Are Housing Production Law Increasing Housing Production? Maybe
- William Fulton
- Sep 5, 2022
- 4 min read
For the fourth year in a row, Gov. Gavin Newsom has signed major legislation designed to increase housing production – a surprise this year, which began as a year when it appeared as though the rush to expand housing production legislation would slow down. So maybe now is a good time to ask whether all these bills are actually increasing housing production. What’s really happening on the ground? Steve Levy, who is probably the most insightful observer of the California economy, has come with a solid answer: Maybe. Cobbling together data from the California Homebuilding Foundation (CHF) and the Construction Industry Research Board (CIRB), Levy found that in the first half of 2022, residential building permits were up 15% over the year before – about 76,000 as opposed to about 61,000. And if the trend continues (a big “if” given rising interest rates) – the state will have its best year for homebuilding since 2006, right before the Great Recession. In his report, Levy looked at both single-family and multi-family permitting and he looked at all regions in the state. He left 2020 out of some of the analysis because COVID made that year so weird. But what he found was really interesting. First, while it’s true that homebuilding permits have gone up overall, almost all of the increase in 2022 has been in multifamily permits. As the chart below shows, single-family permits are up this year by about 3% -- from 34,000 to 35,000. That’s up from 2019, but single-family permitting has been sluggish ever since the Great Recession for a variety reasons, not all of which have to do with the entitlement process. (A lot of prospective homebuyers had their houses foreclosed on and saw their credit scores crash during the Great Recession and have been out of the market ever since.) But multifamily permits went up from 27,000 to 35,000 – an increase of about 30%, or 10 times the single-family increase. Levy’s analysis doesn’t break down owner v. renter in the single- and multi-family categories, but it’s reasonable to assume that most of the new multi-family development is rental. Residential Permits By Housing Type, 2019-2022
