Tuesday, October 27, 2015

Solving Southern California's Expensive Housing Crisis

If California wants to reduce vehicle miles traveled, the job-to-housing ratios and home affordability must be addressed through robust market competition.
Why does it cost so much to live near Downtown Los Angeles?

Transit Talking Points by: Nicholas Ventrone, Community Engagement Director

The Transit Coalition monitors the housing market simply because when one region becomes too expensive for its workers and their families, many people opt to buy elsewhere and commute in. That obstructs transportation mobility and the 91 freeway corridor between the Inland Empire and Orange County has been a prime example of that for over two decades. In contrast, when both the job-to-housing ratios and housing prices are in balance and violent crime is controlled, people will generally opt to live where they work. Look at the Coachella Valley and the rush hour conditions between there and the Inland Empire to the west. The balance and affordability there helps keep the I-10 corridor moving through the San Gorgonio Pass, even during peak commute times because people can live where they work in the south desert.

State politicians envision a reduction of vehicle miles traveled. But what is the fair way to address this? The short answer is not to over-regulate the private sector. It is to finally solve the state's expensive housing crisis.

Every now and then, I come across news articles that illustrate that an increase in home sales means increased property and land values. Thus, when more people stream into town, that could very well be an indicator of economic growth which is a valid argument. However, there is a very serious problem stemming from rapidly rising home prices in Southern California and the stats are hard proof.

If you've ever searched for ways to balance your family's budget, you know that financial experts suggest that about 30% of household income after taxes should go to housing-related expenses. Some professionals recommend that about 15% should go to transportation, 10% to healthcare, 10% to food, 10% to debt reduction or savings, 5% to utilities, and 20% to other items.

However, the truth is working salaries have generally not kept up with the rising home prices and rents which forces hard working Californians to spend well more than 30% of household income toward housing or commute very long distances which clogs our infrastructure and increases vehicle miles traveled.

Let's look at Irvine, a prime economic job center.

Have a good job in Orange County? Could you afford to live there too?

This master-planned city has a very robust employment hub on its western side dubbed the Irvine Business Complex. Jobs are plentiful and pay very well. For instance, people who are good at balancing financial budgets, organizing accounts, and managing purchase and sales orders (a.k.a. accountants) will find good and honest work in this portion of Orange County. According to the job portal site Indeed, a Senior Accountant salary is around $69,000 per year in Irvine. Sounds like a dream job for many.

Let's suppose a private firm in Irvine hired a guy named Tom to take hold of the company's accounting at the generous $69K salary. Tom is married with a stay-at-home wife and two children. He is the main provider of the house as the wife has to stay with the kids and cannot work. With the child tax credits, about $5,000 is taxed out from Tom's salary per year, leaving the net income around $64,000.

Could he afford to live where he worked by allocating 30% of his salary toward the house payments? Let's go ahead and see...

According to the housing web site Zillow, the median home value in Irvine is a whopping $733,100 with median rent at $3,000. Having a wife and two kids, Tom needs a 3 bedroom house.

A listing on Zillow has a 3-bedroom single family rental unit in the Deerfield subdivision listed for $2,985 per month. The house itself was built in the 1970's and is 1,906 square feet. Keep in mind that Deerfield is a master-planned neighborhood with a giant park that bisects the subdivision with multiple community pools, commons areas, schools, playgrounds, walking trails, and a community center. The vast open space and amenities can neutralize the small living space which would allow the family to move around enjoy the outdoors.

But the question is about affordability. The rent is $35,820 per year. That adds up to 56% of the net household income; almost double of what should be paid. Buying is out of the question. A similar property in Deerfield with four bedrooms at 2,100 square feet is listed at--ready?--$829,999 with an estimated $3,031 mortgage not including property taxes.

No wonder the 91 freeway corridor is so clogged. And its not just Deerfield.

There are traditional-sized tract homes all over Irvine and the surrounding areas selling for well over $1 million. People like Tom cannot afford to live anywhere near the Irvine Business Complex area and his salary is way too high to receive any form of government handouts. To be fair, prices are a little bit better west of Irvine in Santa Ana and Costa Mesa. There are some 3 bedroom condo units selling in the 300K's, but the living space is cramped. That's why the Inland Empire underwent urban sprawl for the last two decades which continue to jam the 91, I-15 and other east/west freeways.

