Housing Shortage is Threatening Orange County’s Middle Class, Researchers Warn

A promotional image for a Chapman University conference last week about the future of Orange County.

As housing continues to become more and more unaffordable in Orange County for young professionals and working families, there’s a serious risk the county will become an economy of low-wage “servants” and wealthy homeowners, according to a stark assessment by Chapman University researchers who are advising county government.

But there’s a path to avoid that fate, they say: by bringing together government, businesses and universities to collaborate on expanding the housing supply and the number of well-paying jobs.

The picture painted by the researchers is a dire one for the county’s long-term future, if the issue is left unaddressed. A significant portion of OC residents already are living in poverty, they said, and it will worsen as housing prices continue to skyrocket, leading businesses to move to other areas or states where employees can afford to buy homes.

“Orange County is in a good race with San Jose for being the least affordable place” for housing in the entire United States, Chapman professor Joel Kotkin told county supervisors during a presentation Feb. 21. “This has massive impacts, going all the way into – does a professional come here, [and] does a person have to pay such high rents that they become homeless.”

“We have a rapid growth in poverty,” he added, calling it “a huge problem.”

If the housing shortage isn’t dealt with, Kotkin said, “we have this danger that we are going to become…a place where affluent people retire or have retirement homes, [and] all they’re gonna need are servants and nice restaurants.”

The issue was front and center again at an event Feb. 23 at Chapman about the future of the county.

“I think a major challenge in Orange County…is what we’re going to do to make it possible for those Chapman, Cal State Fullerton, UC Irvine grads, to stay here when they’re not going to be able” to afford a home, said Jim Doti, who was Chapman’s president from 1991 to 2016.

Only 21 percent of Orange County households make the $146,000 it takes to afford the median home price of $745,000, the Chapman researchers told supervisors.

And the trend has only been getting worse, they said, with housing prices climbing eight times faster than income over the last 15 years. That gives Orange County a “tremendous disadvantage” to other areas of the country when companies choose where to locate, Kotkin said.

And a stumbling block to progress, Doti said, is the currently “weak lines of communication between government, business, and higher education.”

Experts say the housing shortage is a result of new home construction not keeping up with the increase in the county’s population, resulting in more intense competition for each available unit – and thus higher prices. In addition, many middle class professional jobs, such as in aerospace and defense, have left the county and haven’t been replaced by as many well-paying jobs.

Orange County does have a lot going for it that can attract young professionals, the researchers noted, including great weather, arts institutions, diversity, and a growing information technology industry. But if the housing shortage continues to worsen – and thus drive up prices even further – the county will have a harder and harder time holding on to college graduates, they said.

It’s critical to add more housing, they said, with possible solutions including converting unused retail space into housing, as has been done elsewhere in the country.

“It’s astounding how many shopping centers are half deserted” or have low-paying retail tenants, said Kotkin. “That’s an area where we’re gonna need help from the county” and cities with rezoning.

The nice thing is that those areas already have basic infrastructure, like electricity and roads, “and you’re not going into somebody’s neighborhood” to build housing, he added.

The researchers also called for strong collaboration between government and business to develop strategies to attract and retain well-paying jobs, which they say has been done with great success in places like Seattle and Boston.

However, unlike Seattle, there is no collaboration in Orange County between county and city officials about how to give companies an incentive to move here and stay, the researchers said. Incentives could include streamlining processes to start or relocate businesses to Orange County and promoting the county as being at the cutting edge of technology and other professional jobs.

The researchers’ effort seems to have support from county staff, with county CEO Frank Kim saying the Chapman researchers are helping the county develop its long term strategic vision.

And the Board of Supervisors, as the county’s top elected officials, can play an important role, the researchers said. Kotkin says he and his colleagues see the county government as a “convener of other governments.”

But supervisors traditionally have resisted taking leadership on such issues, and some on the board pushed back against the researchers.

Supervisors Andrew Do and Shawn Nelson criticized their presentation and questioned whether it was the supervisors’ role to take leadership on the issue. The two represent central and north Orange County districts with the largest numbers of low-income residents.

Do, in particular, was upset that researchers were suggesting the supervisors take specific actions, like advocating for policy changes in Sacramento.

“We’re not here to fight a battle with the state of California,” Do told them, clearly frustrated. He suggested the researchers “stick with” only providing data.

One of the researchers pushed back.

“We have a right to say this is what we think is happening,” and to ignore the role of state policy “makes no sense at all,” Kotkin said.

Nelson took issue with the idea that supervisors could lead a conversation among cities about adding housing density, saying city officials will be “apoplectic.”

“We’re the County of Orange, not the city of fill-in-the-blank,” Nelson said, calling it “interesting info, but that’s not actionable for us.”

Other supervisors seemed more interested in the dialogue, but didn’t make any specific commitments to take on a leadership role.

