homes for the san fernando valley in the new century
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Homes for the San Fernando Valley in the New Century. Challenges and Opportunities. March 26, 2003 Presented by Henry Cisneros. A FFORDABILITY AND H OMEOWNERSHIP. Affordability Now at Near Record Lows. Ratio of Median House Price to Median Income. Ratio of 3.1 in 1975; 4.1 currently. - PowerPoint PPT PresentationTRANSCRIPT
Homes for the Homes for the San Fernando Valley San Fernando Valley in the New Centuryin the New Century
Challenges and Challenges and Opportunities Opportunities
March 26, 2003March 26, 2003
Presented by Henry Cisneros Presented by Henry Cisneros
AFFORDABILITY
AND HOMEOWNERSHIP
AffordabilityNow at Near Record Lows
2.5
3.0
3.5
4.0
4.5
1975 1978 1981 1984 1987 1990 1993 1996 1999 2002
Source: U.S. Census Bureau, Milken Institute
Ratio of Median House Price to Median Income
Ratio of 3.1 in 1975; 4.1 currently
Affordability: Three Dimensions
• Mortgage Interest Rates
• Income
• Home Prices
Mortgage Interest Rates
The decline from 8.05% in June, 2000 to 6.5% currently gives the median income household an 18% increase in its purchasing power.
Source: Federal Housing Finance Board (Bloomberg)
0
2
4
6
8
10
12
14
16
18
1975 1978 1981 1984 1987 1990 1993 1996 1999 2002
National Average 30 Year Conventional Fixed Rate Home Mortgage
Household Income
Over the last 25 years, incomes have increased steadily.
0
50
100
150
200
1975 1978 1981 1984 1987 1990 1993 1996 1999 2002
Median Household Income
Source: U.S. Census Bureau, Milken Institute.
Thousa
nds
of
$
Household Income vs. Home Prices
But in that time period, incomes have grown slower than home prices. Median home prices increased at an average annual rate of 5.9 percent.
When home prices rise faster than incomes, affordability suffers.
0
50
100
150
200
1975 1978 1981 1984 1987 1990 1993 1996 1999 2002
Median House Price Median Household Income
Source: U.S. Census Bureau, Milken Institute.
Thousa
nds
of
$
Home Production
The price of homes is a function of supply and demand: the problems of producing homes constrain the supply of new housing units.
Source: U.S. Census Bureau
500
1,000
1,500
2,000
2,500
1975 1978 1981 1984 1987 1990 1993 1996 1999 2002New
Pri
vate
ly O
wned H
ousi
ng U
nit
s (I
n T
housa
nds)
Recommended Ratio:Recommended Ratio:1 new housing unit
for every 1.5 jobs created
In Fact:In Fact:California: 1 to 3.6Los Angeles: 1 to 5San Jose: 1 to 7.8
CityOccupatio
nAverage Income
Median Home Price
Qualifying Income
Downtown Los
AngelesTeacher $ 38,570 $ 333,250 $ 111,083
Yorba Linda
(Orange County)
Firefighter $ 42,300 $ 338,500 $ 112,883
Palo AltoPolice
Detective$ 62,230 $ 815,000 $ 270,667
San JoseRegistered
Nurse$ 56,650 $ 430,000 $ 143,333
Home Prices are Beyond the Reach of California’s Middle-
Class
Home Prices are Beyond the Reach of California’s Middle-
Class
Affordability
• Land Cost
• Public Role
• Fiscal Issues
• Financial Institutions
• Gentrification
• Homebuyers Assistance
• Local Government Homeownership Priorities
•Professional & Business Groups
•In Cooperation With Employers as Employee Benefits
•Immigrant Self-help Advocacy Groups
•Community-based Organizations
•Church Communities
•Person-to-person Explanations
Homebuyer Assistance Alliances
Targeted Mortgage Products
• First-time Homebuyer Mortgage Assistance• Down Payment Assistance;• Zero Down-Payment with Fannie Mae and KB Mortgage
Company for Teachers, Nurses, Policemen, & Firefighters;• “1% down-payment” and low-interest loans sponsored by
Fannie Mae or other financial institutions;• Bond financing to create low interest loans for
moderately-low income families.• New ACV initiated and targeted products …
SPECIAL LOAN PROGRAMSSPECIAL LOAN PROGRAMS::
