How Bad Is California’s Housing Shortage? It Depends on Who’s Doing the Counting

But choosing a “healthy” vacancy rate — one that reflects a functional housing market — and then backing out the number of additional homes needed to hit it, is more art than science. Most estimates turn to historical data to find some level when supply and demand weren’t completely out of whack. Whether that halcyon period of relative affordability is 2015 or 2006 or 2000 or 1980 varies by researcher and, likely, by the region being considered.

Beyond that, many researchers have tried to put a value on what is sometimes called “pent up” demand or “missing households.” Those are all the people who would have gone off and gotten their own apartment or bought their own place, but, because of the unavailability of affordable places to live, have opted to keep living with housemates, with parents or, in more extreme cases, without shelter of any kind.

Absent a survey of every living person, there’s no way to precisely measure how many people fall into this camp.

“This notion of ‘pent up demand’ is necessarily in an economist’s judgment call,” said Elena Patel, a fellow at the Brookings Institution who helped put together a nationwide shortage estimate last year (4.9 million).

These variations in methods help explain some of the differences in the shortage estimates. Other differences pop up thanks to the vagaries of data.

The Moody’s Analytics-led report, for example, calculated a national shortage of roughly 2 million units by adding together both the number of new units needed to raise the overall vacancy rate and the homes needed to backfill their measure of “pent up” demand. But for its California-specific estimate, the data wasn’t available to do the latter, potentially leaving out a big chunk of the statewide shortage.

Then some estimates differ because the analysts are defining the shortage in a completely different way.

The California Housing Partnership looks at the difference between the number of households deemed by federal housing guidelines to have “very” or “extremely” low incomes and the number of units that those households could conceivably rent with less than 30% of their incomes.

That gap of 1.3 million gets at a problem totally distinct from an overall shortage of homes.

Finally, there’s the question of scale. Housing markets are, on the whole, local. A national shortage is going to add together San Francisco and Detroit, masking the extremes of both. A shortage estimate for a state as large and diverse as California may have the same problem.

“It is like looking for a weather forecast for a trip to the beach and being told that the average temperature nationwide is likely to be 67 degrees,” the authors of the Moody’s-led analysis wrote.

Why estimate a shortage?

What might be more valuable than fixating on any one shortage estimate, said Daniel McCue, a researcher at the Harvard Joint Center for Housing Studies, is to look at all the estimates together and appreciate that, by and large, they’re all huge.

“Whether it’s one-and-a-half million or five-and-a-half million, these are big numbers,” he said. That leads to an inescapable takeaway, he said. “There’s so much to do. There’s so far to go.”

Patel, from Brookings, said trying to put a precise tally on what is ultimately the somewhat nebulous concept of a “housing shortage” is still a worthwhile exercise because it gives lawmakers and planners a benchmark against which to measure progress.

How much additional taxpayer money should a state throw at affordable housing development? How aggressive should a locality be in pursuing changes to local zoning? “The more concrete you can be in policy making land, the better,” she said.

The state of California does in fact have its own set of concrete numbers.

Every eight years, the Department of Housing and Community Development issues planning goals to regions across the state — a number of additional homes, broken down by affordability level, that every municipality should plan for. These are, effectively, California government’s official estimates of the state shortage.

To cobble together these numbers, state regulators look at projections of population growth to accommodate the need for future homes and then tack on adjustments to account for all the homes that weren’t built in prior periods, but perhaps ought to have been. If a region has an excess number of households deemed overcrowded, it gets more units. If vacancy rates are below a predetermined level, it gets more units. If there is a bevy of people spending more than 30% of their incomes on rent, more (affordable) units.

It’s a process that the state regulators have come to take somewhat more seriously in recent years, engendering an ongoing political backlash from density-averse local governments and neighborhood activists.

In the state’s last estimate, the topline total was 2.5 million units.

This coming cycle, which has already begun in the rural north and will slowly roll out across the state in the coming years, will produce yet another number. That will be one more estimate for state lawmakers of how much brake fluid the car needs.

This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.