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.