For several years, the state of California has faced a housing crisis, where rental and sale prices have climbed while wages have stagnated. In fact, a report from the California Housing Partnership Corporation (CHPC) found that median rent in Los Angeles County has increased 32% since 2000, while wages have decreased by 3% (adjusted for inflation). In 2014, Los Angeles Mayor Eric Garcetti called for 100,000 new housing units by 2021, with 15,000 of those designated for low-income residents. It’s a start, but it’s hardly a drop in the water compared to the 382,000 new affordable housing units recommended by Harvard’s Joint Center for Housing Studies, or the 551,807 recommended by the CHPC.
Scarce inventory promoted higher sale prices in the first quarter, which normally deters purchase activity. However, the market didn’t suffer much (if at all), as our data shows growth in nearly all categories. The only notable area of decline was the sales volume of single-family homes, and the reason is clear: the city Los Angeles needs to construct a lot more homes for you all to sell.
California State senators are taking steps to address the housing crisis as well. This past Thursday, the California Senate passed two housing bills, SB-3 and SB-35 respectively. SB-3 enables the Housing Bond Act of 2018, which authorizes $3 billion dollars in bonds towards affordable housing projects. SB-35 forces cities that are not meeting their state housing production goals to both streamline their development approval process and set space aside for low income housing. Both bills focus on addressing poverty and homelessness, however it’s clear that the bills will also help to address the pervasive issue of scarce inventory at all levels of residential real estate.
According to an article from the LA Times, the city of Los Angeles constructed enough new housing units in 2016 to keep up with the population growth. Now the city will need to speed up residential development even more to meet Mayor Eric Garcetti’s deadline of 2021. If signed by governor Jerry Brown, SB-3 and SB-35 will help to fund housing projects and prevent further procedural delays. As legislation demands faster, more voluminous residential development, we will likely start to see this quarter’s pattern reverse; greater inventory and a lesser demand for housing will drive more competitive pricing. The silver lining is that there will likely be more listings to go around!