If there’s one thing most real estate experts and developers agree on, it’s this: California is in the midst of an affordable housing crisis.
“Up and down the State of California, there is a really serious conversation happening around affordability,” Mayor Robert Garcia told the Business Journal. “We need housing at every level. It’s not just about affordable units; it is also about market rate homes and single-family homes.”
The California Association of Realtors (CAR) estimates that, as of the third quarter of 2017, only 28% of California residents could afford a median-priced home in the state, which goes for $555,680. Just one year ago, 31% of residents could afford a median-priced home.
An annual income of $112,100 is necessary to make monthly mortgage payments at a 4.16% interest rate for a median priced home, according to CAR. The association’s president, local realtor Geoff McIntosh, estimated that the median price of a single-family home in Long Beach is significantly higher than the state average, at $620,000 as of September.
This chart, pulled from a city report on rental rates, illustrates the change in rental rates by zip code across all bedroom configurations over the last 10 years. (City of Long Beach graphic)
As of 2016, the median household income in Long Beach was $54,769, according to a report by the Southern California Association of Governments (SCAG). The home ownership rate in the city is 41.4%. The majority of the city’s residents – 58.6% – are renters. Long Beach home ownership numbers are far below the state and the nation. According to the U.S. Census Bureau, Calfornia’s home ownership rate is 53.5% and for the U.S. it’s 63.9%.
To get a better grasp on the affordability of rental housing, the Long Beach City Council asked city staff in February to conduct research on rental rates and their changes within the city over time and across zip codes. In late September, Long Beach Development Services Director Amy Bodek and Director of Economic Development John Keisler issued a memorandum summarizing the findings of this research.
The Long Beach Economic and Property Development Department entered into a contract with CoStar Group, Inc., a well-known firm commonly used by real estate brokers to gather data about sales and rental prices of residential and commercial properties. Staff used information collected by CoStar to compile their report.
CoStar’s database includes comprehensive rental data for 20% of all multi-family properties and 43% of all multi-family units citywide. City staff analyzed data dating back to 2007 to provide a 10-year perspective on how rental rates have changed by zip code.
Citywide, rental rates for all bedroom configurations have increased by 22.1% in the past 10 years. In the past year, they increased by 4.1%. The zip code with the highest 10-year and one-year appreciation rates was 90808, which is located in the largely suburban area of East Long Beach. The second highest rate of increase was in 90802, which represents the majority of Downtown Long Beach. This is where much of the construction of new, Class A multi-family buildings has taken place within that time frame.
Rental rate increases of individual zip codes in the past year range from 2% to 5.6%. The five zip codes with the most rental units – 90802, 90804, 90805, 90806 and 90815 – experienced rate increases of 3.8% to 5.2%. In one zip code, 90810, rental rates decreased due to acquisition and renewal of affordable housing contracts at two housing complexes, according to the city report.
The vacancy rate for apartment buildings, which reflects how many units are empty and available to rent, is right on the edge of what SCAG considers healthy for cities in its region. The vacancy rate of Long Beach apartments is 4.6%, and SCAG considers a rate of 4.5% to be healthy.
As the city staff report points out, a healthy vacancy rate is necessary to “moderate the cost of housing, allow sufficient choice for residents and provide an incentive for upkeep and repair.” As vacancy rates decrease, “competition for units increases, causing housing prices and rental rates to rise,” the report states.
“The City’s analysis has demonstrated that Long Beach needs a variety of housing choices, from single-family homes and condos to rental units for large families, seniors, people with disabilities and other populations,” Bodek told the Business Journal via e-mail. “Since the City cannot manufacture new land, it must balance the need for this type of housing with other land use needs, including job growth, economic development, and the changing retail environment.”
In preparing a report required by the state that assesses “fair housing” in Long Beach, city staff has concluded that 16.2% of renters and 6.1% of homeowners experience overcrowding, according to Bodek.
SCAG determines the city’s housing needs, which the city must plan for in the Housing Element of its General Plan. “SCAG has determined that the city’s regional housing needs are 7,048 units through the year 2021,” Bodek said. “The production of these units is allocated across all income levels, including affordable, market and above market rates.”
The breakdown of Long Beach housing needs during the period of 2013 to 2021 is as follows:
• Very low/low income – 2,839 units
• Moderate income – 1,170 units
• Market rate – 3,039 units
Since 2014, Long Beach’s cumulative total of housings starts (data which indicates the beginning of construction) amounts to 1,125 units, according to Bodek. The city would have needed to generate 2,643 housing starts by now to have kept in line with SCAG’s annual goal of 881 housing unit starts.
“Housing production has not kept pace with population changes and preferences of renters, nor has it allowed a reduction in overcrowding to occur. These are some of the factors that contribute to rising rents,” Bodek explained.
“You’re seeing some cities up north and in the Sacramento region grow dramatically because they are building a lot more housing, because they have hundreds and hundreds of thousands of acres to build on. That’s not Long Beach,” Garcia said. “We are a built-out community. And so, we will do what we can, but we are not going to have a lot of population growth outside of the downtown area.”
Garcia noted that Long Beach needs more single-family homes, and that two new communities are being built to accommodate those needs. However, he said that most of the city does not have room for such developments.
“We are going to build some more housing in the downtown area and certainly along the Metro where there is some opportunity to build some housing for seniors and young professionals and families. But the rest of the city is pretty much built out,” Garcia said. “I think most of the housing responsibility has got to be with other cities in the state that actually have room. And that’s not us.”
Long Beach Development Services recently finished a series of community meetings to get feedback on the proposed update to the Land Use Element of the General Plan. The element includes changes to allowed land uses and building heights in some areas in part to accommodate housing needs.
“The Land Use Element (LUE) is not a stand-alone document. It must balance housing and employment needs of the city to ensure that the city’s fiscal health remains strong in years to come. It must be internally consistent with the adopted Housing Element and the city’s adopted Economic Blueprint,” Bodek said. “It does not, however, control market decisions, so there is no guarantee that any development will occur anywhere in the city based on the adoption of the LUE. Rather, the LUE is meant to provide the guidance on where, when and what kind of development the city wants to encourage to meet its housing and economic development goals.”
Garcia has come out in opposition to some proposals in the LUE that would increase allowable building heights in East Long Beach suburban areas. He said that the city must be realistic about where new housing should be created. “There just isn’t room and it’s really not appropriate to dump and build a lot of housing in much of East Long Beach or the north, since these are residential, suburban communities. But we can and we will continue to build in the downtown. I think that’s where it’s appropriate.”
Garcia noted that, while there is “always more that can be done to address homelessness,” the city is invested in providing services and creating housing for the homeless. “We have one of the most comprehensive villages [aimed at eradicating homelessness] out in West Long Beach in the Villages at Cabrillo, and we’re actually expanding the housing opportunities there for homeless families and homeless veterans,” he said. “And we just built the Mental Health America site there on Long Beach Boulevard north of PCH, which is going to be great. So we will continue to do what we can. . . . But it’s just tough. As you know, the rental vacancy market is so tight. It’s tough across the State of California.”