California Homes Are the Nation's Least Affordable, New Study Finds; CBIA Urges Lawmakers to Heed Governor's Calls for Eliminating Hurdles to Affordable Housing.

SACRAMENTO, Calif. -- California's housing affordability crisis continues to deepen, as the state is now home to the 11 least-affordable housing markets in the entire nation, according to a report released today.

Robert Rivinius, chief executive officer of the California Building Industry Association, said the results of the study make it even more urgent for the Legislature to act this year to enact needed reforms to allow housing production to finally meet the demand for new homes and apartments.

"Just one day after Governor Schwarzenegger told the Legislature in his State of the State address that we need reforms to make more homes and apartments available to California families, this new report is a fresh reminder of how serious the crisis is and how it's getting worse," Rivinius said.

"It used to be that California dominated the 'bottom 10' list of least-affordable metropolitan areas. Now we are the bottom 10 - and then some. What's worse is that even in California's most affordable market - Tulare County - less than half of the county's residents can afford a median-priced home.

"What more proof does the Legislature need to finally pass reform laws to make it easier and less-costly to build the homes our working families need?"

The newly revised National Association of Home Builders/Wells Fargo Housing Opportunity Index found that during the third quarter of 2004, 19 of the bottom 25 housing markets nationally were in California. In fact, 25 of the 43 least affordable markets are found in California.

The least-affordable market out of 162 metropolitan areas nationwide was Santa Barbara County, where a family earning the median income could afford only 4.9 percent of area homes. The next four least-affordable areas were San Diego County, Monterey County, Los Angeles County, and Orange County. (A PDF file listing all California metro areas is available in the Newsroom section of the CBIA Web site, www.cbia.org.)

In comparison, the NAHB survey found that in the nation's most affordable market, Lima, Ohio, 90.5 percent of homes sold during the third quarter of 2004 were affordable to families earning the area's median income. Among larger metro areas nationwide, the most affordable were Grand Rapids, Mich., where 86 percent of the homes were considered affordable, and St. Louis, Mo., where the affordability rate was 83.7 percent.

"In cities around the country where housing production keeps up with demand, affordability is far greater than it is in California, where a web of restrictions, regulatory hurdles, and the highest building fees in the country have caused far too few homes to be built and driven up prices for those that have been built," Rivinius said. "As the Governor said so eloquently, the Legislature must act to solve this crisis."

On Wednesday, the Governor told lawmakers that reforms to solve the housing crisis are a top State priority:

"We need roads and we need affordable housing. The median price of a home in California is $460,000. That is too much. A home of your own is part of the American Dream. I believe in such dreams, so I will propose legislation that eliminates regulatory and legal hurdles that delay construction and increase the costs of new housing. I want a California where people spend less time sitting on the freeway and more time in the homes that they own," the Governor said.

Besides removing the barriers that the Governor referred to, CBIA supports a number of other measures to make the American Dream possible for more Californians, including making sure that there's an adequate supply of land to build well-planned housing of all kinds - high-density condominiums as well as single-family homes, especially in the state's job centers.

The California Building Industry Association is a statewide trade association representing more than 6,000 businesses - homebuilders, remodelers, subcontractors, architects, engineers, designers, and other industry professionals. A recent study determined that homebuilding generates approximately $60 billion a year to the California economy and creates an estimated 526,000 jobs statewide.

The Housing Opportunity Index calculates the share of homes sold in an area that would have been affordable to a family earning the median income. For income, NAHB uses the annual median family income estimates for metropolitan areas published by the Department of Housing and Urban Development. NAHB assumes that a family can afford to spend 28 percent of its gross income on housing, a conventional assumption in the lending industry. That share of median income is then divided by 12 to arrive at a monthly figure. On the cost side, the monthly principal and interest is based on a 30-year fixed-rate mortgage with a 10 percent down payment. The interest rate is a weighted average of fixed and adjustable rates during that quarter. The cost also includes estimated property taxes and property insurance.