Joe McClary (L) looks on as Delirosa Porfideo (C) shovels pebbles that will serve as the base for new concrete highway slabs while a re-decking construction project continues on Interstate-95 northbound March 10, 2004 in Philadelphia, Pennsylvania. The $84 million dollar project to refurbish the decking on the highway started in Decmber 2002, and is slated to be finished in June 2005. (Photo by William Thomas Cain/Getty Images)
California homebuilders will add a projected 46,500 new single- and multi-family units to the state’s housing supply in 2010, the Construction Industry Research Board reported last week. That represents a 27.7 percent increase from a year ago.
That seems like good news for California’s beleaguered homebuilding industry, long a pillar of the state’s economy, except that this year’s housing production still ranks among the lowest yearly totals since the state began keeping records back in 1954.
The decline of the Golden State’s housing sector has had a devastating effect on the state’s overall economy, as borne out by a new report by the Center for the Continuing Study of the California Economy.
From 2005 to 2009, CCSCE documented, California saw an 83 percent decline in yearly building permits. That accounts for much of the 60 percent reduction in construction spending over that span, from nearly $100 billion in 2005 to less than $40 billion in 2009, as well as the 33 percent decline in construction jobs between 2007 and 2009, some 500,000 workers sidelined.
The collapse of California’s housing sector has exacerbated the state’s continuing budget crisis. Home values have fallen as much as 50 percent in certain parts of the state, which has resulted in substantially lower property tax revenues collected by the state treasury.
In fact, the consulting firm Beacon Economics expects a decline in property tax revenues of more than 10 percent before they find a bottom. That amounts to nearly $5 billion.
As goes California’s housing sector, so goes the state economy. That’s why it makes sense for the state government stimulate new home purchases. That’s also why it makes sense for not only the state government, but also local governments to lessen, if not remove altogether, impediments to new home construction.
The state did take an affirmative step with its homebuyer tax credit, available to residents purchasing new homes after May 1 of this year and before August 1 of next year. The credit is worth 5 percent of the purchase price of a new home or $10,000, whichever is less.
The Legislature set aside $100 million in credits for the program but it already has run out. By renewing the credits, lawmakers can continue to stimulate new home sales and the job creation new home construction foments.
Meanwhile, the continued sluggishness of homebuilding in California, evidenced by both the CIRB and CCSCE reports, represents the appropriate occasion for cities and counties throughout the Golden State to reconsider the various fees and regulations on their books that makes building a home far more costly and time-consuming in California than any other state.
California prospered during the great housing boom of the mid-2000s. While a similar boom will not be witnessed anytime soon, the state can and should take steps to speed recovery of its still important, but still ailing homebuilding industry.