Increased Housing Essential for Economic Growth

Very few Orange County residents are immune to the current state of housing. Whether you’re looking to buy, or simply rent in the Southern California market, you will be subject to record-breaking prices as well as a severe shortage of housing units.

If you’re one of the few that have seen an average $200,000 gain in equity since 2012, or one of the small yet growing number of debt-free homeowners, today’s prices might not be of concern. But, if you happen to fall among the over 1.5 million strong 34-year-old and younger category, and hope to one day own a home in Orange County, you may already be looking elsewhere.

Orange County home prices continue to climb. As reported in the O.C. Register in late 2017, the California Association of Realtors put the median priced OC home at $786,000 – suggesting that one would need to earn a minimum of $159,000 a year for this price tag to be affordable.

On the rental side, average OC rents are expected to rise by 3.6% to $2,080 a month in 2018 and by another 3.7% to $2,157 a month in 2019, according to a University of Southern California forecast. If we apply the widely accepted “Under 30 Rule” – meaning housing costs should not exceed 30% of one’s income – a would-be renter should earn $84,000 annually.

Escalating prices are largely due to the region’s severe housing deficit. The Orange County Business Council (OCBC) puts the local housing supply shortfall at 50,000 to 62,000 units per year.

At the state level, the Department of Housing and Community Development’s Housing Assessment Report predicts that California will need 1.8 million units by 2025, or 180,000 new units annually, to meet population and household growth.

These realties should not just concern those looking to pay rent or buy a home – they should concern us all, residents and employers alike.

Skyrocketing cost of living is a grave danger to the economic vitality of the region’s aggressively growing economy. If city leaders together with builders do not adhere to the simple concept of supply and demand and look for ways to increase our housing stock, Orange County will be at risk of losing the region’s talented work force to other counties and other states.

According to OCBC’s chief economist, Dr. Wallace Walrod, Orange County has already seen the population of individuals between 25 and 34 years of age shrink 7% over the last 15 years, even as overall population grows by 15%. Compare this to the doubling of the over- 65 population by 2060.

Where Orange County sees declining populations, surrounding southern California counties are showing increases. Yet, Orange County continues to add jobs. One can only assume that those leaving to live in nearby Riverside and San Bernardino counties are returning to the OC job market. As Walrod goes on to say, nearly 40% of the OC workforce commutes more than an hour a day, adding significant usage to our roads and freeways.