, including SB 9, and SB 10 that allow for more housing in areas once reserved for single-family homes. Opponents to SCAG’s position said the initiative would threaten to undo state tenant protections, fair housing goals and progress toward getting the State out if the housing crisis.

    Interestingly, the breadth of the ballot measure's language could also prevent the enforcement of state laws that often limit the development of new housing, including CEQA, which requires jurisdictions to study and mitigate the impacts of a new development before approving it. CEQA often empowers third parties to sue if they believe a new development has not been thoroughly vetted, and activists and special interests frequently use it to stop or reduce the size of new projects. The ballot initiative—by overriding state laws when they conflict with local zoning codes—could therefore override local activists' ability to use CEQA to slow up development.


    Real Estate Trends for 2022:  Real estate experts and industry observers at the recent National Association of Real Estate Editors conference made a number of observations about what real estate trends might take over the headlines in 2022. Highlights include:

    Trend 1: buyers are evolving.  Buyers are real estate companies that allow consumers to basically buy and sell on demand. They buy your home for a price that their algorithms say is correct, allowing the freedom of making a non-contingent or cash-like offer at will. 

    Trend 2: Interest rates are rising.  In 2010, 30-year mortgage interest rates were around 4.69 percent but fell to the mid-3 percent range by 2012, according to Rocket Mortgage, and mostly stayed there. At the end of 2018 and the beginning of 2019, mortgage rates increased to over 5 percent. They quickly declined, and in January 2020, mortgage rates were back at around 3.7 percent. When COVID hit, the Federal Reserve Bank lowered the federal funds rate to between 0 and 0.25 percent, and mortgage interest rates dropped below 3 percent.

    Lawrence Yun, the chief economist of the National Association of Realtors, and Mike Fratantoni, the chief economist of the Mortgage Bankers Association, agree that interest rates will rise. It also appears that the Federal Reserve will look to raise the federal funds rate three times in 2022, while phasing out its bond-buying program, which makes it likely that mortgage rates will rise.

    Trend 3: Millennial and Gen Z home buyers may find buying is unaffordable. If interest rates rise, millennials and Gen Z home buyers will find it increasingly unaffordable to purchase first homes. And millennials account for the majority of home buyers at the moment. U.S. home values appreciated at an annual rate of 18 percent in October, according to CoreLogic, which was the highest level recorded in the 45-year history of the index. For those looking to buy a single-family house, those appreciated at a rate of 19.5 percent.


    Estimates are that the United States is about 5.24 million homes short (rentals, townhouses, condos and single-family detached houses) of actual need nationwide.


    The housing affordability crisis; how high can prices go? In May 2021, the cost of housing in the United States grew 15.4%, according to data from CoreLogic. In the same month housing prices rose by 30.3% in Idaho, 23.4% in Arizona and 20.4% in Utah. According to the Fannie Mae Home Purchase Sentiment Index (HPSI), the public expects the housing market to soften this year. The National Association of Realtors expects new construction and higher interest rates to help normalize the market.


    A growing share of Americans say affordable housing is a major problem where they live.  Almost half of Americans responding to a Pew Research Center survey in October 2021 say finding affordable housing in their community is a "major problem,"  An additional 36 percent call affordable housing a "minor problem," while only 14 percent don't think it's a problem at all. People in the western states expressed the highest level of concern, with 69 percent calling affordable housing a major problem. Rural residents showed less concern than urban residents: 40 percent of rural respondents called housing a major problem. 63 percent of urban dwellers worry about affordability. The results also show partisan differences: 59 percent of left-leaning respondents called affordable housing a major problem, while only 36 percent of right-leaning respondents felt the same. 


    Can 3D-Printing Can Make Housing More Affordable? Habitat for Humanity is seeking help of 3D-printing companies to address the growing housing crisis and build more homes faster and more affordably. According to this report, high costs and material shortages have led developers to look for innovative solutions for producing low-cost housing to meet growing demand. According to the article, a 3D-printed home built from concrete can save up to 15 percent on construction costs while still providing a "safe, affordable place to live" and the opportunity to own a home for low-income families.

    According to Kirk Andersen of 3D-printing company SQ4D, the minimal need for on-site supervision also prevents injuries and saves builders money. And while traditional homebuilding takes six to 12 months, a 3D-printed home takes under six months to erect. 


    How COVID and high prices have contributed to more sprawl. Patrick Sisson, in an article presented in Bloomberg CityLab (https://www.bloomberg.com/news/features/2022-01-05/a-supernova-of-suburban-sprawl-fueled-by-covid) explores how the pandemic has accelerate the movement of urban households to suburbs and beyond reduced Americans' appetite for public transit. To meet rising demand for new homes, the author asserts that developers are building on suburban fringes rather than urban infill properties that often carry more difficult permitting processes. The writer states that “Indeed, the ascendance of sprawl is a source of dismay for historic foes of this land- and energy-intensive development pattern, which bakes-in car-centric lifestyles and strains resources like water." While certain jurisdictions are putting zoning reforms and pro-density policies in place to increase affordability and fight climate change, "those factors are not nearly enough to offset the magnetic pull of cheap land" the article asserts. 

