Elias: California’s increased housing units haven’t meant lower rents

California’s top officials and the bureaucrats who back them up persist in telling us there’s a massive housing shortage in this state, amounting to something between 1.8 million and 3 million units (over the last five years, they’ve used varying figures within that range).

This means the state – with 14.6 million existing units as of mid-2022 – is about 10% short. If this shortage is real and not merely a figment of the imagination of officials at the state’s Housing and Community Development (HCD) Department, few vacancy signs should be on the new apartment and condominium buildings that have proliferated around the state since 2021.

There are many, though. It’s hard to find a 2015-or-later vintage market-rate building without huge signs advertising vacancies. Now comes a study that begins to show why: Even in the midst of the building boom, not enough units are going up to satisfy the shortage, while prices and rents remain too high for most of those who would like to move to new quarters, even for many so-called affordable units.

With rents around $2,700 per month for two-bedroom apartments in the state’s largest cities, that’s easy to understand. That also doesn’t even include the state’s 170,000-odd homeless people, who can barely afford any rent at all, thus resorting to tents where publicly owned shelter is not available.

A look at some of the state’s highest-demand housing areas provides details of what’s going on. The aforementioned study comes from the RentCafe website, which reveals that construction in California’s densest ZIP codes does not match new development in other places like Dallas and Washington, D.C.

The 92101 ZIP code running along the coastline of San Diego Bay features fabulous views, outstanding restaurants and 5,345 housing units built between 2017 and 2022, the latest building boom era figures available. That was a 46% increase in available units.

That large percentage of increase may have brought some price relief but did not: Median apartment rent there is $3,048 per month, or more than $36,000 per year. How many Californians can afford that? What’s more, the increase in 92101 housing ranked as only the eighth fastest-growing ZIP code in America but No. 1 in California.

ZIP codes in Dallas and D.C. far outstripped this one, with the 20020 ZIP code near the White House adding 10,098 units in the same time, or an increase of 73%. Even with the big new supply, rents there still average about $3,000 a month, not much different from those on San Diego’s bay shore. These figures go a long way toward making the old rule that a greater supply will bring lower rents obsolete.

New supplies also have not reduced rents in San Francisco’s 94103, California’s second fastest-growing ZIP code in new housing with 4,379 new units and a 66% housing supply increase since 2017. The ZIP code includes the Civic Center, around which apartment rents still average about $3,300, even though prices have dropped about 7% over the last year in the overall San Francisco Bay Area.

It all suggests a new differential in housing between urban, suburban and rural areas. Rents of $1,000 or less are not very difficult to find in the lowest-density ZIP codes among California’s 1,763 postal areas. In the densest areas, though, places with high land prices that are most likely to attract builders seeking high returns on their investment, prices are staying up while supply rises.

This suggests a determination among developers who own the new buildings to keep prices up even when demand is low, in order to avoid rent controls that could keep prices and profits low for decades if owners allowed rents to drop now. It also suggests that housing shortage figures bandied about by HCD and its patron politicians may be vastly inflated products of their imagination.

One thing is for sure: Even though density advocates in the California Legislature, led by state Sen. Scott Wiener, D-San Francisco, and rubber-stamping Gov. Gavin Newsom, remain convinced high supplies equal lower rents even when reality says that’s incorrect. Perhaps the state should instead emphasize single-family housing and less dense areas where history shows Californians actually want to live.

Email Thomas Elias at tdelias@aol.com, and read more of his columns online at californiafocus.net.