California appears unlikely to be able to build enough homes in the coming years to put a meaningful dent in skyrocketing housing prices triggered by a shortage of affordable dwellings, according to economists who prepared a new UCLA Anderson Forecast.
This also holds true for the Bay Area, where an analysis of housing data by this news organization indicates it might take the area's major metropolitan areas between 14 and 36 years even to modestly roll back housing prices.
The latest quarterly UCLA Anderson Forecast, released Wednesday, estimates how much construction would be required to reduce home prices in the Golden State by even 10%, to roughly 2014 levels.
"We find that to obtain a modest 10% reduction in price requires a little over 20% more housing," economist Jerry Nickelsburg wrote in the forecast, which focused on the state's economy. "Making housing affordable in California is difficult at best."
This news organization analyzed the pace of residential housing construction in the Bay Area's three major employment centers — Santa Clara County, the East Bay and the San Francisco-San Mateo region — and compared the current level of home building to the 20% increase the Anderson Forecast says is needed to achieve a modest 10% reduction in prices. The analysis indicated that the region is a long way off from a 20% growth in supply.
Santa Clara County at the end of 2015 had 646,200 residential units, according to the U.S. Census Bureau's American Fact Finder site, its latest figures available. So a 20 percent increase would be 129,240 new housing units.
But based on the current development pace of single-family and multi-family residential units, the South Bay is expected to add about 9,000 housing units during 2017. At that rate, it would take the South Bay at least 14 years to achieve a modest 10% price reduction.
This year's pace of residential building was based on figures from the Construction Industry Research Board, provided by the Palo Alto-based Center for Continuing Study of the California Economy.
Other areas around the Bay face even longer time frames.
At the end of 2015, the East Bay had roughly 995,000 residential units, which means it would need to build around 199,000 new homes, single-family and multifamily, to increase housing supply by 20%. The Alameda County-Contra Costa County area could add somewhere around 9,000 housing units in 2017 — a pace that would require 22 years to reach the estimated target to roll back home prices in that area by 10%.
San Francisco had about 384,000 residential units in 2015, was on pace to build 3,900 units in 2017, and would require 20 years to increase housing supply by 76,800 new units, or 20%.
San Mateo County, with 272,000 residential units in 2015, was expected to add 1,500 housing units in 2017, and might need 36 years to achieve the 20% threshold of 54,400 new units.
"Our inattention to building enough homes has led to disastrously high housing costs for everyone," said Carl Guardino, president of the Silicon Valley Leadership Group, a public policy trade association that represents businesses. "This is not going to be solved in a day or even a year, or even a few years. This literally has been decades of California not preparing the state for Californians."
To be sure, a $4 billion housing bond measure that the state government recently endorsed could provide financing for affordable housing developments, if voters approve the measure at the polls in 2018.
"The more supply you have, the lower the price," Nickelsburg said. "But at least initially, all we will be able to do is reduce the rate of gains in home prices, which have been significant, particularly in the Bay Area."
Even that effort might not provide significant near-term relief, the forecast said.
Yet some increases in home building would be better than none, Guardino said: "We can either throw up our arms and do nothing, or we can get our tools and start building."