  • November 2021

    It’s a wrap! The 2021 Legislative Session saw some significant housing bills pass. Here is a summary of  the bills that ICSD followed: 

    Enacted Bills: 

    • SB 7 builds on a 2011 law that eased CEQA regulations for housing, clean energy and manufacturing projects greater than $100 million. The proposal reduce that requirement to $15 million, as long as 15% of each housing project built is for affordable housing.
    • SB 8 extends the Housing Crisis Act of 2019, a law that prevents the reduction of housing density.
    • SB 9 attempts to increase housing supply by making it easier for homeowners to build duplexes on their property. 
    •  SB10 allows governments to streamline the zoning process of multi-family units near public transportation.
    • SB 478 sets minimum standards on floor area ratios (FAR) and minimum lot sizes for land zoned for missing middle housing (from duplexes to ten unit buildings). This prohibits extreme FAR requirements that prevent multi-family housing units to be built on land it is zoned for. 
    • AB 215 establishes a process for a mid-cycle housing element consultation between the state Department of Housing and Community Development (HCD) and any jurisdiction it deems to have not made sufficient progress toward its regional housing needs allocation (RHNA), including a requirement for the jurisdiction to obtain a pro-housing designation.
    • AB 571 prohibits affordable housing or inclusionary zoning fees on the bonus units of a project using the state density bonus.
    • AB 787 authorizes cities and counties to receive credit toward their lower income regional housing needs allocation (RHNA) for market rate units that are converted to deed-restricted housing affordable to very low-, low-, or moderate income households, as specified.
    • AB 816 requires the creation of a statewide plan for addressing homelessness and allows for legal action against jurisdictions that do not make progress towards meeting plan goals.

    Stalled Bills: 

    • SB 5 would have provided for a statewide housing bond measure to be sent to the voters, likely in 2022. Affordable housing advocates desire more funds to support creating more deed-restricted affordable homes, and current bond funds from 2016’s Proposition 1 and 2 will likely be spent next summer. 
    • SB 6 would have allowed residential development in commercially zoned areas.
    • SB 15  would have created incentives for localities to rezone commercial land for residential development.
    • SB 477  would have mandated local governments to study the impacts of laws intended to alleviate the housing crisis.
    • AB 115 would have allowed residential development in commercially zoned areas.
    • AB 244 would have required the California Housing Finance Agency and others to conduct an affordable housing cost study across all state funded housing projects.
    • AB 387 would have established the California Housing Authority to develop affordable and mixed-income housing.
    • AB 561 would have required the Office of the Treasurer to work with CalHFA and HCD to create an Accessory Dwelling Unit financing product to assist homeowners in the creation of ADUs.
    • AB 617 would have allowed cities and counties the option of paying other jurisdictions to transfer all or a portion of their Regional Housing Needs Assessment allocation.
    • AB 916  would have prohibited public hearings for proposed room additions for single family homes, and would have expanded allowable ADU height to 20 feet.
    • AB 1401 would have prohibited the enforcement of parking requirements on new housing projects near transit or in low vehicle miles traveled (VMT) areas.
    • SCA 2 would have repealed Article 34 in the California Constitution that requires a vote to approve public housing projects. Article 34 is at times blamed for the paucity of public housing in the state. 

    Inland housing market remains stable. The median sales price in September for the Inland Counties was $547,000. Comparatively, the median sales price in August of this year was $550,000. In September, there was a slight decrease in new listings (-2.3%) when compared to September 2020, but the median sales price and sales volume have increased by almost 20% since last year. The highest and lowest median home prices were located in La Verne and Homeland for $818,000 and $300,000, respectively. Moreno Valley saw a 30% increase in new listings in a 1-year period (September 2020 - September 2021). On the other hand, Claremont saw a 40% decrease in new listings. 


    Housing inventory decreased for most of Southern California compared to one year ago.  Although the housing stock in Southern California is 13% lower in September, San Bernardino County’s housing stock increased by 21.6%. Riverside County’s inventory decreased by 19.1%. Supply in Ventura, Los Angeles, San Diego, and Orange counties decreased compared to last year. All counties in Southern California experienced an increase in price, with Riverside and San Bernardino having the largest percent change at 20.7% and 11.1%, respectively. 


    More than 50 California cities and counties pass ordinances to phase out gas-powered buildings. Motivated by the effects of climate change, Santa Clara became the 51st city on October 25th, 2021 to adopt building codes that are more stringent than statewide building codes. The California Energy Commission updates building codes every three years to help the state meet its target of relying on 100% clean energy by 2045. The ordinances vary in strictness and scope and only apply to newly constructed buildings. Here are some examples of city codes. More can be found here. No cities in the Inland Region have regulations that go beyond the statewide code in place. 

    Fairfax: All buildings constructed starting on March 1, 2222 will be required to be fully electric with the exception of commercial kitchens. 

