Los Angeles and Ventura counties lag in meeting the state’s housing demands, and they better catch up or the state may intervene, economist Mark Schniepp said at the annual conference on the health of Ventura and the neighboring county.
Schniepp, with the California Economic Forecast, held his economic outlook Thursday at the Hyatt Regency Westlake in Westlake Village.
The country’s overall economy is “generally very strong right now,” due to a healthy stock market at or near-record highs, a robust housing market, rising wages, interest rates that are stable and declining and low gas prices. These make the possibility of another recession “negligible,” Schniepp said.
“It’s very rare to have this combination of circumstances in the economy now,” he explained, adding not only are those conditions “very positive,” but also the lowest they’ve been since the 1990s.
Technology continues to drive growth in California but there are signs of a slowdown in jobs, Schniepp explained. He pointed to Santa Clara County, which shed more than 6,000 tech jobs recently. However, in L.A. County, the industry shed only 114.
“The tech run-up was stunning, but it’s now starting to grow old,” Schniepp said.
The biggest flaw statewide is in the inability to keep up with the housing demand, driven by industrial and commercial development and jobs’ gains, an issue which is causing prices to soar.
In Ventura County, the median hosing price was $666,500 in June, a 5.5 percent year-over-year change, according to Schniepp. In the city of Los Angeles, it was $750,000. And apartment rents are also increasing.
“We accept it,” he added. “It doesn’t threaten to derail the economy, but it will impede growth.”
Ventura County has built only 33 percent of its state-mandated housing requirement, while Los Angeles County has built only 46 percent, Schniepp said, and cited development restrictions by counties and cities as the main cause.
That reluctance is catching the eye of the state that may soon enforce intervention techniques, such as new legislation. Similarly, rent control also may be “resurrected,” Schniepp explained, and bills have been introduced that would repeal existing laws that restricted the practice.
While in Ventura County job creation has accelerated, the office market remains “cold,” he said. But, the good news is the county has added nearly 2,500 housing units and another 2,600 are in the entitlement process.
Jobs in the county are at a cyclical high in leisure and hospitality. Last year, 80 percent of job growth came from that sector, Schniepp said. However, retail sales in the county are not even back to pre-recession levels.
“The county has created lots of jobs but in the end, they are not in high-paying areas,” he explained.
That’s because office-occupying companies are not taking large spaces and the local office vacancy rate was nearly 17 percent over the summer compared to 12 percent in L.A. County.
The hope for the county is in future housing projects and in 1.6 million square feet of non-residential space under construction, the most since the Great Recession, Schniepp said.