Supervisor Lisa Bartlett said given the tough regulatory environment for building homes, it would be helpful for the county to “band together” with other groups and counties to advocate in Sacramento for policy changes.

“I think the county can be a greater partner” in this, she said.

Supervisor Todd Spitzer said he appreciated having the data and that the board needs to decide whether it will step up.

“As a county, we’ve never really engaged in public policy” surrounding business retention and attraction, Spitzer said.

Regardless of the supervisors’ interest level, the university plans to move forward with its effort to lead a conversation about the housing crisis and economic development.

The researchers plan to create an advisory board of government and business leaders from across the county, and a meeting is scheduled next week with 40 chief executives who lead the largest companies in Orange County, they said.

“The idea is to create a big tent to discuss all of this and figure out what the needs are,” said Chapman researcher Marshall Toplansky.

An initial report is expected by the end of November, with a final report and recommendations in January 2018.

They emphasized the need for a big-picture discussion about how to solve the county’s housing, jobs, and transportation challenges in a way that drives economic growth.

“If we don’t do that, then kind of the game is over,” as far as the county’s ability to retain and attract jobs, Toplansky said.

Correction: A previous version of this story misspelled the last name of Chapman professor Joel Kotkin in second references. Voice of OC regrets the error.

 Nick Gerda covers county government and Santa Ana for Voice of OC. You can contact him at ngerda@voiceofoc.org.

  • OCservant_Leader

    The OC BOS finds “slots” for all their EAs and family members in the OC City Bureaucracies? Who do these buffoons think they are fooling?

  • David

    The same University with busts of Ayn Rand and Milton Friedman proudly displayed on their campus are now advocating for appropriate government intervention in housing supply and cost controls? Say it ain’t so…. #trysocialism

  • Rivett

    I don’t have time to address every reason why, who does, but let it suffice to say that nearly every word of this is pure idiocy.

  • kburgoyne

    My observation based on what I see when driving around is wealthy landowners largely don’t want to give up the long term income in exchange for building and selling owner-occupied homes. What I see a LOT of are HUGE apartment complexes being built. This certainly isn’t exclusively true, but I think it’s a major trend impacting the greater availability of owner-occupied housing.

    From a wealthy landowner standpoint it actually makes more sense to build huge expensive apartment complexes. If you sell your land for owner-occupied homes then its a one-time revenue source. If you build huge apartments to keep people out of owning their own homes and renting from you instead, that’s long-term ongoing revenue. Plus you still own the land.

    It’s in line with the increasing trend toward the subscription model in other markets. Don’t sell the person the product when you can rent/lease it to them and create a reasonably predictable source of monthly income.

    It’s also in line with the millennial mindset where they’ve been trained that everything becomes obsolete so fast it’s not worth buying it. Just do the equivalent of rent/lease your iPhone or whatever with the expectation you’re going to be dumping it in a year or two for the newer model.

    Now granted that might not be as logical when applied to your residence, but the issue is one of mindset not logic.

    • Carl

      If this was true we’d expect rents and housing prices to be moving in opposite directions, instead we have a shortage of both. We simply don’t permit enough of either to be built.

  • Falpherst

    It is shocking that County Supervisors fail to envision or value OC. Supervisors can direct staff and allocate resources to facilitate communications, ideas, and recruitment efforts between the State and any municipalities who chose to work on this. A generation from now, when OC is run-down and vacant like Detroit is today, locals will look back on today’s County Supervisors and despair. Vote these short-sighted scumbags out!!

  • justanon

    I hope any development is tied to some form of mass transit.
    Our freeways are grid-locked now for hours everyday, this is unsustainable.

    • LFOldTimer

      Of course our freeways are grid-locked.

      Over 800,000 illegals have been issued driver’s licenses!!!

      DUH????

      • justanon

        They were driving before, you know, to their US employer provided jobs.

        Now they have licenses and insurance, it’s a good thing.

        • LFOldTimer

          How is aiding and abetting a good thing?

          Would you give a set of burglary tools to a residential robber?

          Would you give a slim-jim to a car thief?

          So why would you endorse giving a DL to somebody who steals jobs???

          • justanon

            I prefer that people who are driving on the roads with me are licensed and insured.

            Again, they didn’t “steal” a job they were GIVEN a job by a US citizen, big difference.

          • LFOldTimer

            They took jobs that they weren’t authorized under the law to take.

            That’s “stealing” by definition.

            Even a 3rd grader could figure that out.

          • justanon

            When one is offered something that isn’t “stealing”. Look it up.

          • LFOldTimer

            They’re stealing from US citizens or legal immigrants who could work the job. They aren’t stealing from the employer!!!

            When you take something which is against the law to take – that is “stealing”.

            DUH???