Do you super-commute? Wait until you see this...

In the San Francisco Bay Area, the situation is worse. In fact, its housing prices are so bad that it is more affordable for a worker to live in Las Vegas and commute in daily into San Francisco by airplane.  I am not kidding. The Business Insider's numbers tell the truth. You want a new definition of super-commuting and urban sprawl, there it is. Sadly, if nothing is done to resolve the housing affordability crisis, expect these kinds of high prices to seep into the Inland Empire, commutes longer, and transportation networks jammed.

This whole story is beyond belief. The fact that the governments continue to fail to take action on this situation is unbelievable. Southern California has a massive freeway network, yet we still have some of the worst traffic. Every environmental organization that opposes urban sprawl should be demanding the state and local governments to take action.

So, what's being done about it? I've been hearing in the political arena that the government needs to dump more money into this situation through more Section 8 and subsidized housing and increasing the minimum wage. Although I do support safety-net housing in general and believe the minimum wage should be tied to inflation and set a point at around $10/hour that incentivizes mobile people to work instead of receiving welfare, that will not get to the bottom of this situation, period. In fact, The Press Enterprise opined that red-tape regulations mandating developers to set aside property to be sold below market value has made overall housing even less affordable.

I believe politicians and entrepreneurs well know the true answer and we the people must hold the power structure to account into taking action. And every environmental organization should back this.

Concept: Spacious Family-Friendly condo units stacked 20 stories high in a block within the Irvine Business Complex area with plenty of open space commons. Good competition like this all over Southern California could allow buyers to rent or purchase these huge family units for about $1,500 per month.
Note: Concept only. Not officially proposed.
The marketplace needs to be allowed to address the high housing demands, grow the infrastructure via in-fill development, and lower prices and improve quality through competition.

A high school 12th grader can tell you that if demands are high and supplies lacking, prices are going to go up. However, if there is robust competition between developers all around Southern California, the buyers' selection improves. Quality and selections go up including the incentive for entrepreneurs to look into improving manufactured housing technology to further speed up development and lower capital costs. China has already used pre-manufactured panels to erect full-size skyscrapers in mere days that can withstand powerful earthquakes.

The strong competitive market will control and reduce the high prices without government subsidies. A perfect example of such market competition is the robust options to travel in between Vegas and California. With many airlines, bus companies and potentially a private high speed rail firm all competing, travelling between these two points is very affordable. Unfortunately, trivial red tape and broken loopholes in CEQA law obstruct the marketplace from investing in California's heavy demands for better in-fill housing. Smaller-name developers won't come in and compete because the government is tapping into their profit margins with trivial rules and high taxation that chokes up in-fill development.
That's why smart growth development remains generally slow. That's why people like Tom can't afford to live near the Irvine Business Complex employment hub. That's why present-day developers build on cheaper land so that they can at least make some kind of profit from their projects with the all the red-tape bureaucracy.

I must mention that inventory in Irvine and South Orange County is growing. Although nowhere near the rate it should be, the increased supplies have finally started to lower purchase prices with the bargaining power there--long controlled by sellers--now in the buyers court. But prices are still unaffordable for many workers and supplies still short. That means competing in-fill developers and investors need to be better incentivized to grow the inventory, build family-friendly units, better compete, and improve housing options to finally meet demands, just like how market competition has lowered travelling rates and fares between California and Las Vegas.

Tom should have the option to find a quality home or a spacious family-friendly condo unit for $1,500 per month including property taxes under a competitive market with a short 15-20 minute bus ride to-and-from work.

Robust competition will grow buyer's selections which will lower unit prices and rentals. That will allow more workers the freedom to be able to live where they work.

What about land and property values and existing homeowners?

Infill development will not only preserve, but will elevate land values while keeping unit prices in check. That's because if the owners of Orange County's retail shopping centers were to convert their sprawling parking lots into vibrant mixed-use transit villages, the property value would soar. But the individual housing units would be plentiful, affordable, and family friendly.

For existing homeowners in Orange County, especially those who bought high, this is a tough sell. But if the governments work with the lending banks, landlords and residents and offer heavy tax credits and property tax breaks for writing off the price drops and discourage residents from walking away, these entities will more likely back this project. The common goal should be to ensure people can afford to live where they work.

