An interview with...

Jean Ross
Exec. Dir., California Budget Project

Your organization recently completed a study on housing costs in California; what was it called, and what did it reveal?

Locked Out: California's Affordable Housing Crisis -- and our study found that California has a real crisis in terms of the accessibility and availability of affordable housing for California families.

What is your general assessment of housing in the Central Valley?

The central valley is having some serious housing problems. A lot of the valley's problems are really the spillover effect of the crisis situation that's occurring in a lot of the coastal counties.

How does the Central Valley's situation compare to the rest of California? Is there anything that sets us apart?

The Valley has more supply, and a lot of that certainly has other consequences -- the paving of our farmland to build housing. But there has been relatively more construction to job growth, which means that prices are lower, although they are beginning to increase at a fairly rapid pace here, in particularly the greater Sacramento area. So we have more housing that's available, but we have lower incomes here in the Valley. And in particular, in the Southern and Northern parts of the Valley, job growth has been limited or nonexistent, so people don't have the incomes they need to afford housing.

So is achieving the dream of home-ownership easier in the Central Valley?

It's easier in parts of the Valley. It's also more difficult in other parts, and again, it's a trade-off between lower prices, but also lower incomes. If you look at the average earnings in Tulare County, for example, it's about a third of what someone in Silicon Valley can expect to make on an annual basis. So while housing is certainly a lot less expensive, if you're earning $22,000 a year, it's still hard to buy a house.

Earlier you mentioned the link between the Bay Area and the Central Valley; how does the housing crisis in the Bay Area impact the Central Valley?

The really tremendous, unbelievable housing costs in the Bay Area have caused people to move further and further out. Young families who want to own a home -- even in many cases renters who just can't afford housing in the greater Bay Area -- are moving out into the Valley: into the Stockton area, into the 80 corridor. We're hearing reports of people living in Merced and Madera commuting into Silicon Valley, and that's driven the prices up. And you end up in a situation where those workers bring the higher salaries that that they're earning in the Bay Area to the Valley housing market, and they're able to outbid the people who live and work in the Valley. And that's caused a real problem for the people who live and work here.

So from an economist's perspective, what is the real, day-to-day, real-life impact on Valley residents who are competing with people from the Bay Area for housing?

They are spending a greater share of their income either on rent or on a mortgage payment. That leaves less money to spend on childcare, on healthcare, on buying, clothing and shoes for their kids to go to school in -- and so it really has had a tremendous impact on families' total standard of living.

What are the challenges for farm workers or people who live in rural areas?

The farm worker population has some of the same problems. They have very low earnings, which make it very hard to afford either rent or housing purchases. To the extent that there is still a migrant population through the Valley, they have particular housing needs. It can be either housing for single adults who are traveling without their family or, many times, extended families who work and move from crop to crop. Over the past two decades, the supply of farm worker housing has dropped by about two-thirds in the Valley despite the fact that we have a growing agricultural workforce. If you look, moving further up into the foothills and the more the really rural parts of the Valley, we see the highest prevalence of substandard housing. Over a third of the housing stock in the foothills is substandard. That means it has at least two or more serious defects.

What about the urban area? What's the housing situation, say, in downtown Sacramento?

It's a housing market that's changed a lot in the last couple of years. Housing prices are going up. Over the past year, the housing affordability index for both Sacramento and the Valley as a whole has dropped. In other words, fewer families are able to afford the median priced home that's available on the market. It's stayed flat for the state as a whole, and some of that's been the dot-com slowdown in the Bay Area. We've seen rental prices in Sacramento go up tremendously, and vacancy rates decline significantly. Some of that again is the spillover. We hear reports of people who have public housing assistance who get a section eight certificate, for example, in the Bay Area. They can't find a place to use it; they'll move to Sacramento, where, at least until very recently, housing has been more available.

What happens to those renters who can't afford an apartment, or a middleclass family that gets outbid by Bay Area folks?

To lower income families, we see people doubling up, tripling up -- a lot of overcrowding. Overcrowding's become a real problem in California the last several years: people living in substandard housing stock that couldn't have been rented a few years back. And so people are living under tougher conditions than they might have been. The people who are commuting, maybe they have to move further out to find something they can afford to rent or own. That means they're spending more time on the highway. They're clogging the freeways, polluting the air, and they have less time to spend with their families, and they're stressed out at the end of the day.

Looking ahead, what is your best-case scenario prediction for housing in the Central Valley?

I think there have been some positive steps forward. We've seen things like the Metrosquare development in Midtown. We're seeing some of the housing, the development that's going on at McClellan. I think that there can be an opportunity for planning, for in-fill development -- so called "smart growth." And I think that because our prices are a little bit more affordable, that can be a good thing. I think if things keep going the way they have been, we can see a greater imbalance between job growth, growth in the supply of the housing stock. We can see prices continue to go up, and we can see more loss of farm land, and more loss of the quality of life that I think people like here in the Valley.

What's your advice to policy makers, in terms of handling growth in the Central Valley?

That there needs to be public investment in housing. In previous decades, state and federal dollars were significantly higher for housing programs. We saw an increase last year, but this isn't a problem that can be solved in one year. There needs to be greater public investment in housing. We need to look at land use policies, how we finance government in California, and find ways to encourage housing development. We need to build more multi-family housing. One of the clearest findings in our report was the fact that multi-family housing -- apartments -- haven't kept pace with demand for those units, and that's really crunching. Particularly for young families, lower income families.

Presentation also made possible by a grant from
the Great Valley Center