    Petaluma: Does not allow for new gas stations to be created in the city. Requires all new buildings to be fully electric. 

    Healdsburg: Most appliances are required to be electric but gas cooking and fireplaces may be exempt. 

    Milpitas: Gas infrastructure will be limited on city-owned property.

    Carlsbad: requires use of heat pump for water heaters or allow for solar thermal heating for buildings under four stories. 

    Windsor: All single-family homes, low-rise multifamily homes, and accessory dwelling units (ADUs) are required to be fully electric.


    The National Low Income Housing Coalition’s (NLIHC) 2021Out of Reach report finds inequitable wage growth between 1979 to 2019. Lowest-wage workers saw an inflation-adjusted hourly increase of 6.5%, median-wage workers experienced an 8.8% wage growth, but these statistics are in stark contrast to the significant wage increase seen by high-wage workers, who had a 41.3% gain. Low wages contributes to the widening wealth gap between socioeconomic groups. Unaffordable rental rates make low-income households rent-burdened,and are more likely to be housing insecure when emergencies strike because of the inability to save. 

    California has one of the highest disparities between the average renter’s salary, and the fair market rent they can afford for a two-bedroom home. The slow wage growth, combined with the housing affordability crisis makes California’s low-income residents the most vulnerable and at risk of homelessness.


    Funding for California housing increased in Southern California, but vulnerability among low-income households remains high. According to data gathered by California Housing Partnership, most of Southern California’s counties received increased state or federal funding for housing production and preservation, but most extremely-low income households are still cost-burdened. 

    County

    % of Extremely Low-Income Households that are Cost-Burdened

    Number of Low-income Renter Households

    Minimum Wage needed per Hour to Afford the fair market rent (FMR) of a 2-bedroom home

    % change in State Funding from FY 2018-2019 and 2019-2020

    % change in Federal Funding from FY 2018-2019 to 2019-2020

    Riverside

    80%

    51,451

    $28.19

    65%

    157%

    San Bernardino

    79%

    59,882

    $26.69

    110%

    - 47%

    Los Angeles

    78%

    499,430

    $38.23

    108%

    48%

    Orange

    82%

    118,405

    $39.48

    84%

    - 52%

    Imperial

    57%

    4,628 

    $15.68

    270%

    - 2%

    Ventura

    74%

    23,895

    $38.50

    196%

    596%


    What can we learn from Oregon’s 2019 zoning reform? In 2019, lawmakers in Oregon passed HB 2001, which allowed duplexes, triplexes, and fourplexes to be built on parcels containing single-family homes. Sandra Wood, Portland’s principal planner from the Bureau of Planning and Sustainability, reflects on their successes and challenges that they encountered. This panel discussion hosted by the Terner Center for Housing Innovation provides insight for California’s local jurisdictions.


    Federal initiative called “House America” takes aim at addressing homelessness. President Biden plans to partner with local officials to provide stable housing to people experiencing homelessness and increase the supply of affordable housing units. As part of the program local governments will receive financial support and technical assistance from the federal government to prioritize permanent housing over temporary fixes such as shelters.


    Department within the California Department of Housing and Community Development (HCD) is formed. The newly established Housing Accountability Unit (HAU) will be working with local governments to assist with fulfilling housing requirements.  The new unit provides resources and technical assistance to help jurisdictions comply with state housing laws. Unlike past years, the unit will enforce housing laws and will be able to revoke housing elements if necessary. 


    The housing crisis is a global problem. The U.S. is not alone in the housing crisis—the world is experiencing it too. Worldwide, house price to income ratios have grown significantly since the 1990’s, rent increases are pushing people farther away from cities, and the low housing stock is contributing to a lack of affordability. Sweden, for example, has seen a 100.2% increase in house price to income ratios from 1995 – 2020. The U.S. saw a 2.7% increase during the same time period.


    Did you know that…

    • 9 out of 10 Californians believe that housing affordability is a serious problem? 
    • The median cost of a home in California costs 7 times more than the average household income? This is comparatively higher than during the 1960s, when California homes were roughly 3 times higher than the average household income. 
    • In 2020, the average national price-to-income ratio was 4.4, the highest since 2006?

    Elon Musk announces that Tesla headquarters will be moving to Texas due to high housing costs.  Musk stated that “It’s tough for people to afford houses, and people have to come in from far away...There’s a limit to how big you can scale in the Bay Area...I believe we need more tools in the toolbox. Driving Silicon Valley’s capacity for innovation are our amazingly talented people. If they have nowhere to live, it doesn’t just cost us a Tesla headquarters today, it costs us the companies that grow from Tesla alumni tomorrow,” he stated.Jim Wunderman, the CEO of the Bay Area Council, also commented on the state’s housing crisis.: “Mr. Musk’s announcement highlights yet again the urgency for California to address our housing affordability crisis and the many other challenges that make it so difficult for companies to grow here.”