Concept: Smart Growth development in South LA.
Note: Concept only. Not officially proposed.
Here in the Inland Empire, the same patterns must happen too as the logistics and medical sectors drive the regional economy. Plus, more high paying white collar jobs need to find their home here as well. The doctors, nurses, receptionists, truck drivers, manufacturers and procurement workers all need be able to live where they work too and not have to spend more than 30% of their household income toward rent, mortgage or property taxes. Both Corona and Southwest Riverside County where housing prices are on the rise need to look into redeveloping their commercial corridors with additional infrastructure and local jobs. Temecula already has big plans to address this.

If California really wants to reduce vehicle miles traveled on Southern California freeways as we hear from state politicians, our governments should really consider this fair and fact-based proposition.

Who will take charge of it?

Tuesday, October 20, 2015

Transit Updates and Rising Housing Costs in the Inland Empire

By: Nicholas Ventrone, Community Engagement Director

I want to let all of our regular readers know that I haven't forgotten about you. Basically, I've got to practice what I preach on this blog regarding spending time with family and doing your best at work. Both have kept me on my feet and busy.

Okay. I've have a few Transit Talking Points lined up for the next couple weeks. Plus, I was able to network with a transit rider in the Corona area regarding his views of the Riverside Transit Agency's 10-Year Transit Network Plan for the entire system. The rider had some very good bus routing ideas but didn't have a forum to make them known. The official comment period took place last year but as I've stated countless times here, "public hearings" don't close here. Plus, he has some ideas to improve the Corona Cruiser bus system. I'll have the piece put together soon on that in its full context. Stay tuned.

High Speed Rail Funding

I'm also continuing to monitor the progress of getting private funding toward California's High Speed Rail master plan. I think this is perhaps the only way the network is going to get funded and supported. Hopefully this should create some kind of common ground between the advocates and the dissenters. Since many opponents don't want massive sums of public dollars to be spent directly on the project, partnerships with the marketplace to get the train lines funded and built could be the very way to go in my opinion. Don't forget that there is a branch that is proposed to run through the Inland Empire between LA and San Diego.

Rising Housing Costs

The other major story that is unfolding is housing infrastructure all over Southern California is generally continuing to fail to keep up with growing demands. That means living costs continue to go up, and up, and up, well beyond the growth of working salaries... And this has begun to leak into the Inland Empire. Some places in Corona and Southwest Riverside County are becoming unaffordable for the working middle class. Housing near the job hubs in Orange County and LA remain out of the question for many workers. Forget San Francisco; rentals costs there are nearly out of control. Reports are also beginning to show that this trend is going to create a very new definition of long distance super-commuting. And I thought 42 miles was pushing it.

With purchase and rental rates combined with food and health care prices rising faster than working salaries, this situation must be dealt with. Oil prices are down. California gas prices should be further dropping as we transition into winter blend. That means the price of food and the goods we buy should be reflecting that, not rising faster than working incomes.

The state government has had numerous opportunities to reform CEQA law and other trivial regulatory red tape which would better allow developers to expand infrastructure in existing high-demand areas to cut down on crowded housing conditions and high prices without fear of a trivial lawsuit.

Plus the marketplace needs to be allowed to expand the job market which would force employers to actually look for quality workers by paying them more. The way to do that is to reform the tax and regulatory codes. That will help get many mobile Californians off of the government welfare programs and back into the workplace and self-reliance.

You want smart growth and reduce vehicle miles traveled? Allow the marketplace to invest back in our existing cities, get an honest and robust housing market going with quality units, wide selections and competition from single rooms and studios starting at around $450/month all the way to spacious family-friendly units at about $2,000 monthly so that workers can afford to live where they work.

Anyway, I'm gathering up some hard facts on this topic and just wait until you see them. The success of smart growth is going to require fact-based solutions and reforms, period.

I do appreciate you following this blog. Talk to you next time.

Monday, October 5, 2015

Inland Empire Transit Happenings - October

Carmageddon II in Corona: Westbound traffic on the Grand Avenue circle and the 91 freeway is a at standstill.

By: Nicholas Ventrone, Community Engagement Director

First, I need to apologize for not posting anything recently. Work and family have been keeping me busy. As I preach here on this blog, we need to mentor and spend the undivided time with the kids.

Anyway, enough of my personal worries. This autumn continues to be a very busy season on the transit front as there's several important stories that we're covering:

Metrolink's Hyundai-Rotem Cab Cars
Reports are showing that there may be a potential safety flaw in the railroad's Hyundai Rotem cab cars.

