Recent reports on the cost of living in Orange County paint a fairly bleak picture if you are one of the county’s “working families.”
According to the study “The Orange Crush: The Squeezing of Orange County’s Middle Class,” done at the University of California, Irvine, “most housing is no longer affordable to low- and middle-income families. The cost of housing in Orange County remains among the highest in the nation.”
And that’s after an extended correction in housing prices.
The report points out that many of the jobs being created in the county are low-pay, low-skill jobs that are not adequate to cover the cost of living and certainly not the cost of housing.
Nationally, the housing picture isn’t really any better. A study by the Center for Housing Policy written by Keith Waltrip underscores that rather than improving, housing affordability actually worsened slightly from 2005 to 2008.
The share of households spending more than half of their monthly incomes for housing (including utilities) increased from 14% in 2005 to 15% in 2008.
The regions where the cost of housing is highest, based on percent of household income used for housing, include Riverside-San Bernardino-Ontario (36%) and Los Angeles-Long Beach-Santa Ana (35%).
Consequences
The lack of affordable workforce housing has many ramifications for OC.
One of the most troubling is that the county continues to lose a major portion of its younger population to areas and states where home prices are more affordable.
The Orange County Business Council reports that the county could lose up to 20% of its young adults in the next 20 years, due mainly to the lack of entry-level housing.
Little has changed in the past several years. The county’s high cost of home ownership and rental housing requires many low-wage workers who don’t move to less expensive states to either live in crowded housing conditions or commute from cheaper locations outside the county.
Although housing prices have declined, so has median household income. Consequently, many households earning the area median income for OC are still not able to afford a median-price, single-family home in the county or the rent out a nice apartment.
In fact, OC continues to be among the nation’s most expensive rental markets. According to the UC Irvine report, the wage needed to pay for a two-bedroom apartment in the county is about $31 an hour, about four times what a waiter or waitress makes ($8 per hour) and twice what a customer services representative earns ($15).
Unfortunately, the largest number of job opportunities in the county is in the lower paying categories.
Rental housing is usually the housing source that can provide low- and moderate-income workers with affordable places to live. But the lack of affordable rental housing can cause unduly high occupancy levels, resulting in overcrowding and stress.
“This imbalance has a potential to create overcrowded housing conditions, as families couple together to split rental costs, and several health risks,” the UCI report said.
Ultimately, a shortage of quality, affordable housing can lead to potentially debilitating social and economic effects throughout the county, such as increased homelessness, domestic disruption and health issues.
While housing prices in OC have in fact decreased rather substantially with the economic downturn, they are still much too high for many blue collar workers and young professionals to afford.
In fact, a housing affordability index indicates that affordability has gotten worse in our region compared to other major metro areas in the nation, especially for homeowners earning up to 120% of area median income.
“Since 1970, the median home value in OC has remained at the top 1% of U.S. counties,” the UCI report said.
The current median price of a home in the county is $425,000, a 15% increase from a year ago.
Foreclosure Theory
The belief that foreclosures would create a pool of affordable housing that could be purchased by working families has not panned out as some expected. Many of these distressed properties have been purchased by investors with cash in hopes of handsome returns as the housing market improves, which it seems to be starting to do.
One of the key policy recommendations made by the UCI report is for developers to “focus on providing workforce housing close to downtown business centers so that (workers) won’t have to seek housing in the distant regions. Local governments should provide incentives for developers to provide such housing.”
Taken together, these reports emphasize the need for affordable workforce housing in OC and throughout Southern California—not just a few units here and there, but thousands of units to accommodate our working families today and tomorrow.
As our economy recovers, which now seems to be happening, the recovery will be stifled if the workers necessary to fill a growing number of jobs—whether blue collar or white collar—cannot afford to live here. They simply will not come, and that’s not a union issue or management issue, that’s a fundamental economic issue that we must all address and solve together.
Our future depends on it.
Gebre is a member of the Orange County Housing Trust board of governors.