    Boomers looking to down-size can't find starter homes. Inventory of starter homes (defined as having1400 sq. ft. or smaller) is at its lowest in 50 years. Supply of starter homes have always been modest; in 1980, they made up 40% of new construction, but in recent years, only 7% of new construction were starter homes. Builders have shifted their focus on upper-tier homes, which are typically worth $500,000 or more.

    Extreme housing shortage of starter homes are exacerbating housing affordability. As Boomers prepare for retirement and look for smaller homes, Millennials, who are at the prime age of becoming first-time owners, are also competing with them for the same housing stock.

  • August 2021

    ICSD year-end report released:  The UCR Inland Center for Sustainable Development (ICSD) has just released its "2021 Report: Regional Challenges and Opportunities for Housing Development in Inland Southern California"

    The report is a culmination of more than a year of work and contributes to and expands on the ongoing conversation and research about the Inland Region’s main housing issues including, regional affordability, the jobs-housing imbalance, and rising unattainability.  A profile of the Region’s housing stock is given, housing construction and statewide policies are examined, and challenges and opportunities for development are presented.  Some of the Region’s most salient issues are discussed, and policy recommendations are provided on each examined topic.

    Read the report: ICSD Final Report.pdf (ucr.edu)

    Visit the UCR ICSD website: Inland Center for Sustainable Development | (ucr.edu)


    Inland housing sales remain strong: The Inland Valley Association of Realtors most recent housing report shows that the median home sales price in the two combined counties for July stands at $550,000, about 22% higher than July 2020 ($449,900). Homes are being sold in an average of just 7 days (compared to 13 days a year ago). For the two counties, homes in Chino Hills had the highest average sold price ($831,000) and homes in Banning had the lowest average sold price ($350,000).


    Inland Counties lag in housing production, but not as much as neighboring counties: The National Association of Realtors Housing Shortage Tracker computes how many permits are issued for every new job in 178 metropolitan counties. Based on historical averages, one permit is issued for every two jobs. 2019 data for the San Bernardino/Riverside area, according to the tracker, shows a ratio of one permit for every four jobs. In the L.A./Orange County areas, the tracker indicates a ratio of one permit for every eight jobs.


    Billions included in California Housing and Homelessness Funding Package: In July Governor Gavin Newsom signed the largest funding and reform package for housing and homelessness in California history as part of the $100 billion California Comeback Plan. The package includes $10.3 billion for affordable housing and $12 billion over two years towards tackling the homelessness crisis.

    $10.3 billion is provided for affordable housing including:

    • $850 million incentivizing infill development and smart growth

    • $800 million to preserve the state’s affordable housing stock

    • $100 million promoting affordable homeownership

    • Additional funding to scale up the state’s efforts to create more Accessory Dwelling Units, build more housing on state-owned excess land and invest in farmworker housing

    $12 billion is provided over two years to confront homelessness including:

    • $5.8 billion for Homekey over two years, creating more than 42,000 new homeless housing units

      • $2.75 billion for the Department of Housing and Community Development

      • $3 billion for the Health and Human Services Agency to create clinically enriched behavioral health housing and funding for the renovation and acquisition of Board and Care Facilities and Residential Care Facilities for the Elderly.

    • $2 billion in HHAP grants over two years with strong, new accountability requirements for local governments

    • $1.75 billion to unlock up to 7,200 units of housing in the pipeline for extremely low-income families and people exiting homelessness

    • $150 million to stabilize participants in Project Roomkey hotels

    • $50.6 million for encampment resolution efforts

    • $45 million for services and housing for homeless veterans

     


    Who’s leaving California? Who’s coming in? A May 2021 post from the Public Policy Institute of California unpacks some of what’s behind the 2020 census results. Of note: people who move to California are different from those who move out. In general, those who move here are more likely to be working age, to be employed, and to earn high wages—and are less likely to be in poverty—than those who move away.

    Those moving in tend to have higher education levels than those who move out. California has been losing lower- and middle-income residents to other states for some time while continuing to gain higher-income adults. In the past five years the flow of middle-income residents out of the state has accelerated.  Most people who move across state lines do so for economic or family reasons. The vast majority of adults who left California in the 2010s cited jobs (49%), housing (23%), or family (20%) as the primary reason. A recent PPIC Statewide Survey finds that one-third of Californians have seriously considered leaving the state because of housing costs.

    From the report: “Highly educated, high-income workers are certainly helpful to the state’s bottom line: they contribute to state tax revenue and use relatively few social services. But the larger picture painted by these trends illustrates the economic challenges faced by many lower- and middle-income Californians. The state’s high cost of living, driven almost solely by comparatively high housing costs, remains an ongoing public policy challenge—one that needs resolution if the state is to be a place of opportunity for all of its residents.”


