Too Many People Not Enough Homes – Can we more than double California’s homes in the next 7 years?

 In Real Estate

According to The California Association of Realtors, House production averaged building less than 80,000 homes annually over the past 10 years, which is well below the projected need of 180,000. How does California address a shortfall that dramatic? With runaway housing prices continuing their charge, how can the supply of homes ever catch up to the over increasing demand? Why has development be so slow to keep pace with overwhelming demand?

California needs at least 1.8 million homes to address household growth from 2015 to 2025. State housing and planning law encourages housing development that also helps the state meet its sustainability goals (developing inward and more compactly, close to jobs, transit, and services), and encourages the development of housing that is affordable to Californians at a range of income levels. While the state can require that local governments plan to meet housing needs and offer incentives to build housing, the state continues to fall short on what is actually built.

Every eight years, by law, (Government Code Section 65800) future housing needs are determined for each region of the state based on growth over a specific period of time (projection period) through the Regional Housing Need Allocation (RHNA) process. The RHNA process looks at projected population growth to determine housing and affordability needs compared to household incomes, and provides general estimates of how many new units are needed to meet those specific needs. Regional governments distribute this regional housing need to the local governments who are tasked with developing a plan (housing element of the general plan) to accommodate the additional growth. 

During California’s most-recent Projection Period (2003-2014) not a single region in the state actually built enough housing to meet its determined regional need. Statewide, only 47 percent of the housing required to meet projected need was constructed during this time-period. 

The image below shows the five stages of the residential planning and development process here in California. Constraints at each stage compound to create a large gap between the  state’s projected housing need and amount of housing that ends up being built. 

California builders want to build and develop projects as fast as possible with prices rising. However, it seems the path to carry out their plans is moving far to slow to keep pace with the influx of new residents coming to the state over the past 20 years and for the foreseeable future. It seems in order to speed up development at all, either the planning, zoning, and permitting processes need to be streamlined or an ease on restrictions may allow more projects to be approved. 

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