The Key to Affordable Urban Home The Key to Affordable Urban Home OwnershipOwnership
The Key to Affordable Urban Home The Key to Affordable Urban Home OwnershipOwnership
An Exclusive Financing Option Through Fannie Mae & KB Mortgage Company
- Firefighters
- Healthcare Professionals
- Teachers
- Police Officers
• Zero Down
• Zero Closing Cost
• Targets:
Targeted Mortgage Products
Targeted Mortgage Products
VALLEY PROGRESS
AND HOMEOWNERSHIP
Homeownership
•Traditional Infill
Approach
•Large Sites:– Brownfields
– Large tracts
KB Home at Mountain GlenSylmar, CA
1,650 – 3,999 sq. ft.From the Low $300s
KB Home at Mather AFBSacramento, CA
1,716 – 4,028 sq. ft.$239,500 – $344,000
KB Home at Stapleton Airport
Denver, CO
1,248 – 2,153 sq. ft.$180,000 – $300,000
Urban RealitiesUrban Realities
• Land cost can be substantially higher than regional suburban alternatives; land configuration and previous uses increase costs
• Smaller & difficult to develop sitesSmaller & difficult to develop sites
• Costs and entitlement processes dictate more expensive and/or higher density products
•Social conditions can be as complex as the physical sites
•Older, poorer and more diverse educational institutions
Urban RealitiesUrban Realities
Yet, More American Homeowners Are Seeking
Infill Locations
Yet, More American Homeowners Are Seeking
Infill Locations• To Avoid Congestion, Traffic, and Long Commutes
• To Enjoy a Metropolitan Lifestyle With Downtown Amenities
• To Be Near Employment Centers
• To Be Near Familiar Neighborhoods and Close to Family and Community Roots
• To Participate in Civic Involvements and Greater Citizen Interactions
• To Have a Distinctive “Village Within the City” Experience with New Home Comforts and Technologies
Village GreenVillage GreenLos Angeles, CaliforniaLos Angeles, California
Targeted Consumers Want
Location and Convenience
Targeted Consumers Want
Location and Convenience • Young Professionals
• Empty nesters and retirees• First-time homeowners with
young families• Immigrants• Minority homeowners• Working families• Multigenerational
households
Work with local governments who declare homeownership a priority
to review land use policies and fiscal structure for middle class
and entry level affordability.
Consider incentives to encourage states and local governments to create housing trust funds with their own funds and with private
resources, in order to supplement Federal programs for
homeownership.
Work with local governments who declare homeownership a priority
to review land use policies and fiscal structure for middle class
and entry level affordability.
Consider incentives to encourage states and local governments to create housing trust funds with their own funds and with private
resources, in order to supplement Federal programs for
homeownership.
Expand the concept of empowerment or enterprise zones to create “homeownership zones.”
Encourage local governments to Encourage local governments to assemble sites, clean up assemble sites, clean up
brownfields, create land banks, brownfields, create land banks, rehabilitate properties, reconstruct rehabilitate properties, reconstruct infrastructure, and prepare land for infrastructure, and prepare land for
large-scale infill neighborhoods.large-scale infill neighborhoods.
Expand the concept of empowerment or enterprise zones to create “homeownership zones.”
Encourage local governments to Encourage local governments to assemble sites, clean up assemble sites, clean up
brownfields, create land banks, brownfields, create land banks, rehabilitate properties, reconstruct rehabilitate properties, reconstruct infrastructure, and prepare land for infrastructure, and prepare land for
large-scale infill neighborhoods.large-scale infill neighborhoods.
