Study Warns of Crisis in Housing Affordability

Government, nonprofit groups and big business must join forces to keep Orange County’s housing affordability problem--split largely along geographic lines--from becoming a crisis, a new study released Thursday said.

The report from the Enterprise Foundation, a Maryland-based low-income housing group, recommended forming a public-private entity known as the Orange County Partnership for Housing Initiatives to address the problem.

Merrill Lynch & Co., which commissioned the study, pledged $1 million to fund the partnership, which would be composed of government, corporate leaders, builders, community groups, lenders, academic institutions, social service agencies and even clergy.

That money comes from a $77-million, three-year pilot project Merrill established two years ago to fund housing, small businesses and economic development in Los Angeles and Orange counties for underserved communities.

The study was released one day after two Merrill employees who were key figures in the Orange County bankruptcy--the largest municipal debacle in U.S. history--admitted they knew little about municipal finance while selling billions of risky securities to the county.

But the report also comes as median housing prices have eclipsed the boom of a decade ago. Prices have jumped by staggering amounts this year. Twice, the median price has jumped by $10,000 in a single month, pushing the price of an Orange County home to an all-time high of $236,000 in June.

Higher prices, the study noted, mean employers have a harder time attracting new employees, and that workers must commute longer distances to jobs, creating more smog, congestion and a lower quality of life for all.

Some experts were skeptical about the degree of the affordability problem.

While more lower-priced housing is needed in Orange County, there is less concern than a decade ago, when escalating prices made homes less affordable for more people, said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University.

“If this report was produced in the late 1980s, I would have had more sympathy than I do now because the affordability is so high,” he said.

In Orange County, the study found, the rich are concentrated largely behind gated walls in the south while lower-income households tend to be clumped in older cities in the north.

Defining affordable as spending 30% of income on rent, the study found that the chance of renting or buying a home is rare for low-wage earners.

A family of two minimum-wage earners, for example, can afford only $575 in monthly housing costs under that formula, but average rents in the North County are nearly $800, and more than $1,000 in South County.

An Anaheim teacher making $32,000 a year can afford about $800 per month; a $40,000-a-year police officer, $1,000 a month. That’s only enough to qualify for a $125,000 home, according to the study.

“I was struck by the inability of middle-class professionals to buy a home in Orange County,” said Stan Oftelie, chief executive of the Orange County Business Council, a group representing more than 1,000 companies.

He added that the biggest issue among businesses is finding qualified employees, which partly stems from the shortage of lower-priced housing.

In all, the study said, an alarming 60% of the county’s households cannot afford to buy a median-priced home. There are 120,000 households--roughly 15% of the county’s total--that earn less than $20,000 a year.

In affluent Mission Viejo, almost half of the households contained only one or two people. But in Santa Ana, one out of four homes has six people or more, the study found. There were entire neighborhoods in the county’s northern cities where one-bedroom units contained eight people.

“Doubling up in the most affordable neighborhoods will continue to be one of the few viable options,” the report said.

Consequently, as most of the county’s population growth is projected to be in the north, but with more homes--and more expensive ones--built in the south, “the mismatch could lead to higher levels of neighborhood decline,” the report said.

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Affordability Crunch

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Median Percent of households City rent that can afford median rent* North County Anaheim $712 72 Buena Park 727 68 Costa Mesa 810 60 Fullerton 706 70 Garden Grove 745 65 Huntington Beach 860 69 Orange 766 71 Santa Ana 736 59 Westminster 736 66 South County Irvine $925 71 Lake Forest 892 76 Laguna Hills 919 53 Laguna Niguel 901 78 Mission Viejo 969 75 Newport Beach 967 70 Tustin 755 72

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* Maximum rent calculated at 30% of monthly household income

Source: Enterprise Foundation