Simplex Open House

Monday, November 14, 2016

California Facing an Affordability Crisis

A Housing Summit held recently in Los Angeles seemed to open a Pandora’s Box over the issue of affordable housing.

Should more money be thrown into affordable housing (AH) in those cities that are already building AH and possibly cutting off funding to those that don’t.

Or maybe California should allow developers to skirt the local building process in areas that need AH now. What happens if homeowners are allowed to build and rent out Tiny Houses, Granny Pods and maybe even Park Models?


People with jobs and growing households are increasing faster than new housing can be built. In some areas less than a third of the population can move into AH, relying on government subsidy for housing with just the most basic needs. Right now 68% of all CA renters are paying substantially more than 30% of their earnings on rent.

Typically, a new housing unit is needed for every 1.5 new jobs. That number has climbed in areas like San Francisco to as low as one new unit for every 6 jobs.

This scenario needs a two prong approach according to state officials. First there needs to be “Market Rate” affordable housing for middle class families and secondly there needs to be more subsidized housing. Both of these cost lots of investment by the state, developers and the local cities and towns.

Here are some of the building ideas put forth at the Summit:

• Granny flats, Tiny houses, Park models: The bulk of housing in the region and across the state is in low-density single-family housing tracts added in homeowner backyards or by converting a garage into a separate unit.



• Prefabricated, Modular housing: Building parts of homes in factories and assembling them at the home site can reduce homebuilding costs by at least 20 percent and could cut construction time in half. Manufactured homes; HUD; was not mentioned as any significant part of the solution.

• National renters credit: The federal government subsidizes homeownership by providing a mortgage interest deduction, but has nothing for renters. They suggested that the federal government embed in the tax code a credit for renters up to a certain income level and up to a certain rent level.

• Rent to own: New mortgage products need to be developed to create more paths to homeownership with the federal housing finance system finding more ways to increase lending to non-traditional buyers. I seem to recall that creative, non-traditional subprime lending was a major contributor to the 2008 housing crash. This one should be avoided at all costs.

• Streamline the approval process: Some affordable housing developers complained about duplicative inspections and reviews by the city and state. Affordable housing costs about 33 percent more in CA to build than market-rate housing due to red tape and the complexity of financing such projects.

Ultimately, affordable housing is essential to help families stabilize their lives, get an education, find a better job and move up the income ladder, several speakers said. Living in crowded conditions or getting evicted and moving frequently is hard on families and harmful to children.

This is not a problem unique to California. Summits are being held in almost every state trying to come to grips with the housing problems facing people that need and want affordable housing but are forced to rent either subsidized low income housing or higher than market rate housing.


The modular housing and manufactured housing industries can be keys to helping solve this crisis but as far as I know, there is no industry alliance currently working on the problem or even planned. We are missing a golden opportunity to work together with state and local housing authorities to help them realize that with the labor shortage facing the site built market, system built housing is the logical choice.

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