Many City & County Governments Have
Established the Construction of Homes in Central Areas as a Priority
Many City & County Governments Have
Established the Construction of Homes in Central Areas as a Priority
GOVERNMENTS CAN BE HELPFUL:• Identifying Sites in Priority Areas
• Helping Assemble Complex Sites
• Assuring the Adequacy of Needed Utilities, Transportation, and Other Public Infrastructure
• Working to Meet Local “Affordability” Objectives
• Expediting the Approval and Entitlement Process
• Working with Neighborhood and Community Leaders
• Housing Fairs – multiple providers of services;Housing Fairs – multiple providers of services;
• Non-profit neighborhood organizations;Non-profit neighborhood organizations;
• Training programs for currently non-qualifying homebuyers;Training programs for currently non-qualifying homebuyers;
• Employer assistance programs;Employer assistance programs;
• Full participation of banking and mortgage lenders.Full participation of banking and mortgage lenders.
Homebuyer Assistance Alliances
First-time home buyers, especially immigrant and non-First-time home buyers, especially immigrant and non-English speaking urban residents, need to be educated English speaking urban residents, need to be educated and introduced to the fundamentals of homeownership.and introduced to the fundamentals of homeownership.
Downtown South Downtown South (So. Garey @ 7(So. Garey @ 7thth St.) St.)
Pomona, CaliforniaPomona, California
Downtown South Downtown South (So. Garey @ 7(So. Garey @ 7thth St.) St.)
Pomona, CaliforniaPomona, California
Downtown South Downtown South (So. Garey @ 7(So. Garey @ 7thth St.) St.)
Pomona, CaliforniaPomona, California
• School districtsSchool districts• Neighborhood leadersNeighborhood leaders• Local businessLocal business• PolicePolice• Community collegesCommunity colleges• Corporate partners – i.e. telecom/digitalCorporate partners – i.e. telecom/digital• Financial institutions - make Financial institutions - make
homeownership a realityhomeownership a reality
Strategic Partnerships:Strategic Partnerships:The Key to Urban The Key to Urban
ProjectsProjects
Homeownership and Demographic
Change in California
Population Distribution
Year TotalWhite /
Non-Latino LatinoAfrican
AmericanAmerican
IndianAsian-
American
1995262,82
0193,566 26,936 31,598 1,931 8,788
2000281,42
2194,553 35,306 34,658 2,476 10,243
2020 E
324,926
207,145 55,156 44,735 3,207 19,589
2050 E
403,686
212,990 98,228 59,239 4,405 37,589
Source: U.S. 2000 Census & U.S. Census Bureau Population Division, Population Projections of the U.S., Total Population by Race, Hispanic Origin, & Nativity
Population Projections for California
Year Department of Finance Census Bureau Preferred
1990 29,942 -
1995 32,063 31,589
1996 32,384 31,758
1997 32,957 31,925
1998 33,506 32,100
2000 34,653 34,441
2005 37,372 37,644
2010 39,958 41,373
2015 42,371 45,278
2020 45,449 49,285
2025 48,626 -
2030 51,869 -
2035 55,210 -
2040 58,731 -
Source: Public Policy Institute of California
In Thousands
California Population by Race / Ethnic Distribution
Source: Public Policy Institute of California
1995
Latino28%
Asian & Pacific
Islander10%
African American
7%American
Indian1%
White54%
DOF, 2025
Latino41%
Asian & Pacific
Islander15%
African American
6%
American Indian
1%
White37%
Population Projections by Race / Ethnicity
