Land. The final frontier.
You can forever debate solutions for the housing affordability challenges in and around Southern California. Yet there is one nagging issue that cannot easily be cured.
Where to put the housing we need?
You know the old real estate cliché: they’re not creating any more land. And prices of land in and around Orange County are surging again.
That’s a key reason why prices of new homes continue to skyrocket. For a typical single-family home, land is roughly half the cost a builder encounters in a construction project.
Orange County land is particularly pricey, according to statistics from land tracker Market InSite Real Estate Advisors:
The price of a ready-to-build-on lot in Orange County averaged $575,000 last year – up 51 percent from five years earlier as the recession was ending.
In contrast to Orange County lot prices last year, Los Angeles County averaged $157,000; Western Riverside County, $143,000; Eastern Riverside County, $175,000 and San Bernardino, $180,000.
Orange-County’s land challenges are in some ways unique. The amount of developable land remaining is very limited, barring some dramatic change in how the community thinks about its vast open spaces.
And Orange County’s remaining buildable land is primarily owned by a handful of major developers. That’s the key reason why Orange County land values did not plummet during the recession as they did in nearby, much more densely populated regions.
Orange County lot prices were essentially flat from 2004 to 2009, according to Market InSite. Elsewhere? Los Angeles County was down 53 percent; Western Riverside County, down 54 percent; Eastern Riverside County, down 37 percent; and San Bernardino, down 44 percent.
Limited and expensive land makes it unlikely that new housing could make a meaningful dent in Orange County’s high living costs.
Over the last five years, the median selling price of a newly built Orange County home rose 59 percent to $798,000 in 2014, according to CoreLogic. That’s roughly one-third higher than the county’s overall median sales price of $583,000 last year.
Pricey land and the resulting steep cost of roofs over people’s heads will alter Orange County’s economic and social fabric without a major rethinking of housing policy.
The pocketbook pressure of costly living will force out a chunk of working-class people and young families – either to faraway communities in California or out-of-state. In their place will come households with high income jobs, either from other states or overseas. Conversely, those with modest household incomes who remain in the county will likely congregate in dense, congested urban settings.
“I don’t think Joe Public understands how supply-constrained we are going forward,” says Bob McFarland, managing director of Market InSite.
It’s unlikely we’ll see parks or other open spaces getting torn up for new housing. Currently, there doesn’t seem to be much support for high-density development, which would bring more housing per acre so developers could better overcome the high cost of land and construct profitably.
Of course, denser populations do have costs, too. For example, where do these people park? What about traffic congestion? Where will they shop or be entertained?
That’s why too many people – and the policy makers they vote for – like the “NIMBY” status quo housing policies. Some folks believe that no-growth logic keeps communities stable and real estate values high.
One land-supply answer, already quietly playing out, is the so-called “in-fill” project. That’s housing built on small sites in already-developed neighborhoods. Typically, the construction is on land previously used by a shuttered business or institution.
This is a hot segment of the region’s building market. It appeals to older cities that want new housing. House shoppers like relatively affordable housing in established communities where commutes are minimized. And it pencils profitably for builders.
“It’s built-in demand. Population and jobs are there. The services are already there,” McFarland said. “You have to go out of your way to mess it up.”
In-fill will never solve the region’s housing shortage. And more low-density planned communities – the classic cul-de-sac living – typically just meets the need of households with children.
Young working adults and our rapidly growing older population need denser housing for cost and convenience. The challenge comes in crafting such projects to meet tricky economic and societal hurdles – and secure bureaucratic approval.
“There’s certainly a need for innovation,” McFarland says. “Or our kids will never be able to live here.”
Read the article: http://www.ocregister.com/articles/county-659515-land-housing.html