Los Angeles Housing Shortage
by Deke Keasbey, Real Estate Investment Specialist, Tierra Properties

The production of housing in Southern California faces a serious shortfall. Since 1990 new housing units, both ownership housing and rental housing, have failed to keep pace with demand.

The housing supply problem is outlined in a recent joint study by the Greater Los Angeles / Ventura County Chapter of the Building Industry Association (BIA/GLAV) and the Los Angeles County Economic Development Corporation (LAEDC). According to the study, there is a shortfall of almost 300,000 homes over the past sixteen years in Los Angeles and Ventura Counties. This shortfall continues in the face of an ever-increasing population. The general population of five-county Southern California is projected to grow by more than six million people between 2000 and 2020.

Holly Schroeder, chief executive of the building association chapter, said, "For more than a decade, we have consistently neglected to build enough homes and provide the infrastructure needed to accommodate the people who live and work in this region. "If we don't make a positive commitment to change, Schroeder said, the housing shortfall will have far-reaching and devastating effects on the region.

According to the study, the largest contributing factor to our growing population is not immigration but natural increase, that is, more births than deaths.

The resulting housing shortage combined with high housing prices takes away the hope of home ownership from a great many families. Regional highways and transportation corridors are strained beyond their intended capacity. Schools are overcrowded. The number of people who can afford to buy a home is shrinking at all levels.

Jack Kyser, chief economist of LAEDC, says the mismatch will worsen if we continue at the current pace. It does not bode well, Kyser continues, for long-term housing affordability, nor for the future economic viability of the region.

The number of new residents in Los Angeles County increased by 1,382,500 between 1990 and 2006. During the same period only 201,440 new housing units were produced. This means that only one new housing unit was built for every 6.8 people who needed housing.

Change or Suffer the Consequences of Staying the Same Course

Researchers say city and county planners need to begin treating the problem with the urgency it deserves. Recommended solutions include a mix of new suburban homes and higher density infill development to ensure adequate supply of various types of housing. The current anti-growth trend of "not in my backyard" has detracted from effective solutions.

Unless something changes, a quality-of-life meltdown is predicted over the next 20 years as people and business move out of the area in search of better housing prices and more affordable cost of living. The study begs a call to action. If we continue on the current path of basically doing nothing, Kyser says we jeopardize our quality of life and economic future. To see the complete study and for further information, go to www.biaglav.org

Crisis Brings Opportunities

The housing shortage problem has been known to local, regional and state authorities for some time. Implementing effective planning solutions to the problem and overcoming entrenched resistance to growth have faced daunting challenges.

The California Association of Realtors has been in the process of sponsoring legislation intended to streamline the approval process for new building projects. The goal is for projects that meet current building code regulations to be approved over the counter. This would make it easier for a developer to get a project approved if it meets code requirements.

The housing shortage problem is not unique to greater Los Angeles. Large cities around the United States, and indeed around the world, face similar problems of burgeoning population growth and housing shortages. Most large cities are built out. There is simply little or no place left to build new housing. The likely solution to the problem is to allow higher densities and taller buildings in the city core, along with ever-expanding suburbs.

Meanwhile, the situation makes it clear that demand for existing housing will continue to be strong for some time to come. The demand for housing is greater than the supply. This is a bullish prescription that apartment owners and investors wait for. Opportunity beckons!

Note

Deke Keasbey, author of this article, is an investment real estate broker at Tierra Properties, West Los Angeles. He has specialized in apartments and commercial properties for more than 20 years. Deke is a USC graduate, an apartment building owner, and a member of a proud family that has lived and owned property in Southern California for 100 years. He can be reached at (310) 477-3192, keasbey@tierraproperties.com

  

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