“It shouldn’t be about country club California. This should be a California everyone can live in,” said Christopher Thornberg, director of the UC Riverside School of Business Center for Economic Forecasting and Development, neatly summarizing the theme of the center’s 2019 annual conference.
“The House That Wasn’t Built. Housing Scarcity: The Inland Empire’s Natural Barrier to Economic Growth” was held Nov. 6 at the Riverside Convention Center. It coincided with the release of a new economic forecast for the U.S., California, and Inland Empire economies.
Thornberg said that contrary to the bleak vision of inland California embedded in some statewide economic development agendas, the Inland Empire — Riverside and San Bernardino counties — has a robust economy and the 14th largest labor force in the nation. Over the past five years the Inland Empire joined the Bay Area in fastest job growth in the state. The region’s unemployment rate of 4 percent is the lowest it has ever been, equaling that of Los Angeles, and it has the same income per level of educational attainment as Los Angeles and Orange counties.
However, while coastal areas boast large, highly paid professional and technical sectors, health care, government and logistics dominate the Inland Empire’s economy. These jobs often require less education and fewer skills, and generally pay less than jobs in technology, finance, and educated professions that lead the coast.
Rather than regard this as an impediment to developing the kind of economy found in coastal California, Thornberg suggested the Inland Empire’s labor force and housing supply have been necessary supports to California’s growth all along and comparison to coastal areas is both methodologically unsound and unfair.
“Comparing local economies to San Jose is like comparing your health to an Olympic athlete,” Thornberg said. “The only place that looks like San Jose is San Jose.”
The housing supply, however, has not kept pace with the population, which over the past 25 years has grown three times faster than that of the coast.
Apartment vacancies, for example, are at less than 4 percent. The region is not building enough housing, and neither are Los Angeles and Orange counties. This situation will increase regional competition for housing that is already pushing out the Inland Empire’s workforce as housing grows scarcer and rents rise.
While some worry the rich are leaving California in droves, far more people at the other end of the spectrum are abandoning the state for places like Nevada and Arizona, where housing is available and affordable.
The Center for Economic Forecasting’s analysis indicates a crisis of housing supply, not affordability. California has the second-lowest vacancy rate in the nation and the highest percentage of adults living with parents. Thornberg said California needs to be issuing 200,000-250,000 building permits per year to sustain a 2 percent job growth rate but is only doing 130,000.
“Lower-skilled workers moved inland because coastal areas put the kibosh on housing 20 years ago,” Thornberg said.
The center’s analysis finds the housing problem is a land use issue that needs to be solved at the local level. Thornberg said a poorly thought-out tax model exacerbates the housing crisis. Most city revenue comes from business taxes, which encourages local governments to invest in business development, not housing. If cities have to build housing, they want it to be high-end and often enact restrictive laws to prevent high-density alternatives that attract lower-income occupants, like apartment complexes.
“Baby Boomers are often the primary opponents of housing because they’ve got theirs already,” said speaker Steve PonTell, chief executive officer and president of National Community Renaissance, or National CORE, a nonprofit affordable housing developer with a focus on community revitalization.
He said high-density housing does reduce home value, but self-interest shouldn’t influence a city’s housing decisions.