Housing construction is on the rise in California, but it’s still not enough

A new-home community in Anaheim last year. Construction is on the upswing in California, though it still trails the rate of population growth.
(Glenn Koenig / Los Angeles Times )

Housing construction jumped last year across California, adding new supply in a state grappling with a persistent housing shortage, according to data released Monday.

The state’s housing stock increased by 88,562 units, while the population rose by 334,578 residents — or one new home for every 3.78 new residents, data from the Department of Finance showed.

Developers are now adding homes, relative to population growth, at a far higher pace than in recent years. But it’s still below what experts believe would be enough to keep up with California’s growing population, which topped 39.5 million last year.

Many economists and academics point to the lack of new housing construction as the chief reason that home prices and rents have grown far faster in California in recent decades than the nation as a whole.

Economists say that if housing costs are to be kept in check, developers should build at a rate roughly in line with average household size, which as of Jan. 1 was about three people in California. To hit that rate, the state would have needed to add about 23,400 more homes than it did last year.

Still, though California’s population grew faster than housing supply last year, the rate of construction has improved as builders take advantage of the economic recovery.

For example, in 2015, developers added one new housing unit for every 4.05 new residents. In 2011, following the Great Recession that decimated the construction industry, developers built just one new housing unit for every 9.67 new residents.

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Southern California

In Los Angeles and Orange counties, the pace of construction was better than the state as a whole and even outpaced population growth — at least last year.

Los Angeles County added one housing unit for every 2.52 new residents. In Orange County that rate was 2.79. Both of those rates were below the average household size in the counties, which is just a tick above three people per household.

But given the historic low rates of construction, housing experts say the two coastal counties need to build far more to keep rents and home prices in check.

Since 2010, Los Angeles County has added one new housing unit for every 4.99 new residents, while Orange County added a unit for every 5.26 new residents.

As of February, home prices across the two counties are up 5.11% from a year earlier, according to the Case-Shiller index. Compared with February 2010, prices rose nearly 50%.

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