Let's Debate: Solving the Expensive Housing Problem in Job-Rich Orange County

By: Nicholas Ventrone, Community Engagement Director

One of the main reasons why the infamous 91 freeway between the Inland Empire and Orange County is so saturated in cars and HOV's is the simple fact that Orange County has job-rich areas where local quality housing is generally unaffordable for its workers. That includes small rental units, condos, and town homes. Many workers are then forced to live in the Inland Empire where such desirable homes are more affordable, but far from the job. Some workers commute clear out from regions like Lake Elsinore and even Temecula each day to job-rich hubs on the other side of the 91. Even with the carpool, vanpool, 91 Express Lanes, peak-hour Metrolink services and commuter bus options available through the corridor, total commute times can last in excess of over 1-2 hours door-to-door.

How can we cut those times down to under 30-45 minutes each way or less? First, let's look at the  problem.

How Expensive is Orange County Housing?

According to the 2014 Community Indicators report released by the County of Orange, "Affordable" housing is defined as spending 30% or less of one's income toward rent.

According to the report, the 2014 median rent in OC was:
  • One Bedroom, $1,312 monthly
  • Two Bedrooms, $1,644 monthly
  • Three Bedrooms, $2,300 monthly

The report concludes that one looking to rent just a single bedroom unit must make a whopping $25.23 per hour to meet the 30% threshold. To compare, Riverside and San Bernardino Counties clocked in at just under $17.00 per hour. San Diego was $19.85 with LA being $20.83. As you can see, the Inland Empire is the place to live if you want to live somewhere decent and not have to dedicate a majority of your income into housing. Not surprisingly, the highest livable housing wage was San Francisco where a worker must make at least $29.83 per hour to afford rent for a single bedroom unit in order to purpose at least 70% of his/her income to matters unrelated to housing.

More facts according to the report: A minimum-wage worker must work an astounding 126 hours per week to afford to budget 30% of earnings toward a one-bedroom unit at the fair market rent rate in Orange County. A household with one minimum wage worker can afford only $416 per month on rent if he/she allocated 30% of income. Find me rooms for rent or roommate units in the marketplace for each and every minimum wage worker in Orange County at $416 per month.

Woodbridge It's safe to say that many hardworking individuals budget far more than 30% of their incomes toward their housing obligations. Many simply have to do that in order to live. But by doing so, that leads to increased economic insecurity and paycheck-to-paycheck living as a larger proportion of their earnings must go towards housing expenses not including the utility bills.

To be fair, the median housing wage for a single bedroom unit in the Inland Empire is also on the high side at $17.00 per hour, but much more affordable than other parts of Southern California. That's why so many people elect to live in the Inland Empire and commute to jobs outside of the region.

Economics 101: Housing Supply and Demand

It's quite clear that housing is unaffordable even for many full-time workers in Orange County and a shortage of supply is primarily to blame. Even a high school 12th grader knows through economics that if supplies are kept short when demand rises, prices go through the roof.

That's why OC housing is expensive and such units are often shared, overcrowded or stressful. High prices prevents renters from saving up money and building up credit toward a down payment on a home purchase, which by the way, is another problem in OC. Because demands are so high and supplies so low, a household must make at least $82,000 per year in order to afford to pay the mortgage bill each month according to the report. Even though housing supplies are growing rapidly in south Irvine and east of San Juan Capistrano, those new developments have still failed to keep up with Orange County demands. In fact, despite these new developments, median housing prices went up $100,000 between 2012 and 2013 and Orange County’s median price is $240,000 more than the state's median price. That's because Orange County job growth is outpacing housing once again.

Keeping housing supplies low in a job-rich area which drives up prices keeps hard-working people in a state of fiscal poverty for those who attempt to live close to their jobs while driving up social poverty for those who elect to live farther out in more affordable regions but must spend hours each day commuting, time that can be better spent on more important things.

LA Fitness Signature club Irvine CA photo D Ramey Logan Can OC build its way out of a shortage?

