My oldest son and his significant other, both thirtysomethings, have been working hard and saving money for years. A few months ago, they decided it was time to graduate from their apartment and buy a house. They were eager to claim this important benefit of the American Dream. They found a nice little house and quickly made a full-price offer. I’m still shocked that a small place without a garage can cost more than $1 million, but the home caught their fancy. They were excited and talkative about the notion of buying it. Their prospects seemed bright, but then someone swooped in with an all-cash offer and made off with their house. Alas, such heartbreaking tales are all around us. As everyone knows, there is a serious housing shortage here. Serious. And metastasizing. Multiple first-day, full-price offers, long the norm on the westside of Los Angeles, are becoming more common throughout the region. A veteran and well-known Valley-area residential real estate agent told me a couple of months ago that all-cash buyers reign now, even here. And what about regular folks, I asked, like my son, who offer the traditional 20 percent down payment? She shook her head. She said nothing. For those who are frustrated because they can’t buy their first house and start climbing the homeownership ladder, this housing shortage doesn’t fall under an academic title such as “market imbalance.” It isn’t being shrugged off as some temporary oddity where transactions aren’t working out now but just be patient, everything will be fine later. No, this housing shortage feels personal, hurtful and essentially permanent. It’s the nagging sense that something isn’t right. It’s the feeling that the system that everyone understood and lived by suddenly appears dysfunctional at the least and perhaps all but extinct in California. It’s the sinking notion that one of society’s big promises to every American in the past has been broken for them. I imagine you hear the same talk I do, particularly from those in their 20s and 30s. Maybe, they say, they’d be better off in Arizona or Colorado or Texas. Someplace outside of California where they could actually buy a house. When I hear that kind of talk, I react like that real estate agent: I don’t say anything. I want them to stay, but on the other hand, the impulse for them to move is understandable. They may improve their lives by moving, but I don’t want to encourage them to leave. So I nod. I mean, what can you say? Since this is a business publication, let’s state the obvious business impact: The housing shortage has been hard on our economy, and it seems destined to get worse. If you operate a business, you know it has been difficult for years to attract talent from outside the region because of high housing prices. But now, because of the added burden of the housing shortage, it is increasingly tough to keep talent here. And if family members of your key employees move outside the state, it will become harder to keep your key employees here. The housing shortage may well be California’s version of brain drain. What’s maddening is that this doesn’t have to be. Florida, for example, has high levels of in-migration and lacks great quantities of dry land to build on, yet there’s no housing shortage and crazy prices like in California. The problem here is that a number of policies have constrained home building and caused prices to escalate when they are built. Voters have approved everything from Ventura County’s SOAR (Save Open Spaces and Agricultural Resources), which severely constricts new development, to Measure JJJ in Los Angeles, which forces most new home builders to pay more for labor (which raises the cost of all the new units) and to set aside homes for low-income residents (which raises the prices on the remaining units). Then there are all the permitting and regulatory hoops and neighborhood council approvals that delay or downsize or kill projects and ultimately boost prices, and, well, if you read this publication and similar ones, you know all about these matters. No need to dwell on them. I’m not sure a housing shortage with very high prices is what the voters really want, but it’s what they keep voting for. And my son? He’s stopped looking at houses and said he might redouble his savings so he could make an all-cash purchase some year in the future. But then he sighed as he realized that as home prices zoom from the stratosphere to the ionosphere, his savings could never keep pace. He is disillusioned, facing a possible life sentence in an apartment. He has not talked about leaving California. But I suspect he may broach that topic eventually. And if he does, I’ll probably say nothing. After all, I don’t want him to leave. But I want him to have the chance to better his life. Charles Crumpley is editor and publisher of the Business Journal. He can be reached at [email protected].
