California housing shortages highest in L.A., study finds

Housing shortages in California’s major employment centers were confirmed by a recent study that found Los Angeles County and the San Francisco Bay area have the tightest housing markets.

While many contractors and realtors have long acknowledged the housing shortage, the study by the Public Policy Institute of California reports new homes were under-produced from 1993 until 1999. According to Timothy Coyle, senior vice president of governmental affairs for the California Building Industry Association, there was a lack of production in the early ’90s because of growth control and governmental restraints. After the housing market bottomed out in 1993, there was a severe slowdown in new home construction, he says.

The study, “In Short Supply? Cycles and Trends in California Housing,” calculates how many homes and apartments should have been built in California to keep up with the needs of the public, based on factors such as nationwide housing production, immigration levels, demographics and the state’s economy. Once the needed home construction was calculated, it was compared to the actual rate of housing construction. The study found that, through 1999, Los Angeles County experienced a 30 percent rate of underproduction, or a shortage of approximately 101,000 units. San Francisco had a 21 percent lack of construction, and San Diego had a 20 percent shortage. Other areas that experienced 5 percent to 15 percent shortages include Inland Empire, Ventura County, Orange County and the Sacramento area.

The research showed the housing shortfall is smaller than previous estimates and almost entirely confined to the three largest metro areas.

“As all economists will tell you, high prices signal market shortages, and no state has higher housing prices than California,” Coyle says.

Hans Johnson, co-author of the PPIC report, said the housing situation in 2000 was probably better than in 1990.

“There are some serious regional concerns about housing supply and affordability in California,” Johnson said. “However, we do see evidence that the magnitude of the statewide crisis has been overstated.”