LA needs a housing boom. That, we know beyond a doubt.
However, housing is a regional market, and the SoCal market includes the Inland Empire, which has historically been an outlet for housing demand in LA County and Orange County. The IE does have some apartment development, but it’s best known for its single-family residence (SFR) subdivisions, where houses are considerably cheaper than in LA-OC.
SFR construction in the IE is probably a pretty low priority for most urbanists, but there’s a pretty good case it’s not a bad thing. For one, growth in the IE provides at least some measure of new housing to check price and rent increases in LA-OC. Second, The IE is projected to be one of California’s fastest growing employment centers, and those folks will need housing close to where they work. Last, given how much of the IE is already developed, many projects are effectively suburban infill. Since regional density is more important than local density in determining vehicle miles traveled (VMT) per capita, one of the best ways to reduce VMT per capita is for the IE to look more like LA.
If you went back to 2012 or 2013 and asked housing market watchers, they likely would have expected more growth in SFR construction in places like the IE by today. (Some little corners of Twitter can hardly wait to shove an SFR boom in people’s faces; you know who you are.) To be honest, I expected suburban growth in the IE to have returned full force, and ended all the speculation about the death of the suburbs. That expectation was not based on supposed Millennial housing preferences or demographic shifts or gas prices or anything like that, but on land use policy realities: people would move to where housing was cheap, and housing would be cheap in the IE because it’s so much easier to build new SFRs there than to redevelop land in LA-OC.
Despite steadily increasing prices, though, there’s no sign of an SFR boom. Calculated Risk has the run down on housing starts at the national level as of September. Happily, after tapering off earlier this year, multifamily starts have picked back up. Single-family starts are still lower than at any time since 1969 except the brief, sharp recession of 1981-1982, and are only increasing slowly despite over 6 years of very low construction levels.
This is true at the local level too. While multifamily starts in LA-OC are at least back to prerecession levels (though still much lower than in the 1980s, and they need to be even higher than that), SFR starts are incredibly lame: less than 1,000 permitted per month, worse than even the early 1990s recession that pummeled SoCal’s economy. You could, to some extent, argue that’s about land: the only places in LA-OC with any appreciable amount of land for SFR construction are Irvine and the Antelope Valley, and Irvine actually does have an honest-to-goodness boom. The Antelope Valley is too far from job growth centers; its boom in the 1980s was related to the local defense industry, and SFR construction there is practically non-existent today as there is no price support.
On the other hand, there’s plenty of land in places like Ontario and Fontana, both for large master plans of the type that exploded in Eastvale in the 2000s, and for small infill subdivisions. Lack of suitable sites is not the issue. And yet, SFR construction in the IE is going nowhere.
The IE economy was badly damaged by the recession, but job growth has resumed and passed the prerecession peak.
In addition, LA-OC has had fairly strong job growth, which should create spillover effects in the IE housing market.
But IE housing construction is very weak. Why is this?
The new SFRs that are being produced are high end houses. Bloomberg reports that nationally, starter homes are increasingly beyond young people’s grasp. Anecdotally, keeping an eye on what the suburban home builders are offering, you almost can’t find any new construction in Eastvale, Chino, Ontario, Fontana, or Jurupa Valley for under $400,000. In a region with a median household income of about $55,000, that is a luxury product. If you want to find new construction below $300,000, you’ll have to go to Menifee, Perris, or places east of the 215, which is impractical if you work in LA-OC.
This situation is perhaps even more surprising given that the IE has had no real wage growth. It’s not like people are making lots more money and looking to buy bigger.
The lack of cheaper SFR construction has been attributed to just about everything under the sun, from materials costs to labor costs, from tight lending conditions to municipal reluctance to permit cheaper housing, from Millennial preferring cities to home builders preferring to target the top of the market. Whatever the cause, so long as SFR construction in the IE remains weak, it is even more imperative that we solve our housing construction issues in LA-OC, to keep the region from becoming ever more unaffordable.