The Symposium on the Affordability of Housing
Joel Kotkin, Professor of Urban Development, fellow at Chapman University and the Legatum Institute
Steve Pontell, President and CEO of National Community Renaissance (CORE)
Randy Jackson, President The Planning Center
Purpose: There is good news and bad news about the housing market. The good news is that we are in a recovery but the bad news is that we are in a recovery. After the housing crisis in recent years, we have felt the need for an adequate supply of affordable housing. In many places around the country, income has not kept pace with the rise in housing prices. The market has failed to produce a supply of affordable housing. Because of this, federal housing assistance programs are facing considerable strain. There is a need to have a conversation to identify the causes of the housing market’s inability to provide affordable housing alternatives and to find workable solutions to this crisis.
Information, problems, and proposed solutions
Change in median house prices from 2012-13. The national median for this change was 11.3%. California had the city with the highest change in median house prices. This city was San Francisco, the median price for houses in San Francisco rose by 32.6%. Riverside had an increase of 24.3%.
Median Multiples. One way of measuring the affordability of housing in an area is to determine how many years at the median income, for that city, would it take to make enough to buy a house, in that city. The national average, in this respect, is 3.1 years. There are some discussions that above 4 or 5 years indicates a problem with affordability. In Los Angeles, it would take about 6 years, by this measure. The highest that is measured is in San Francisco, which is nearly 8 years. Minorities are hurt by this, in part due to a lower median income. Nationally, African Americans would need about 5.5 years to be able to earn enough to buy a house and Hispanics would need 4.9 years.
Affordability in California and Orange County. The gross rent national average is $871 per month. In the Los Angeles/Orange County area, it is closer to $1400 per month. This is one of the higher rates that they found. 27% of people, nationally, spend more than 50% of their income on housing. In Los Angeles, closer 40% of people spend greater than 50% of their income on housing. If you want to buy a home in Orange County, you need to have an income of at least $117,000 to be able to adequately afford a house. In the Riverside or San Bernardino area, this drops dramatically to about $40,000. In Orange County, to afford a median priced one bedroom apartment, your hourly wage needs to be $26.62 per hour. In the Los Angeles/Orange County area, overcrowding of apartments is well above the national average. Overcrowding of a rental property is 1.5 people/room. The national average is 1.8% of rental properties. In the Los Angeles/Orange County area, it is 7.5%.
Problems in housing affordability. We do not have so much of a supply gap but an affordability gap. The biggest three issues for housing affordability is that increasingly there are more and more real houses being bought by investors. There are just enough affordable housing units. Third, people’s economic strategy does not always include housing.
Coachella Valley project. On one side of the Coachella Valley, it is incredibly wealthy, while on the other it is full of migrant farmers and agricultural workers. About 70% of the agricultural workers live in Coachella Valley full-time. About 33% of farm workers in Coachella Valley are living in places not intended for humans. The Planning Center has announced a competition where various organizations are competing to be able to put up affordable housing. The winner will get $500,000. They have partnered with a green energy company, as well. The goal is to be able to build a safe community that will allow people to live healthy lives in the Coachella Valley.