            Liberal logic is fascinating.

          • justanon

            The employer is the one determining who gets the job, they’re the ones “stealing” jobs from US citizens.

          • LFOldTimer

            So when a drug buyer purchases meth from a dealer – the buyer is innocent and only the dealer is guilty???

            You live in a strange convoluted world of justice.

          • justanon

            Why is the employer taking a job away from a US citizen and giving it to an undocumented immigrant?

            And using your analogy, we go after the dealer far harder than the addict. The dealer has the power and the money, the addict is just that, an addict.
            So,when someone crosses the border in search of a better life they are at the mercy of the employers who are usually just using undocumented labor to pad their bottom line. They have the power and the choices.
            They are the root of the problem.

          • LFOldTimer

            Both the buyer and the seller of drugs are guilty.

            Same with stealing jobs from US citizens.

            Both the employer and the worker are guilty.

            The illegal probably broke two other laws to get the job: (1) Entering the country illegally (2) Using fake ID (identity theft).

            So the worker in this case would be worse than the employer. He committed 3 crimes while the employer only 1.

          • justanon

            Keep telling yourself that. Deception, maybe that’s the only way you racists can look at yourselves in the mirror.

          • LFOldTimer

            Many illegals pass themselves off as citizens or legal residents by committing identity theft and using phony ID. So employers believe they are acting in accordance with the labor laws.

            It’s not racist to expect foreigners to abide by our immigration laws. Any American who promotes and applauds illegals breaking into our country and committing a myriad of crimes like stealing jobs and committing identity theft in no American at all IMO. They are low-life bottom-feeding traitors to our nation.

          • justanon

            “low-life bottom-feeding traitors to our nation”

            Like comrade trump? Ha, ha, ha.

        • joe gonzo

          Insurance????

          • LFOldTimer

            I pity the fool who gets into an accident with an illegal.

            They are completely on their own. Normal uninsured motorist in an insurance policy covers next to nothing.

            And basically nothing happens to the illegal for driving without it.

            Causing an accident and not being insured does not mean deportation. The Trust Act protects the illegal. That’s how corrupted this society is.

  • LFOldTimer

    Of course Kotkin was unable to mention “illegal immigration” as one of the primary causes for the lack of housing and the increasing rate of poverty in OC. He would risk instant banishment from the university circles.

    In 2015 the OC Register reported that 10% of OC’s population (or 313,000 at that time) are illegal immigrants. They would fill up the Honda Center by more than 17 times.

    Illegal immigrants are almost always indigent. And they need a place to live too. And, of course, they drive the working wage down for everyone. So no wonder the middle class is disappearing and only 21% of OC residents could afford a median priced home.

    One doesn’t have to be a college professor to connect those dots.

    And when cities like Santa Ana declare themselves as sanctuaries for illegal foreigners – and more illegals flock across the border with the protections of the Trust Act – what the h*ll do you expect to happen?

    Stop acting like children. Grow up and tell the truth!

    • justanon

      “Illegal aliens are almost always indigent.”

      Stop with your BS, most undocumented immigrants have been living here for decades and a lot of them are homeowners. Also, please stop with the canard that “illegals are flocking” across the border. They aren’t, we’ve had negative immigration with Mexico for the last decade.

      Just because that dumb-*ss trump says something doesn’t make it true. When will you trump supporters get it, trump knows nothing, you were duped. For proof, the dumb-*ss-in-chief just discovered that “healthcare is unbelievably complicated” yet he’s been saying for months that he has a plan and it will be so great.
      Who believes trump and his ignorant supporters on anything anymore?
      Lies, lies, lies.

      • LFOldTimer

        Just because some have lived here it doesn’t mean they didn’t violate the law. If they worked they violated our labor laws too! And if they used fake ID they violated identity theft laws too! But for some reason you seem to be fine with those engage in criminal activity. Hmmm.

        And illegals are flocking across the border. The Border Patrol reported there has been a surge of illegals breaching the border for the last 2 years and violating the law, many coming in from Central America.

        So Trump wants to enforce the law and he’s the bad guy??? LOL!

        Are you an American? Why are you an apologist for foreign lawbreakers???

        • justanon

          The people coming from Central America are mostly asylum seekers, but naturally people seeking asylum from violence means nothing to a trump supporter.

          Why, why, why don’t we first go after the US citizens that hire the undocumented?

          The employers are the biggest lawbreakers and are betraying their country.

          The undocumented immigrants are just trying to survive, but the people employing them are trying to save money by hiring cheap labor. Who is the bigger criminal?

          That is the most logical way to deal with undocumented workers, just stop offering and providing jobs.

          Of course, that isn’t nearly as satisfying for the racists and angry a-holes who really just want to see others suffer.

          What is wrong with you? Why don’t you bring up and attack the illegal employers as much as you do the poor folks trying to find a better life?