How can we solve this problem specifically? Although the simple answer is increasing supplies, Orange County land is pretty much developed to its limits. What makes this issue even more challenging is the fact that many Orange County job sites are close to the beach. That further raises demands. This means that such growth and development issues have to be solved at the local level which would require public support of existing residents.

Getting to the bottom of forming a solid fact-based solution will require plenty of public outreach and robust debate among existing residents. Bottom line is job growth is outnumbering housing. That has to be balanced to counter the 1-2 hour commute in order to live in a desirable home. Here is what I submit:
  • The central goal should be to balance the job-to-housing ratio countywide with an overall goal to keep total commute times to under 30-45 minutes for workers and eliminate the requirement for long distance commuting which can span well over 1-2 hours.
  • Driving out jobs from Orange County to balance the scales is not an option.
  • The County of Orange and each affected city should put together a comprehensive transparent general master plan and updated land use zoning proposal to incentivize a balanced job-to-housing ratio for the entire county while protecting wildlife corridors and public open spaces. Officials should submit it to the public and host public open houses and town hall meetings to gather comments on future developments prior to adoption. Valid concerns from existing residents like local traffic congestion and crime must be integrated into the plan. Legit issues brought up by the public must not be ignored or stonewalled.
  • Officials need to be held accountable of carrying out the plan quickly. The public hearing period can last 4-6 months with permits issued thereafter. The increased supplies and competition would make housing affordable within the first 12-18 months.
  • Developers pay for or build all necessary infrastructure and transit upgrades to offset public concerns, especially traffic congestion.
  • In dense employment areas such as the South Coast Plaza area and the Irvine Business Complex, land use policies should support sufficient urban housing supply targeted to workers. Developers should also pay for start-up costs for expanded Bravo! Rapid service as a quick and speedy option to ferry the workers through these dense areas, connecting Metrolink stations and park & ride lots.
  • For Orange County's lighter density commercial corridors that link to the job hubs, jurisdictions should zone areas as specific plans so that it can support in-fill suburban condos and apartments all without over-densifying the region. These units also need to be family friendly with large interior living spaces and large common gathering areas. Major commercial streets can be found all over the county. Such 2-4 story housing and commons should be built at or near existing shopping centers.
  • Rules need to be in place to prevent artificial speculation of the housing market in the high demand areas. That means buyers cannot buy and buy and buy inventory and do nothing simply to keep prices high. Somebody has to be living there. To be fair, all legit investments must be maintained. That is, landlords desiring to rent out the unit to tenants or investors wanting to improve and resell the property within a set timeframe would still have the freedom to do so.
  • Local officials need to hold the state accountable in reforming CEQA law so that NIMBY obstructionists cannot sue to block the legit infill housing plan in the name of the environment. How does balancing the job-to-housing ratio negate an ecosystem?

In addition, I've mentioned last week that driving out crime and solving social issues in troubled neighborhoods would also incentivize better investments and expand housing options.While this option may have a insignificant impact in Orange County, it would certainly make a difference in neighboring Los Angeles County.

The truth is Orange County officials cannot ignore the housing shortage issue for much longer. If job growth continues to outpace housing for its new workers in Orange County, traffic demands from the outer regions will worsen because such workers will be forced to commute long distances to/from work every day. That drives down worker productivity and increases demands for better high-paying jobs in the Inland Empire, which brings me to my next point...

What about the Inland Empire cities and their economies? What if its residents leave town to live closer to work?

I haven't forgotten about that point and I'll go more in detail next week. Balancing the job-to-housing ratio is a two-way process. In order to compete and keep existing bedroom communities strong, Inland Empire officials must continue to incentivize the marketplace to develop more high-paying jobs closer to home. Small business, medical and logistics is growing, but we still have a way to go. Proper oversight would ensure the scales are balanced with a robust job market and plenty of desirable housing options for the hardworking public anywhere in Southern California. More on that next week.

But whether it be chaotic social conditions in the urban centers or obstructing housing supply at the affluent job hubs, officials need to put forth executable solutions for its general land use plans to finally balance the job-to-housing ratio both here at home and in Orange County. It will require transparency and public outreach to do it right.