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Apartments: The New California Dream

May 7, 2013

It's official: Apartments are the new California dream. At least for now.

The Department of Finance's Demographic Research Unit reports that multi-family construction outstripped single-family construction over the past two years not by much, but it did happen.

Between 2011 and 2013, statewide about 40,000 multi-family housing units were constructed, compared to 39,000 single-family units. And of the single-family units, 3,000 were townhomes.
Although this makes a good headline, it shouldn't be very surprising. There's been a general trend toward multifamily construction in California since the 1990s it was temporarily reversed during the housing boom of 2000-2006 and in the last couple of years rental apartments have been virtually the only housing product for which California developers can obtain financing. And the overall numbers are very low compared to the boom, when 200,000+ housing units were being constructed per year.

The breakdown by county, showed in the chart below, shows that there is still a big difference between coastal and inland counties but there's now a big difference between working-class inland counties and more affluent inland counties. For example, while Riverside County contructed only 18% apartments, the figure for neighboring San Bernardino was 35%. Placer County in suburban Sacramento had only 11% apartment construction, but the figure for Fresno was almost half and for Kern was 30%.

The numbers in the coastal counties were off the charts 87% in L.A; around 75% in Santa Clara, San Mateo, and Ventura; more than half in San Diego and Orange counties.

These numbers will change as the housing market comes back. The inland counties are sitting on an enormous supply of entitled single-family lots, and as the market comes back those houses will be built. But the idea that the California dream includes multi-family housing especially in the coastal areas is now too deeply embedded to be denied.