The specifics were not made public and Metrolink did make the decision to add a second locomotive, at least temporarily, to each train set beginning as soon as possible. In a collaborative effort using BNSF Railway locomotives, Metrolink will soon have a locomotive on either end of each train to compliment the passenger rail's existing fleet. BNSF was selected because it has positive train control and the proposed 9-month lease agreement plus additional resources is projected to cost a total of an estimated $19.1 million.

Because of the sudden change of the locomotive use in the name of safety, I believe the public needs to know what specific flaws are suspected in the cab cars. The information leading up to this decision should become transparent as they're found out.

Carmageddon II in Corona
Last Wednesday, there was a morning peak hour traffic wreck on the westbound side of the 91 Freeway at the Orange County Line blocking a segment of the ingress point to the 91 Express Lanes. Due to the Sig-Alert location and lack of direct alternative routes, Corona experienced Carmageddon II. Traffic in the Circle City of Corona was once again gridlocked with the 91 west and surface streets jammed with stopped cars well before the I-15. Like the previous gridlock episode, some commuters headed to the North Main Corona Metrolink station arrived late and had to wait for the next train. That included some inbound RTA Route 206 CommuterLink connections via the I-15.

The morning before, there was a separate rush-hour Sig-Alert at Maple Avenue, causing major delays for motorists and transit riders.

I believe stepped up traffic enforcement of safe lane changes and the 55 MPH posted speed limit through the Corona Squeeze will need to occur in order to reduce the collision rate in Corona. There have been far too many injury-wrecks in this area. The lifeline segment of the 91 through the County Line between Green River and Gypsum Canyon Roads probably needs to be designated a safety zone as well with strong enforcement and heavy fines for speeding and safety violations. If any major incident occurs there, the whole transportation system which includes riders headed to the Metrolink station is seriously affected.

The Future of the Corona Cruiser

Also in the Circle City, some possible good news. I've been hearing some talk here and there over potential plans to upgrade the Corona Cruiser bus system. I've heard the system is getting brand new mid-sized buses and potentially some improved routing.

Unfortunately, I found nothing yet that has been made officially public even though I've personally seen photos and illustrations of the new buses during a recent field study there. I'll network with a city spokesperson to get some official information for you.

The upgrades will be a great asset for local mobility in Corona.

Funding CA High Speed Rail

Here's some more good news: A number of domestic firms have finally expressed interest in investing in California High Speed Rail. That could mean that the marketplace may end up pouring in some private capital to help pay for the bullet train master plan. Perhaps some of the baseless smear-statements over the public funding of HSR might eventually be proven wrong.

The rail authority asked private firms to respond to a list of questions on how to reduce costs, speed up construction and attract more private-sector investment for the segment between Merced and Burbank, which is scheduled to start operating in 2022. 35 firms responded.

No details or deals have been made public at this time but I think the questions asked by CHSRA were very fair considering they've actually addressed some of the valid points that have been long addressed by HSR critics such as high infrastructure and per-mile costs.

Streamlining Route 206 through Lake Elsinore

I've been hearing of some local belly-aching of Route 206 riders out of Lake Elsinore regarding unproductive backtracking.

I was on the route last week to see if this was real or trivial. The complaints are valid.

The majority of bus commuters from Lake Elsinore use the Outlet Center Park & Ride bus stop located off of Nichols Road. There is another Route 206 stop located a few blocks south which is the hub point for the local connecting buses. You would think the southbound 206 bus would exit at Nichols Rd, connect to the car park to drop off most of the commuters and then proceed south to the transit hub stop to discharge passengers transferring to the other bus routes. Not so.

The southbound routing has the line bypassing the park & ride stop, exiting the freeway at the busy SR-74 Central Avenue interchange and backtracking north via Collier Avenue, serving the transit hub first followed by the park & ride. That's because the transit hub point has a bus stop only on one side of the road. Because Route 206 operates through the hub, the backtracking adds about 5-7 minutes of unnecessary travel trip time. That has to be dealt with.

Both the Park & Ride and the transfer hub should continue to be served and I believe the solution lies with getting bus stops on both sides of Collier, working with the City of Lake Elsinore on adding pedestrian crosswalks, and streamlining the Route 206 bus routing through this area.