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Under Newsom, California Housing Crisis Gets Worse, Not Better



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Gov. Gavin Newsom’s grand plan of building 3.5 million housing units by 2025 is off to a terrible start.
In the first six months of 2019, builders gained approval for 51,178 new homes in California, nearly 20% fewer than the same period a year earlier.
That puts the state on track for the first meaningful annual decline since the recession, The Los Angeles Times reports.
Most alarming: multi-family construction, the biggest need, was down 23%.
“We are going in exactly the wrong direction,” said Christopher Thornberg, founding partner of Beacon Economics.

Chart of building permits approved in California Jan. 1-June 30, 2019

(GV Wire/Alexis DeSha)

And, in fact, a report prepared by Beacon Economics for found that “certain jurisdictions in California will not meet their low-income housing production targets for more than 1,000 years.”

The Fresno-Clovis Story

The same report shows that Fresno and Clovis are doing well with housing for moderate and above-moderate income residents.
However, Fresno is not projected to meet its housing goals for very low and low-income families until 2057 and beyond. In those same categories, the projected fulfillment dates in Clovis are the years 3000 and 2108. respectively.

Causes of the 2019 Slowdown

What’s behind the 2019 slowdown?
Builders, particularly in Southern California, point to high costs for land, labor, materials and government fees. And there are the Trump administration’s tariffs on building products and appliances from foreign countries. For some builders, their potential profit margin is so small that it doesn’t justify the risks of construction.

According to John Burns Real Estate Consulting, costs for labor and materials rose 7.2% in June in Northern California compared with a year earlier, while home prices were essentially flat. In Southern California, costs rose 2.1% while prices increased by 2%.
But perhaps the biggest hurdle is the not-in-my-backyard sentiments of residents and voters. This results in many local governments, especially cities, slowing or even opposing large-scale housing construction.
At the behest of city officials throughout California, the Legislature killed a bill to overcome NIMBYism, Senate Bill 50, before the summer recess.

Mortgage Rates Falling

One bright spot for both home buyers and builders: The average rate on a 30-year fixed mortgage is 3.6% — down from 4.94% in November, according to Freddie Mac.