          Hmmm, I wonder? Lol.

          • LFOldTimer

            All of them claim to be “asylum seekers” to get free stuff. It’s just as dangerous to live in Santa Ana as it is to live in Honduras.

            Some employers have been jailed and fined for employing illegals. Google is your friend. But the illegal taking the job is just as guilty as the employer who gives it to him. If the illegal stayed out of our country it wouldn’t even be an issue.

            The illegal aliens can try to survive in their own nations. They can grow a pair and try to change their own governments instead of coming to America and ruining ours.

            There is only so much room at the Inn. We have our OWN underclass to take care of. We don’t need other 3rd world snake pits to pile on by sending us their underclass too!!

            We don’t owe any foreigner a “better life”. Either they can cross our borders the legal way or stay the h*ll out.

            We are supposed to be a sovereign nation. If you don’t like sovereignty go live in the 3rd world with the ones you apologize for.

          • justanon

            “Some employers have been jailed and fined for employing illegals.”

            Yeah, like one, BFD.The numbers are insignificant.

            Keep pumping out the excuses, we all know why you keep attacking the “illegals” and not the people who employ them.

          • LFOldTimer

            Keep endorsing criminality.

            Soon your neighborhood will look 3rd world and you won’t be able to figure out why.

            You’ll blame that on Trump too!

            LOL!

          • justanon

            I’d rather live in a town with the hardworking undocumented immigrants than the ignorant, good-for-nothing, racist haters who supported trump.

          • LFOldTimer

            Then go to where the immigrants come from and live there. Because half the USA are Trump supporters, like it or lump it. When you get sick go to one of their hospitals and demand free treatment. And if you have any kids enroll them in Mexican schools and demand that they be taught in English!!! LOL!

            Maybe Pena-Nieto will allow you to live illegally in his country. Go try it. You might like it. 🙂

          • justanon

            ” half the nation are Trump supporters”

            Um, you’re bad at math too. Fortunately, trump’s supporters were only about 23% of the electorate and even among those folks, the one’s with two brain cells to rub together are figuring out they were conned.

            It’s sad and kind of pathetic, when racists allow their hatred of others to cloud their judgement so much that they get duped into supporting lying con-man who’s going to fleece them.

          • LFOldTimer

            Of those who voted Trump voters represented about half.

            You have Trump voters living all around you, like it or lump it.

            Trump won, Hillary lost.

            Git over it.

          • justanon

            Boy, you really don’t understand math, but whatever, I’m not going to try and teach a pig to sing, waste of time and all that.

            I may have trump supporters living around me, I find them all to be despicable. There is/was no excuse for voting for such a lying, ignorant, bigoted POS.

            I say: Deport the trump supporters, keep the immigrants.

          • LFOldTimer

            “I say: Deport the trump supporters, keep the immigrants.”

            Which proves my point.

            You might call yourself an American – but putting a dress and lipstick on a pig doesn’t transform it into a swan.

          • justanon

            It’s the trump supporters who are anti-American. They dumped any principles they had in order to support trump’s racist and bigoted policies.
            Shameful really.

          • LFOldTimer
          • justanon

            Zerohedge, really?

            I won’t give that Bulgarian crook any clicks.

            Only a doofus would take any of the crap written ‘pseudonymously’ there, seriously. But it’s probably one of the places trump supporters get their ‘news’ because everything else is “fake” (insert huge eye roll). Wake up, you’re being conned again!

            You crack me up … zerohedge, ha,ha,ha.

          • LFOldTimer

            As far as factual reporting goes Zerohedge puts CNN, MSNBC, ABC, NBC, CBS and the MSM print media to shame.

            Anyone who gets their news information from the MSM is a misinformed fool.

          • justanon

            Yeah, Zerohedge with it’s hand-picked facts that back up whatever the chumps who get their information there want to hear.
            Sorry, but that’s NOT how REAL NEWS works.
            You and other right-wingers just believe any old cr*p your right-wing sites throw at you.

            You are always misinformed, have you ever bothered to wonder why?

          • LFOldTimer

            You’re the one apologizing for illegal foreigners who unlawfully come into our country and subsequently break even more of our laws.

            You have zero credibility with me.

      • Becks Torres

        You sound very angry. Did you believe everything Obuma fed you? One would hope not. Every Trump supporter doesn’t necessarily agree with every policy or executive order. Duh.

  • Greg Lamon

    Chapman U is not the center of the universe and if the Supervisors are interested in identifying what issues they should and should not attempt to deal with they should find someone besides Chapman U to wade in and give them some thoughts and recommendations. For instance, where is SCAG on this issue? However, the reality is that a group of term-limited politicians always looking for the next office to run for is not a group that can effectively deal with such a long term multi-jurisdictional challenge.