Single Family Home Construction Is Shrinking

The California government has posted graphs of home production for the Bay Area and for many counties in California. These charts dramatically show how home production has changed since 2010. First, look at the SF Bay Area housing production.

The first thing that stands out is that significantly fewer homes are being built after 2010. The second important change is that the majority of homes built across the entire bay area are multi-family homes.

San Mateo County

In San Mateo County, home production has shrunk, but not as dramatically as the Bay Area wide production. However single family home production has shrunk dramatically.

Santa Clara County

Although housing production actually peaked in 2014, the single family home production was only a small portion of the production.

Outside of Silicon Valley – Contra Costa County

Housing construction in Contra Costa County has shrunk dramatically since 2009, primarily single-family housing production. If you look at other counties further from Silicon Valley such as Napa, Solano, and Sonoma, you will see dramatic decreases in housing production even though these counties do not have the population density of Silicon Valley. It should be noted that the decreases in production in both Napa and Sonoma Counties was dramatic before the fires that occurred there.

Thoughts About The Future

Most of you have seen very little evidence left of the agricultural history of the Santa Clara Valley. Fruit, vegetables, and other agricultural products were a huge part of the local economy. Small houses which were built back in the 1920’s survived until relatively recent times. Residents found smaller homes to be quite acceptable.

In the early 60’s the federal government encouraged the construction of large housing projects to make homes available to very low income people. These projects, which were once promoted as part of a “Great Society”, added to segregation and crime, especially among low income people. Many of the housing projects were considered failures and have been torn down.

During the 2000’s, the federal government, recognizing the major advantage home ownership has for building wealth for most people, tried to expand the advantage to lower income people by encouraging financial institutions to provide mortgages to people who previously were considered too risky. Both the increased risk and the abuse of the change in regulation lead to an economic disaster.

With builders not finding rewarding opportunities to build even in less dense areas, there appears to have been a dramatic change in the affordability of home construction (not just the cost of land). Add in the mandated requirements to reduce segregation of the financial classes of people, changes in what people deem to be acceptable housing (large condo acceptable, but not a tiny house), a likely shift towards studio and 1-bedroom condo construction resulting from the Association of Bay Area Goverment (ABAG) Regional Housing Needs Assessment (RHNA) mandates, I don’t see that viable planning has been created yet. Do you?

The RHNA does not appear to be a path towards addressing what people want and is likely to lead to further regulation and delays. I don’t see an increase in the construction of the homes that are wanted by families even existing on the current horizon. The cost of single family homes is likely to continue a steep upwards climb. The cost of large “multi-family” homes, whether townhouses or even large condos is likely headed steeply upward although possibly delayed, reaching “un-obtainable levels” behind single family homes. Meaningful housing plans will be delayed by financial costs not being addressed, by the high expectations of families not being considered, and the current mandates seemingly only leading to more housing that is only wanted by low-income individuals but that will be built at a cost that is still beyond their means.

If your family finances are secure now, waiting to buy a home is very likely to work against your goals.

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