Unaffordable housing undercuts Orange County progress, business report says – Orange County Register

A shortage of affordable housing is undercutting gains Orange County has made in recent years across a broad spectrum of social and economic goals, a new business report said Tuesday, Nov. 7.

While the county saw academic improvement, rising employment and incomes, a falling poverty rate and an uptick in gross economic output, stubbornly high home prices and rent are driving people away, according to the Orange County Business Council’s new “Community Indicators Report.”

More than 30,000 Orange County residents fled the jurisdiction in 2022 in search of affordable housing.

“Housing is that one big controlling factor that I believe is going to have some impact on our ability to grow,” said Jeff Ball, business council chief executive. “We need supply. It is clearly a supply issue.”

The solution is to eliminate longstanding, intransigent barriers to development and build more housing, the report said. Local restrictions like parking requirements and developer fees, environmental reviews and political opposition to new housing must ease to get housing costs more in line with incomes.

The high cost of shelter is Orange County’s “biggest Achilles heel,” said Wallace Walrod, the business council’s chief economic adviser. “And (it) bleeds through to the population. Some people are moving out of Orange County because they can’t afford housing here.”

Calling itself the “voice of business,” the council is Orange County’s equivalent of a chamber of commerce. Its annual “Community Indicators Report” seeks to “shape informed responses” to county problems by highlighting key areas of improvement and decline.

The report reads like a giant Wikipedia page, with facts ranging from the county’s total land area (799 square miles) to high school dropout rates (4%) and per capita water consumption (114 gallons per day).

This year’s report includes a special section on housing, taking the position that increased homebuilding is the solution to high housing costs.

But barriers to building hold new development in check, the report said.

They include “well-intentioned” regulations and zoning restrictions; the “time- and resource-consuming” California Environmental Quality Act, or CEQA; resistance to state-mandated homebuilding goals; and neighborhood opposition to new development, or “NIMBYism.”

The report adds that economic factors like high interest rates and rising construction costs also contribute to housing shortages. And it denounces rent control because it discourages rental development.

Recent numbers reflect the sluggishness of homebuilding.

While the state determined that Orange County needs almost 23,000 new homes annually by 2030, city and county governments issued just 5,938 building permits in 2022, according to the St. Louis Fed. The county averaged just under 8,800 permits a year for the past decade.

Meanwhile, only 12% of Orange County households could afford to buy a median-priced house during the first half of 2023, according to the California Association of Realtors. That’s a mere 2 percentage points above the county’s all-time low affordability rate of 10%.

The business council’s proposed solutions are not new. State, academic and industry reports have highlighted those barriers to building for at least a decade.

“The state Legislature has been focused on this for some time. Nothing seems to be working,” Ball conceded.

The business council emphasized the need for CEQA reform.

While environmental groups maintain that weakening CEQA threatens the quality of life, reformists argue it’s been abused, blocking construction for reasons that have nothing to do with the environment.

New laws allow affordable housing and other developments to fast-track the CEQA process, Ball noted.

“We acknowledged the fact that it’s a problem. But rather than choose to address the overall problem, we find targeted, narrow gaps where we choose to address it,” Ball said. “Until we get to more of a broader reform, it’s going to continue to be an issue on our supply side.”

On the bright side, the report cited a wide array of indicators showing that Orange County remains a prosperous, low-crime economic powerhouse.

“Our economy is leading Southern California in the recovery,” Walrod said. Rising economic output “shows continuing recovery from COVID.”

Highlights include:

— The Orange County poverty rate decreased to 9.9%, with 10.8% of the county’s children living in poverty, the report said. That’s down from from a poverty rate of 10.1% the year before, with 12.9% of children living in poverty.

— Employment increased by 47,500 nonfarm jobs in the year ending in September, state data show. The county’s unemployment rate also increased to 3.7%, but that’s because more people are looking for jobs.

— Orange County’s gross regional product (the county-level equivalent of the gross domestic product) increased to $284 billion in 2022 from $275 billion in 2021, a 3% gain.

The county’s economic output is greater than in 25 states, including Louisiana, Alabama, and Kentucky, the report said.

— On the other hand, students’ reading and math scores have yet to fully return to pre-pandemic levels.

— Mental health challenges and substance abuse continue to plague local communities. For example, opioid-related deaths rose to 23 per 100,000 residents in 2021, almost triple the 2019 rate of 8 deaths per 100,000.