    Fannie Mae's Home Purchasing Sentiment Index for August worsens: 66 percent of respondents said it’s a bad time to buy a home, up from 64 percent last month; while on the sell-side, 75 percent of respondents said it’s a good time to sell, down slightly from 77 percent last month. Consumer sentiment toward home buying hit yet another survey low in July, continuing the downward trend established in March. The percentage of respondents citing high home prices as the top reason for it being a ‘bad time to buy’ also reached an all-time high. Doug Duncan, Fannie Mae Senior Vice President and Chief Economist, added that “While all surveyed consumer segments have reported increased pessimism toward home buying conditions over the past several months, two of the segments perhaps best positioned to purchase -- consumers aged 35-44 and those with middle-to-higher income levels – have indicated even more pessimism than other groups.”


    Lumber prices are down, but other building costs are skyrocketing:  Even with recent declines in the costs of lumber, building material prices have increased 19.4% over the past 12 months, according to a report issued by the National Association of Home Builders.  Buyers are seeing the results in the prices of new homes. The median sales price for a new home (nationally) was $361,800 in June, up 6% compared to a year earlier. The NAHB says that higher costs for softwood lumber and other building materials based on declining availability are driving up the price of new homes. Some builders are even halting new orders because of the difficulty of pricing projects. Read more: Flooded With New Orders, Builders Limit Sales


    Studies find link between COVID-19 deaths and overcrowded housing: In the greater Houston, Texas area COVID-19 killed Black and Brown people at a far higher rate than white or Asian people.  In The Kinder Institute's 2021 State of Housing in Houston and Harris County Report it is suggested that home overcrowding and labor conditions played a role. According to the report, the overcrowding problem, caused by an increase in cost-burdened households which was in part exacerbated by the pandemic, would have made it hard for a large share of Houstonians to quarantine. In Harris County, Hispanic-headed households are about 10 times more likely to be overcrowded than white non-Hispanic-headed households (10.9% vs. 1.2%). Black- and Asian-headed households are in the middle (4.3% and 4.9%, respectively). Hispanic Houstonians were also the ethnic/racial group with the most outsized death share from COVID-19.

    A New York University Furman Center research project into that city’s COVID-19 spread found that it wasn’t necessarily population density but housing crowding that accelerated the virus’s contagion.

    Of note:   New Geography in 2021 identifies the Riverside/San Bernardino metropolitan area as the third most overcrowded region in the entire United States (overcrowding defined as more than one person per room for a household).


    San Diego Housing Initiative hopes to result in delivery of more housing and affordable housing: The City’s planning department is crafting a package of initiatives intended to place the city's housing, mobility and climate goals at the forefront of the community planning process. It also will strive to streamline the Community Plan update process, shortening plan completion dates from four to five years to two to three years. Other initiatives included in the “Housing for All of Us” effort include plans to develop housing on city-owned land and at dormant industrial sites and a push to develop affordable housing options in all parts of the city.


    New solar requirements for California buildings approved: The California Energy Commission on Wednesday voted to require builders to include solar power and battery storage in many new commercial structures as well as high-rise residential projects. It is the latest initiative in the state’s vigorous efforts to hasten a transition from fossil fuels to alternative energy sources,

    The energy plan, which would go into effect on Jan. 1, 2023, also calls for new homes to be wired in ways that ease and even encourage conversion of natural-gas heating and appliances to electric sources." Because "[h]omes and businesses use nearly 70 percent of California’s electricity and are responsible for a quarter of its greenhouse gas emissions," It is estimated that the proposals approved in August would reduce emissions over 30 years as much as if nearly 2.2 million cars were taken off the road for a year.


    Can the housing crisis be addressed separately from the climate crisis? Author Dana Bourland argues in her new book Gray to Green Communities: A Call to Action on the Housing and Climate Crises that climate change and affordable housing crises are inextricably linked. The nation’s housing stock is a significant contributor to climate change, as residential buildings account for 20 percent of greenhouse gas emissions.  The book makes the case for green housing, presenting ideas for transitioning to affordable, green housing in a way that not only reduces carbon emissions and promotes resource efficiency, but also recognizes the centrality of housing and racial justice.


    California Legislative Update: Below is a summary of some of the housing-related legislative proposals being monitored by ICSD. Bills that have been chaptered, suspended, or have become 2-year bills are noted.

    SB 5 would provide for a statewide housing bond measure to be sent to the voters, likely in 2022. Affordable housing advocates desire more funds to support creating more deed-restricted affordable homes, and current bond funds from 2016’s Proposition 1 and 2 will likely be spent next summer.

    SB 6 would allow housing development projects in office or retail zones, converting empty retail malls and “big box” stores to land zoned as residential, with provisions to make some of that affordable housing.

    SB 7 builds on a 2011 law that eased CEQA regulations for housing, clean energy and manufacturing projects greater than $100 million. The proposal would reduce that requirement to $15 million, as long as 15% of each housing project built is for affordable housing. (CHAPTERED)

    SB 8 In response to the state’s ongoing housing crisis, the Legislature enacted the Housing Crisis Act of 2019. The purpose of the HCA is to facilitate the construction of affordable housing by restricting, for a period of five years, actions by cities and counties that reduce the production of housing. SB 8 makes several changes to the provisions of the HCA to ensure the HCA functions as intended. Most notably, this bill extends the HCA’s sunset by five years, to January 1, 2030.

