Housing Crunch Could Slow Area Economy
Is Southern California’s booming apartment industry--where rents are rising rapidly and vacancies sinking to historic lows--getting too hot?
That was the common question Monday at an apartment industry conference where speakers raised concerns about a growing housing shortage that could choke off economic growth and trigger a backlash in the form of rent control.
“The single greatest threat to the boom’s continuation is the boom itself,” said real estate broker David L. Casper, a panelist at the Real Estate Conference Group’s Apartment Outlook 2000. “The housing crisis will continue to worsen next year.”
The statistics and forecast presented at the Beverly Hills conference spoke of a booming economy and worsening housing shortage. During the second quarter of 2000, the vacancy rate in Los Angeles County’s largest apartment complexes had fallen to below 3% while the average monthly rent approached $1,100, according to a report by the real estate firm Grubb & Ellis.
Meanwhile, new apartment construction remained extremely scarce. In Los Angeles County, less than 3,000 apartments will be completed this year despite the addition of 86,000 jobs, according to Marcus & Millichap, a real estate investment firm that specializes in apartments.
The region and state’s projected population growth “will put significant pressure on California housing markets,” said Kenneth H. Townsend, managing partner of E&Y; Kenneth Leventhal’s Real Estate Group.
Industry observers say the housing being built in downtown Los Angeles and other so-called infill areas will help but still fall far short of meeting projected demand. In addition, many new apartments are targeted at affluent professionals. Few private builders are creating affordable housing for low-wage workers and large families.
The high rent of new multiunit housing “makes it practically inaccessible to the masses,” said Casper, a broker at Grubb & Ellis.
The apartment market will get only tighter as the economy continues to generate new jobs and a large new generation of renters--the children of the baby boom--start looking for housing of their own.
“Can we produce some [housing] that these people can afford?” asked housing research specialist Jeffrey S. Meyers.
