Home construction in Menifee, California on May 18, 2021. While the state has committed Orange County to build about 23,000 new homes by 2030, local governments have issued 5,938 building permits, according to the St. Louis Fed. (File photo by Jonathan Lansner. Orange County Register/SCNG)
Orange County saw wide-ranging improvements in several indicators last year, according to a new business report.
They include student achievement, declines in local poverty rates, increases in labor force participation, increases in incomes and increases in the county’s overall economic output.
“Our economy is leading Southern California,” said Wallace Walrod, chief economic advisor for the Orange County Chamber of Commerce. Rising economic output “shows continuity in the recovery from Covid.
But there is a “but” in the new “Community Indicators Report” released by the Business Council on Tuesday, November 7.
A worsening housing affordability crisis is slowing much of that progress.
Thanks to high borrowing costs and stubborn home prices, home ownership is increasingly out of reach for first-time buyers.
And this is driving people away. Another 30,000 Orange County residents left in search of affordable housing, according to 2022 census data. The county experienced a net population loss in each of the last three years, the report said.
This is threatening the business community’s ability to recruit and retain top talent.
“Housing is one of the biggest controls that I believe will have some impact on our ability to grow,” said Jeff Ball, CEO of the Business Council. “We need a supply. It’s clearly a supply issue.
Self-proclaimed “the voice of business,” the council is Orange County’s equivalent of the Chamber of Commerce. The annual “Community Indicators Report” seeks to “shape evidence-based responses” to county problems by highlighting key areas of improvement and decline.
The report reads like a giant Wikipedia page, from the county’s total land area (799 square miles) to its high school dropout rate (4%) and per capita water consumption (114 gallons per day).
This year’s report includes a special feature on housing, taking the position that increased housing construction is the solution to high housing costs.
But long-standing barriers are holding up new growth, the report says. They include “well thought out” regulations and zoning restrictions; California’s Environmental Quality Act or CEQA is “time and resource consuming”; Coping with government-mandated house building targets; and neighborhood opposition to new development, or “NIMBYism.
Economic factors such as high interest rates and rising construction costs have contributed to the housing shortage, the report added. He condemns rent control because it discourages rentier development.
The latest numbers reflect a slowdown in housebuilding.
While the state mandated Orange County build about 23,000 new homes by 2030, local governments issued just 5,938 building permits by 2022, according to the St. Louis Fed. The county has averaged just under 8,800 permits over the past decade.
Meanwhile, according to the California Association of Realtors, only 12% of Orange County households will be able to afford a median-priced home by the first half of 2023. That’s just 2 percentage points above the county’s all-time low affordability of 10 percent.
The solutions proposed by the Chamber of Commerce are not new. State, academic and industry reports have highlighted those construction barriers for at least a decade.
“The state legislature has been focused on this issue. Nothing seems to be working,” Ball said.
The Chamber of Commerce emphasized the importance of CEQA reform. While environmental groups believe CEQA is working and weakening the half-century-old law threatens the ecosystem, reformers have been bullied by labor and even rival developers to block new construction.
New rules allow affordable housing and other developments to fast-track the CEQA process, Ball said.
“We admit it’s a problem. But instead of choosing to solve the general problem that we have found as a target, the gaps that we choose to solve are narrow,” Ball said. It will continue to be an issue on our supply side until we get to a broader upgrade.
On the bright side, the report cited broad indicators that show Orange County is a thriving, low-crime economic powerhouse.
— Orange County’s poverty rate dropped to 9.9%, with 10.8% of the county’s children living in poverty, the report said. This is down from the 10.1% poverty rate last year, with 12.9% of children living in poverty.
— Nonfarm payrolls rose by 47,500 at the end of September, state data shows. The county’s unemployment rate has risen to 3.7%, but that’s because more people are looking for work.
— Orange County’s gross regional product (county-level equivalent of GDP) grows to $284 billion in 2022 from $275 billion in 2022, a 3% gain.
The county’s economic output is greater than 25 states, including Louisiana, Alabama and Kentucky, according to the report.
— On the other hand, students’ reading and math scores have not yet fully returned to pre-pandemic levels.
— Mental health challenges and substance abuse continue to plague local communities. For example, opioid-related deaths have risen to 23 per 100,000 residents in 2021, which is three times the rate of 8 deaths per 100,000 in 2019.