    SB 9 Requires ministerial approval of duplexes and urban lot splits, as specified, and allows the life of subdivision maps to be extended by one year. Among its provisions, this bill requires a city or county, including a charter city or county to provide ministerial approval, not subject to CEQA, of a proposed housing development within a single-family residential zone containing no more than two residential units (a duplex), that meets specified criteria. It also requires jurisdictions to provide ministerial approval, not subject to CEQA review, of a parcel map or tentative and final map dividing a lot into two approximately equal parts of not less than 1,200 square feet each for residential use (an urban lot split) that meets specified criteria.

    SB 10 Authorizes a city or county to pass an ordinance that is not subject to the CEQA to upzone any parcel for up to ten units of residential density if the parcel is located in a transit-rich area or an urban infill site. Authorizes a city or county to pass an ordinance to zone any parcel for up to ten units of residential density, notwithstanding any local or voter-mandated restrictions on zoning ordinances, as long as the parcel meets the following geographic parameters:

    SB 15  creates incentives for localities to rezone commercial land for residential development.

    SB 478  limits the floor area ratio and minimum lot sizes that cities can impose on projects with ten or fewer units.

    Senate Constitutional Amendment 2 would repeal Article 34 in the California Constitution that requires a vote to approve public housing projects. Article 34 is at times blamed for the paucity of public housing in the state. If passed by the Legislature, SCA 2 would go to the ballot for a statewide vote. (PLACED ON SUSPENSE FILE)

    AB 215 establishes a process for a mid-cycle housing element consultation between the state Department of Housing and Community Development (HCD) and any jurisdiction it deems to have not made sufficient progress toward its regional housing needs allocation (RHNA), including a requirement for the jurisdiction to obtain a pro-housing designation.

    ​​​​​​​AB 244 requires the California Housing Finance Agency and others to conduct an affordable housing cost study across all state funded housing projects.

    AB 387  establishes the California Housing Authority to develop affordable and mixed-income housing

    AB 561 requires the Office of the Treasurer to work with CalHFA and HCD to create an Accessory Dwelling Unit financing product to assist homeowners in the creation of ADUs. (PLACED ON SUSPENSE FILE)

    AB 571 prohibits affordable housing or inclusionary zoning fees on the bonus units of a project using the state density bonus

    AB 617 allows cities and counties the option of paying other jurisdictions to transfer all or a portion of their Regional Housing Needs Assessment allocation.

    AB 787 would authorize cities and counties to receive credit toward their lower income regional housing needs allocation (RHNA) for market rate units that are converted to deed-restricted housing affordable to very low-, low-, or moderate income households, as specified

    AB 816 requires the creation of a statewide plan for addressing homelessness and allows for legal action against jurisdictions that do not make progress towards meeting plan goals.

    AB 916 prohibits public hearings for proposed room additions for single family homes, and expands allowable ADU height to 20 feet.

    AB 1068 requires the Department of Housing and Community Development to create a plan for the use of alternative forms of housing, including modular housing, for the purpose of achieving housing cost reductions.

    AB 1322 creates a process for the governing body of a city or county to seek judicial validation that a local measure approved by the voters is in conflict with state housing law. It allows a local government to adopt a resolution declaring that a provision of the charter, general plan, or local ordinance approved by voters conflicts with state law pertaining to housing and therefore the city or county does not have a duty to defend or enforce the measure in whole or in part.

    AB1401 Would prohibit the enforcement of parking requirements on new housing projects near transit or in low vehicle miles traveled (VMT) areas. (PLACED ON SUSPENSE FILE)


     

    2021 Legislation

     

     

  • June 2021

    Lumber prices skyrocket: According to a recent analysis by the National Association of Home Builders, soaring lumber prices that have tripled over the past 12 months have caused the price of an average new single-family home to increase by $35,872 (although lumber prices have recently began to drop again). This lumber price hike has also added nearly $13,000 to the market value of an average new multifamily home, which translates into households paying $119 a month more to rent a new apartment. Further adding to housing affordability woes, other building material prices have been steadily rising since 2020 and, like lumber, are in short supply as well.


    CA production declines: A new report released by the Construction Industry Research Board (CIRB) shows that California housing production was down by nearly 9% in 2020, with 100,550 new building permits issued. This is the second straight year of decline. Multifamily construction was down by 17%, with 2020 marking the lowest number of units built since 2012.


    Median home price hits all-time high in California: The California Association of Realtorsreports that California’s median home price set a new record in April as the statewide median price surged more than 34% from a year ago. The statewide median home price climbed 7.2% on a month-to-month basis to $813,980 in April, up from March's $758,990 and up 34.2 percent from the $606,410 recorded last April. The year-over-year price gain was the highest ever recorded, and it was the first time since June 2013 that the state recorded an annual increase of over 30%. In April, the median sell price of existing single family homes in the Inland Counties was $500,000 ($545,000 in Riverside and $405,000 in San Bernardino).


