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California Needs To Build 100K More Homes Per Year To Keep Up With Demand, Says New Report

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A house in Westlake. (Photo by Michael Locke via the LAist Featured Photos pool on Flickr)
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L.A.—and California at large—is facing a shortage of available housing, and a new report suggests that the crisis won't be alleviated until both the state and the Southland seriously step up their production of new housing.

"California’s Housing Future: Challenges and Opportunities Public Draft," which was authored by the California Department of Housing and Community Development (HCD), says that the state will need 1.8 million new homes by 2025. This translates to about 180,000 that are needed per year, far above above the 80,000 new homes that California averages annually. For the Southland, this means the region will need 68,000 new homes a year to keep up with demand, according to the San Gabriel Valley Tribune. This is more than the approximately 44,000 building permits that were issued in 2015.

Evan Gerberding, deputy director of communications at HCD, says that the agency had done similar reports in the past, but this one takes on a special urgency. "It was really time for a new report, especially in light of the new challenges we're facing," Gerberding told LAist.

A number of factors go into the disparity between the supply and the demand. For one thing, the state’s population is growing at a steady rate, and it’s expected to balloon from the current 39 million residents to 50 million by 2050.

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Almost 40% of those new residents are believed to be coming to Southern California. The population of the city of Los Angeles surpassed 4 million people for the first time ever earlier this year, and a lot of that growth is likely fueled by millennials who are moving into dense, downtown areas (this hypothesis is partly based on the fact that immigration from Mexico has decreased, and that families are moving out of L.A.). As the influx of people continues, there has been a mighty struggle to keep up with housing demands. A report from 2015 said that L.A. had a vacancy rate of just 2.7 percent. New York City, by comparison, had a rate of 2.8 percent.

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Source: California Department of Finance, Demographic Research Unit, 5/2016 (Graphic by Julia Wick)
But why don’t we have more homes? The reasons are varied. For one thing, the mindset in Southern California has always been to build horizontally; we’ve long favored single-family homes over high-rise developments. This ideology isn’t exactly sustainable, as you eventually run out of desirable land to build on.

This flat-build approach is reflected in the upcoming Neighborhood Integrity Initiative ballot measure, which will be voted on in March. The measure, backed by the AIDS Healthcare Foundation (weirdly), aims to enact in L.A. a two-year moratorium on projects that require a zoning change. This would likely handcuff developers who are looking to bring high-rises complexes to the city (since height restrictions are prevalent).

Another major factor is California’s environment regulations. The California Environmental Quality Act, which requires a survey of the environment impact of a proposed development, can prolong a project's timeline, raise its cost, and make it more susceptible to litigation. It means that an "approval process can take years to get through, so a real estate cycle could have come and gone by the time you get your master plan approved,” Bill Holman, vice president of land development for Christopher Homes and for Rosedale Land Partners, told the San Gabriel Valley Tribune.

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All these factors may have contributed to the huge deficit of available housing (and the subsequent sky-rocketing of home prices). Californians (Angelenos included) are obviously feeling the effects. According to the Department of Housing and Community Development’s report, California ranks third-lowest when it comes to homeownership among U.S. states. “California has the second lowest number of homes per capita. We have 358 homes for every 1000 people. And that low supply really hurts us,” said Gerberding. And according to an earlier Tribune story, nearly 60% of renters in L.A. are “cost-burdened,” meaning they spend more than the suggested 30% of their income on housing. There’s also, certainly, L.A.’s homelessness crisis—in May, the Los Angeles Homeless Services Authority said there were at least 46,874 homeless individuals in the county.

Relief may be on the horizon, however, as more housing is slated to come our way. Measure HHH, which was passed by voters in November, is expected to generate 1.2 billion to fund housing for the homeless. And while some Angelenos are pushing for a flat Los Angeles, overseas developers have still found a way to jumpstart a number of big, vertical developments in the downtown area. As we’d reported earlier, five towering developments in downtown have been slated for approval in the last quarter of 2016 alone. Projects include two 30-story towers by the L.A. River in the Arts District, as well as a massive three-tower project just north of the Ritz Carlton on Olympic Boulevard, reports Urbanize LA.