1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
White 17,180 17,422 17,731 17,902 17,969 18,123 18,216 18,222 18,141 18,005
Latino 9,101 10,689 12,301 13,964 15,643 17,778 20,085 22,547 25,199 28,091
Asian & Pacific Islander
3,338 3,999 4,684 5,314 5,815 6,474 7,128 7,786 8,441 9,092
African American
2,251 2,338 2,343 2,541 2,691 2,806 2,918 3,024 3,128 3,234
American Indian
193 206 222 237 253 266 279 290 300 309
Source: Public Policy Institute of California
In Thousands (DOF)
Minority Populations Are Young
25.7%
32.1%35.0%
38.7%
White Non-Latino Asian-American African-American Latino
% of population under 20
Source: Market Segment Research; Population Report, Middle Series, 1996
Minority Households Are Larger
Whites Blacks Hispanics
HouseholdSize 2.58 2.75 3.54
Source: 1998 Current Population Survey
Country of birthNumber Percent
Mexico 146,865 18.4%Philippines 49,117 6.2%China 41,147 5.2%Vietnam 38,519 4.8%India 38,071 4.8%Cuba 33,587 4.2%Dominican Republic 27,053 3.4%El Salvador 17,969 2.3%Jamaica 17,840 2.2%Russia 16,632 2.1%Ukraine 15,696 2.0%Haiti 15,057 2.0%Korea 14,239 1.8%Columbia 13,004 1.6%Pakistan 12,967 1.6%Poland 12,038 1.5%Canada 11,609 1.5%Peru 10,853 1.4%United Kingdon 10,651 1.3%Iran 9,642 1.2%Total 798,378 100.0%
1997
Source: U.S. Dept of Justice, Immigration and Naturalization Service, Annual Report, Jan 99
Country of birthNumber Percent
Mexico 146,865 18.4%Philippines 49,117 6.2%China 41,147 5.2%Vietnam 38,519 4.8%India 38,071 4.8%Cuba 33,587 4.2%Dominican Republic 27,053 3.4%El Salvador 17,969 2.3%Jamaica 17,840 2.2%Russia 16,632 2.1%Ukraine 15,696 2.0%Haiti 15,057 2.0%Korea 14,239 1.8%Columbia 13,004 1.6%Pakistan 12,967 1.6%Poland 12,038 1.5%Canada 11,609 1.5%Peru 10,853 1.4%United Kingdon 10,651 1.3%Iran 9,642 1.2%Total 798,378 100.0%
1997
Source: U.S. Dept of Justice, Immigration and Naturalization Service, Annual Report, Jan 99
Over 249,000Over 249,000
--31%----31%--
come from come from
Spanish-Spanish-
speaking speaking
countriescountries
Country of birthNumber Percent
Mexico 146,865 18.4%Philippines 49,117 6.2%China 41,147 5.2%Vietnam 38,519 4.8%India 38,071 4.8%Cuba 33,587 4.2%Dominican Republic 27,053 3.4%El Salvador 17,969 2.3%Jamaica 17,840 2.2%Russia 16,632 2.1%Ukraine 15,696 2.0%Haiti 15,057 2.0%Korea 14,239 1.8%Columbia 13,004 1.6%Pakistan 12,967 1.6%Poland 12,038 1.5%Canada 11,609 1.5%Peru 10,853 1.4%United Kingdon 10,651 1.3%Iran 9,642 1.2%Total 798,378 100.0%
1997
Source: U.S. Dept of Justice, Immigration and Naturalization Service, Annual Report, Jan 99
Over 194,000Over 194,000
--24%----24%--
come from come from
AsianAsian
countriescountries
StatesNumber Percent Number Percent
Entire nation 798,378 11 Michigan 14,727 1.8%1 California 203,305 25.5% 12 Pennsylvania 14,553 1.8%2 New York 123,716 15.5% 13 Georgia 12,623 1.6%3 Florida 82,318 10.3% 14 Conecticut 9,528 1.2%4 Texas 57,897 7.3% 15 Arizona 8,632 1.1%5 New Jersey 41,184 5.2% 16 Minnesota 8,233 1.0%6 Illinois 38,128 4.8% 17 Ohio 8,189 1.0%7 Virginia 19,277 2.4% 18 Oregon 7,699 1.0%8 Maryland 19,090 2.4% 19 Colorado 7,506 0.9%9 Washington 18,656 2.3% 20 Hawaii 6,867 0.9%
10 Massachuestts 17,317 2.2% Total top 20 states 719,445 90.2%
1997 1997
Source: U.S. Dept of Justice, Immigration and Naturalization Service, Annual Report, Jan 99
Number Percent Number PercentAll Metropolitan Areas 798,378 13 Dallas, TX 11,061 1.4%
