California’s Affordability Numbers are Raised in 2018

It is time to come together and create solutions to alleviate the affordable housing crisis in California

by Abby Pittman

Welcome to our June issue of Builder and Developer, where we deliver our Mid-year report and prepare for our favorite annual tradeshow, PCBC. This year, PCBC is being held in San Francisco, California — one of the most desirable places to live, with one of the lowest amounts of available affordable housing. As a young Millennial woman living and working in California, who would love to buy a home one day, I have concerns when it comes to affordable housing.

According to a New York Times report (don’t even get me started on housing affordability in New York) more than 6,500 San Franciscans applied to live in a new affordable housing complex that only had 95 units available. Ranking as one of the most unaffordable cities in the U.S., the median rent for a one-bedroom apartment is roughly $1,750 per month — double the national average of roughly $940 per month. People are struggling to find homes that are reasonably affordable, and the number of those that are affordable don’t even come close to meeting the city’s demand. To purchase a median priced home in San Francisco you will need to earn at least $333,270 a year to qualify to buy a median-priced home of $1.6 million.

San Francisco is not the only guilty party; Los Angeles and Orange County both have a shortfall of over 660,000 homes affordable to those who earn 50 percent or less than the median income. Within Southern California as a whole (including the Inland Empire and San Diego County) there are over 941,000 low-income families that are unable to find affordable housing. This, frankly, is terrifying. To be able to qualify for a median priced home in my home of Orange County, my partner and I would have to have a combined income of $167,670. I don’t know about you, but after reading these figures, I will be asking for a raise. Just kidding. (Not really.)

Anyways! I have faith in us, our economy, and all the amazing builders in this area who are searching for innovative ways to provide more affordable housing to California residents. According to the California Association of Realtors (C.A.R.), higher wages and lower seasonal home prices combined raised California’s affordability numbers higher in the first quarter of 2018, compared to the previous quarter. The percentage of home buyers who could afford purchasing a median-priced standard single-family home in California in the first quarter of 2018 increased up to 31 percent versus the fourth quarter of 2017 at 29 percent.

More and more multi-family residences are filling in the gaps of single-family new homes. In this magazine alone, we have four multifamily features from builders like Lennar, Trumark Homes, and Architects Withee Malcolm. According to C.A.R., 39 percent of California households qualify for the minimum income required for a purchase of a $449,720 median priced condominium/ townhome. Though, if you left California, you may be able to purchase a mansion for that same amount of money. However, we pay for the surf, sand, and sunshine, so I suppose it’s all relative. There are also certain areas of California that are on par with the rest of the country — rural counties in Northern California such as Lassen county had a medium home price of $171,000. What we need here is for builders, developers, lawmakers, and financiers to come together with an agreeable solution that keeps the business booming and the buyers actually able to buy.

Technology provides possibilities for alleviating some financial pressure — 3D printed houses and other technological advancements impact the process, shortening building time frame and using less materials, creating more affordable houses for people to purchase. Builders such as Lennar recognize the need for buyers to be relieved of financial pressure and offer programs catered to the Millennial buyer weighed down by student loans. Their Student Loan Debt Mortgage Program offers borrowers as much as $13,000 that can be used to pay off student loan debt. Borrowers can direct up to three percent of the purchase price to pay their student loans, but only if they also purchase a new home from Lennar. That three percent, however, will not add to the price of the home or to the mortgage balance.

The name of the game is changing — and the gap between the wealthy and the middle class is widening. As a whole we need to come together to offer solutions to alleviate the affordable housing crisis.

Abby Pittman is the Assistant Editor for Builder and Developer magazine. She may be reached at abby@penpubinc.com

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