    What type of housing do millennials want? The National Association of Realtors reported that millennial buyers now make up the largest share of homebuyers at 37%.


    Home listings don’t last: The median number of days it took to sell a California single-family home hit another record low of 7 days in April 2021, down from 13 days in April 2020.


    What $1 million will get you in 2030, if not sooner: The average home in California is expected to be valued at more than $1 million by 2030, according to research by RenoFi, an online company that specializes in home loans for renovation projects.


    In case you missed it, May was National Affordable Housing Month.


    A new development in Valencia, CA will have a zero carbon footprint with over 21,000 homes on 15,000 acres and will be the nation's largest net-zero development. 

    Houses will have solar, electric vehicle chargers, and designs that reduce the need for air conditioning, heating, and ventilation. Additional initiatives like a methane capture program at a dairy farm and rooftop solar installations in disadvantaged neighborhoods will assist in extra carbon credits to reach net-zero. Learn more or watch.


    When in drought, is housing out? The Marin Municipal Water District is considering banning new water service hookups to homes in response to worsening drought conditions there. County officials have declared a local drought emergency in light of a “grim and deteriorating” water situation. The National Drought Mitigation Center’s drought monitor recently placed most of the Bay Area as extreme drought zones for the first time since 2015. In Utah, the small town of Oakley has stopped issuing new building permits for projects that require new water connections. U.S. Drought Monitor maps show that almost all of Arizona, California, Nevada, New Mexico, North Dakota and Utah are in a drought. Drought severity is ranked from moderate to exceptional and large areas of those states are considered severe or exceptional. Colorado, Idaho, Montana, South Dakota, southwestern Texas and Washington are also in various stages of drought. Water availability is sometimes used as an argument to stop or curtail growth and could intensify as drought conditions expand and worsen. ICSD will keep an eye on this situation and inform members if/when water conservation measures extend to curtailments on housing permits.


    Eliminating parking requirements is gaining momentum throughout the nation; is California next?: AB 1401 would ban local governments from imposing parking requirements on new housing projects near transit or in low vehicle miles traveled (VMT) areas.Proponents indicate that passage would do away with parking requirements that add to the cost of housing. Research from the Terner Center at UC Berkeley found that a parking space can add an extra $35,000 per unit on affordable housing projects. According to a report published in the Journal of the American Planning Association, 14 percent of LA County's incorporated land is devoted to parking. More space in LA is devoted to parked cars than driven cars; the report estimates that parking infrastructure takes up about 200 square miles of land in LA County. The estimated 18.6 million spaces amounts to an average 3.3 parking spaces for each one of the 5.6 million cars in the county. More recent research examines the combined size of all the surface-level parking lots in the LA area. In just the city of Los Angeles, the study finds, these lots take up 27 square miles of space, larger than the entire city of Pasadena. Research indicates that countywide, another 3.7 million people could be accommodated if parking lots gave way to housing. Several cities across the country have removed parking requirements, including Minneapolis, Buffalo, San Diego, and San Francisco. Other cities nationwide are at various stages of the process of removing some or all parking requirements, including Berkeley, Dallas, Seattle, and Raleigh, among others.


    Ninety percent of Californians are concerned about housing prices, according to a recent Public Policy Institute of California report, and 33% are considering moving to states with more affordable housing.


    Funding proposed for housing in State Budget: After announcing a $76 billion surplus in May, Governor Newsom’s budget proposal includes $9.3 billion for housing and homelessness solutions. $1.75 billion is set aside for affordable housing projects, $100 million to help first-time homeowners make down payments and $3.5 billion to convert hotels and other buildings into homes for those experiencing or teetering on the edge of homelessness.


    LA City planning staff have proposed strategies to spread future affordable housing throughout the City. The report provides recommendations for how ongoing updates to the city's 35 community plans and its housing element can establish "fair share" distribution of affordable housing, while also helping Los Angeles meet its obligation to zone for 456,643 new housing units under its regional housing needs allocation. The report suggests exploring expansions to the city's adaptive reuse policy, relaxing restrictions on micro-unit apartments, and expanding protections for tenants and vulnerable communities. Also included is a proposal to explore a citywide inclusionary housing policy, in which developers would be required to set aside a portion of new units in multifamily projects for lower-income households. The report also calls for eliminating barriers to affordable housing developments in high resource communities, and recommends leveraging existing resources like public land or seeking partnership with other public and private entities.


    National housing shortage growing, and homes for “starters” declines further. Mac report found in 2018 that the housing shortage was at 2.5 million homes; in 2020, that number increased to 3.8 million. Entry-level homes make up an increasingly small share of new construction. Starter homes dropped from 40 percent of newly built houses in the early 1980s to just 7 percent in 2019.


    The craziness of buying a home in one short tik tok video.


