Study Offers Strategy for Housing Gap

Southern California’s rapid appreciation of home prices is poised to cool, and that may help provide a quick fix to the region’s housing crunch, according to a UCLA study to be released today.

Yet there remains a long-run problem of building enough homes at the right prices and in desirable places to meet the needs of existing residents as well as newcomers.

“I believe that the long-term housing problems of low ownership rates, overcrowding and lack of residential choice are severe,” said Paul Ong, director of UCLA’s Ralph and Goldy Lewis Center for Regional Policy Studies and lead author of “The State of Southern California’s Housing.”

Not surprisingly, the study found that Southern California has some of the nation’s loftiest housing prices, thanks to historically low mortgage rates, an economy that is more robust than the rest of the nation and a tight supply of homes.

However, the region also has a disproportionately large number of people living in low-income households. The poverty rate in Southern California was 15.6%, compared with 12.4% for the nation as a whole, according to the 2000 census.

That translates into a home-ownership rate in the state that is below the nation’s: 59% in 2003 versus 68% nationwide, according the U.S. Census Bureau.

“Those in the bottom half are not moving ahead and they are being left out of the housing market,” Ong said.

Bridging the gap will take a comprehensive strategy, mostly on the part of state and local governments, to help more people afford homes, Ong said. If a more effective, coordinated approach is not taken, Southern California will become a far less attractive place to live and work.

“Housing is a critical element in the region’s economy, affecting the ability of businesses to recruit and retain workers,” the report said.

Ong and his colleagues offered an admittedly complex and long-range prescription for improving housing conditions and ownership rates, particularly among poor residents. He said many of the region’s cities were not taking on their “fair share” of the costs of affordable housing and that the state should do more to ensure they do.

“Solving the housing-cost problem is not going to be easy,” he said.

The report’s recommendations:

* Provide government housing subsidies.

* Eliminate institutional barriers such as discrimination, lack of access to financial institutions and local restrictions on the supply of affordable housing.

* Increase the earning power of the poor by providing training needed to promote economic assimilation and by providing quality education.

In July, the median price of a home in the five-county Southern California region was $510,000, according to the California Assn. of Realtors.

Lately, the first traces of a market slowdown have appeared. In Los Angeles County, the rate of home-price growth decelerated slightly in July for the first time in seven months.

At the same time, the supply of homes for sale throughout Southern California is up from a year ago. And mortgage rates are expected to rise by the end of the year, which is expected to further put a damper on prices.