Home Building Recovery Pegged to Jobs, Pro-Business Reforms
Despite signs that the real estate market is improving, the California home building industry won’t recover fully until the business climate grows stronger and more houses are built, an industry expert said Thursday.
An economic recovery, pro-business reforms and new jobs are needed to push down home prices and get more buyers into the market, Bruce Smith, president of the California Building Industry Assn., said at the Pacific Coast Builders trade show here.
But those changes won’t happen until some environmental laws and other regulations are eased, Smith said in a press conference.
“We are coming back, but we are coming back relatively slowly as compared to the rest of the country,” he said.
California had a $31-billion housing construction industry in 1989, but by last year the industry had slumped to $13 billion.
Even with an economic recovery, Smith said, a looming shortfall in new home construction could mean higher prices in the future.
New home construction has not kept pace with the state’s housing needs. The state needs 250,000 to 300,000 new homes built each year to keep up with demand, according to figures from the California Department of Housing and Community Development.
“In 1989, we were close, at 238,000 units, but by 1993, production had dropped to 84,000 units--meeting less than a third of California’s housing needs,” Smith said.
He predicted that 100,000 new homes will be built in California this year and 140,000 next year--still not enough to keep pace with the state’s changing demographics and housing demand.
“When housing is in short supply and more costly than in other states, it takes away our competitive edge,” said Robert Rivinius, chief executive of the 5,000-member trade group.
To spark a housing boom and economic recovery, politicians must review state and federal environmental laws to reduce onerous and costly provisions, Smith said.
In addition, litigation costs are growing and are being passed on to consumers in higher home prices, he said. That’s because laws designed to protect citizens from shoddy construction and housing defects are being abused, he said.
An estimated 8,000 home builders, developers and suppliers were gathered for the annual conference.
Housing Permit Values Decline
Housing permit activity in Southern California has dropped drastically since 1989, although Orange County saw a slight upswing in 1993. Value of residential building permits issued, by county, including alterations and additions, in thousands (not adjusted for inflation):
Year Orange Los Angeles Riverside San Bernardino Ventura 1989 $2,175,452 $6,442,429 $2,796,280 $2,008,621 $661,846 1990 1,392,217 4,155,565 1,735,075 1,474,982 370,968 1991 1,089,116 3,197,540 1,039,639 804,001 316,692 1992 1,032,196 2,600,386 1,010,542 836,875 309,073 1993 1,083,716 1,910,097 896,867 710,922 281,558
Source: Construction Industry Research Board