    Residential zoning reforms are gaining traction nationwide: The latest Zillow Home Price Expectations Survey (May 2021) suggests that relaxing zoning rules to allow for more and/or more efficient new home construction would be the most effective way to increase supply in a housing market currently near historic inventory lows.In Tacoma, Washington, officials are considering a comprehensive plan that would eliminate single-family zones in the city in both name and regulation. Single-family areas would be redesignated and rezoned to Low-Scale Residential or Mid-Scale Residential zoning types, which would permit a mix of housing types like duplexes, rowhouses, and apartments. Low-Density Multifamily areas would also get a boost to Mid-Scale Residential, a more intensive land use designation than the current one. California SB 9, would allow homeowners to put a duplex on single-family lots or split them without requiring a hearing or approval from the local government. Affordable housing and rental properties would be exempt from the changes. Sacramento’s City Council approved a draft plan in January that would allow multi-family units in any residential area. SB 10 would allow cities to rezone transit centers and job hubs to allow as many as 10 units per parcel. And SB 478 addresses local ordinances that limit the construction of housing based on lot size, which effectively eliminates any chance of building small apartment buildings on land that is already zoned for multi-family housing. It would allow a building to be at least 1.5 times the size of the lot, which generally means allowing multi-story units instead of just a single-family home.


    Can the housing crisis be addressed separately from the climate crisis? Author Dana Bourland argues in her new book Gray to Green Communities: A Call to Action on the Housing and Climate Crises that climate change and affordable housing crises are inextricably linked. The nation’s housing stock is a significant contributor to climate change, as residential buildings account for 20% of greenhouse gas emissions. The book makes the case for green housing, presenting ideas for transitioning to affordable, green housing in a way that not only reduces carbon emissions and promotes resource efficiency, but also recognizes the centrality of housing and racial justice.


    California Legislative Update: Below is a summary of some of the housing-related legislative proposals being monitored by ICSD:

    • SB 5 would provide for a statewide housing bond measure to be sent to the voters, likely in 2022. Affordable housing advocates desire more funds to support creating more deed-restricted affordable homes, and current bond funds from 2016’s Proposition 1 and 2 will likely be spent next summer.
    • SB 6 would allow housing development projects in office or retail zones, converting empty retail malls and “big box” stores to land zoned as residential, with provisions to make some of that affordable housing.
    • SB 7 builds on a 2011 law that eased CEQA regulations for housing, clean energy and manufacturing projects greater than $100 million. The proposal would reduce that requirement to $15 million, as long as 15% of each housing project built is for affordable housing.
    • SB 15 creates incentives for localities to rezone commercial land for residential development.
    • SB 478 limits the floor area ratio and minimum lot sizes that cities can impose on projects with ten or fewer units.
    • Senate Constitutional Amendment 2 would repeal Article 34 in the California Constitution that requires a vote to approve public housing projects. Article 34 is at times blamed for the paucity of public housing in the state. If passed by the Legislature, SCA 2 would go to the ballot for a statewide vote.
    • AB 244 requires the California Housing Finance Agency and others to conduct an affordable housing cost study across all state funded housing projects.
    • AB 387 establishes the California Housing Authority to develop affordable and mixed-income housing.
    • AB 561 requires the Office of the Treasurer to work with CalHFA and HCD to create an Accessory Dwelling Unit financing product to assist homeowners in the creation of ADUs.
    • AB 571 prohibits affordable housing or inclusionary zoning fees on the bonus units of a project using the state density bonus.
    • AB 617 allows cities and counties the option of paying other jurisdictions to transfer all or a portion of their Regional Housing Needs Assessment allocation.
    • AB 816 requires the creation of a statewide plan for addressing homelessness and allows for legal action against jurisdictions that do not make progress towards meeting plan goals.
    • AB 916 prohibits public hearings for proposed room additions for single family homes, and expands allowable ADU height to 20 feet.
    • AB 1068 requires the Department of Housing and Community Development to create a plan for the use of alternative forms of housing, including modular housing, for the purpose of achieving housing cost reductions.
    • AB1401, discussed in more detail above, would prohibit the enforcement of parking requirements on new housing projects near transit or in low vehicle miles traveled (VMT) areas. Donald Shoup provides this excellent analysis on issues related to AB 1401.

    Governor Newsom has proposed the creation of a new enforcement unit at the Department of Housing and Community Development (HCD), to have responsibility for monitoring local governments’ compliance with state housing laws. This new Agency could enable HCD to increase oversight


    Finally, read ICSD's new Issue Brief, titled: What Are the Impacts of COVID-19 on Small Businesses in the U.S.? Early Evidence based on the 50 Largest MSAs. The full article was published in New Geography in June 2021. Small businesses have been particularly affected by the COVID-19 pandemic. In this study, we model the spatiotemporal impacts of COVID-19 on small businesses across the 50 most populous U.S. metropolitan areas. The results suggest that while the infection and death incidents directly impacted business operations, the social, economic, and demographic vulnerability and public policies were additionally critical to our understanding of these patterns. Our work provides rich implications for practices and public policymaking.