1 New York, NY 107,434 13.5% 14 Philadelphia, PA-NJ 10,858 1.4%2 Los Angeles-Long Beach, CA 62,314 7.8% 15 Newark, NJ 10,801 1.4%3 Miami, FL 45,707 5.7% 16 Seattle-Bellevue-Everett, WA 10,692 1.3%4 Chicago, IL 35,386 4.4% 17 Fort Lauderdale, FL 10,646 1.3%5 Washington, DC-MD-VA 31,444 3.9% 18 Detroit, MI 10,019 1.3%6 Orange County, CA 18,190 2.3% 19 Atlanta, GA 9,823 1.2%7 Houston, TX 17,439 2.2% 20 Bergan-Passaic, NJ 9,788 1.2%8 San Jose, CA 17,374 2.2% 21 Riverside-San Bernadino, CA 9,518 1.2%9 San Francisco, CA 16,892 2.1% 22 Nassau-Suffolk, NY 9,167 1.1%
10 Oakland, CA 15,723 2.0% 23 Sacramento, CA 7,654 1.0%11 San Diego, CA 14,758 1.8% 24 Jersey City, NJ 7,529 0.9%12 Boston-Lawrence, MA 13,937 1.7% 25 Minneapolis-St. Paul, MN-WI 6,859 0.9%
1997 1997
Source: U.S. Dept of Justice, Immigration and Naturalization Service, Annual Report, Jan 99
Fact: Minority Families Have More Workers Per Household
25.6%
52.5%
13.5% 14.0%19.4%
15.3%
27.2%
U.S. BornLatino
Foreign-BornLatino
U.S. BornWhite
Foreign-BornWhite
African-American
U.S. BornAsian
Foreign-BornAsian
Households with Three or More Workers, 1990The Middle Class - 5 County Area
Source: Pepperdine University Institute for Public Policy “The Emerging Latino Middle Class” 1997
Growth of the Middle Class: 1989-1999
Source: U.S. Census Bureau
29.5% 32.3%
72.3%64.6%
Total Households
African American
Households
Hispanic Households
Asian Households
Middle Class Defined:
1989: $23,663 - $36,2011999: $33,001 - $52,174
Projected Owner Occupied Household Growth in Millions 2000 - 2010
African Asian/ Total Total American Hispanic Other
Minority
10.9 m. 1.8 m. 2.2 m. 1.0 m. 5.0 m.
Source: 1998 Current Population Survey
There Is Still a Significant Gap in the Rate of Home
Ownership74.4%
48.7% 48.8%
White Black Hispanic
Home Ownership Rate: 4th Quarter - 2001
Source: Department of Housing and Urban Development – Office of Policy Development & Research, US Housing Market Conditions, 4th Quarter 2001
1. The availability of quality, affordable rental units is important to creating a pipeline of future homeowners:
1. The availability of quality, affordable rental units is important to creating a pipeline of future homeowners:
Concluding Points
- Preserve and expand the subsidized stock
- Expand the availability of affordable market units
- Preserve and expand the subsidized stock
- Expand the availability of affordable market units
2. In order to enhance affordability, it is critical to expand the supply of affordable for-sale homes:
2. In order to enhance affordability, it is critical to expand the supply of affordable for-sale homes:- National Policy: Homeownership
Tax Credits
- Local Governments: Identify and assist in assembly of sites
- Private Builders: Target median price and below
- National Policy: Homeownership Tax Credits
- Local Governments: Identify and assist in assembly of sites
- Private Builders: Target median price and below
3. Mortgage products must be addressed to high growth homeownership markets:
3. Mortgage products must be addressed to high growth homeownership markets:
- Effective outreach to minority populations
- Design of targeted financial products
- Give core business priority to the new demographics of homeownership
- Effective outreach to minority populations
- Design of targeted financial products
- Give core business priority to the new demographics of homeownership