Skyrocketing Housing Costs. What Can Be Done?
On Thursday, July 20, 2023, the Planning Commission heard a presentation on Irvine’s affordable housing needs. The entire Powerpoint presentation can be viewed here; it provided eye-opening data on Irvine’s affordable housing needs, which resulted from factors including market rate housing and business growth.
The graph below shows how market rate housing creates a demand for goods and services to accomodate new residents. Many of the jobs created by needed goods and services do not pay enough for those employees to afford rent in Irvine.
Residential Market Conditions as of June 2023
The median rent in Irvine as of June 2023 was $4,167, which requires a household income of more than $142k to afford rent at 30% of gross income. The Department of Housing and Urban Development (HUD) defines rent burden as spending more than 30% of gross household income on rent.
The median home price in Irvine as of June 2023 was $1,362,500. This would require an annual household income of more than $300,000 to afford a mortgage at 35% gross income.
Irvine Rent Increases
There was a drastic increase in rent from 2021-2022. Rent in Irvine increased 27.2% from 2021 to 2022. Some attribute the sudden rise in rent to the rent-freeze from the pandemic. However, seeing the trends from previous years, coupled with the fact that incomes only rose 11.6% within that same period, does not seem to explain the shocking increase.
The key findings on affordable housing needs are found on the slide below.
- Private sector and public sector production of affordable housing is not keeping pace with affordable housing need in Irvine.
- Irvine residential market conditions are favorable primarily for households with incomes higher than moderate income.
- In 2022, Irvine gross rent growth was more than two and a half times household change in median income.
- From 2020 to 2022, Irvine median home sales prices increased by 47.2%
Multi-Faceted Solutions Needed
Based on the data presented by city staff, it is clear Irvine needs more affordable housing. As the data has shown, simply building more homes, especially more market rate or “luxury” homes as we often find in Irvine, will not solve the issue. Building more market rate housing further increases the need for affordable housing. Here are some possible solutions to consider that were not addressed in the city’s presentation.
Some cities in California are asking voters if empty homes should be taxed to relieve pressure on the housing market. The City of Berkeley passed Measure M, which imposes a tax after 182 days of vacancy and provides extensions for units worked on or in probate. The vacancy tax is greater for units that are bigger and those empty longer, encouraging owners to put units back on the market.
According to a 2014 Orange County Register article, “About half of the foreign buyers are purchasing U.S. homes to live in year-round — or for their children to live in while studying here, the Realtor report said. Half are maintaining their permanent homes overseas.”
In Irvine, given 55% of the population are renters (see pie chart below), a vacancy tax would be even more impactful to make sure all homes are occupied.
Accessory Dwelling Units
Accessory Dwelling Units (ADUs) and Junior Accessory Dwelling Units (JADUs) are an option for adding housing in California. ADUs have been known by many names: granny flats, in-law units, backyard cottages, secondary units and more.
An ADU is an attached or detached residential dwelling unit that provides complete independent living facilities for one or more persons and is located on the same parcel with a proposed or existing primary residence.The maximum square footage for a detached ADU (Single Family and Multi Family) is 1,200 square feet.
Number of ADUs Allowed on a Lot
- Single family residential detached parcels: Up to 2 ADUs allowed (one JADU & 1 ADU but not 2 ADUs)
- Multi-family residential parcels: Up to 2 detached ADU units with restrictions.
The city is not permitting an ADU if parking cannot be accommodated somehow. One parking space is required per ADU or JADU. A required accessory dwelling parking space is in addition to any required parking for the principal single-family dwelling unit. ADU parking can be in garages, carports or tandem parking on an existing driveway leading to a garage.
Ideas for Future Consideration
The two ideas below have no precedent, but may be worth exploring their legal and policy possibilies, to help the housing needs we face in Irvine. For those who have other solutions to consider, please share them at [email protected].
Special Tax on Investment Properties
The 2014 Orange County Register article, “Chinese homebuyers seeking security in O.C.“ states Irvine as a top destination for property investors. “People like to invest, and Chinese people like to invest in property more than anything,” said Irvine broker Alisha Chen, who travels frequently to Asia in search of buyers. “Because of that, we had a high rise of money pouring into the U.S.”
The article goes on to say, “Asians – including foreign buyers from China, Hong Kong and Taiwan – make up the top demographic at some of Southern California’s new housing developments… and make up about 75 percent of the buyers at FivePoint Communities’ Pavilion Park project at the Orange County Great Park, said company spokeswoman Carol Wold.”
Unlike the United States, “China  limits the number of homes people can own,” Chen said. “Chinese buyers seek out places like Irvine, which has a reputation for top schools and low crime. They tend to prefer newer areas, and since these buyers often rank among China’s elite, there’s a strong appetite for luxury homes.”
The Lu family featured in the article, spent about three months researching real estate online. The article states,”the Chinese websites he visited mentioned Irvine over and over again, citing high test scores, low crime and high quality of life.”“You would be surprised how famous Irvine is in China,” said Shaw, an international specialist for Re/Max Fine Homes in Newport Beach.
The article continues, “Lu’s family came to Orange County for a one-week shopping junket in February, and picked the two-story, 2,900-square-foot home before it was built. As with about 60 percent of overseas buyers, Lu’s father paid cash. Compared to China, houses in Irvine aren’t expensive, Lu’s parents said.”
If Irvine is building more homes to meet the housing needs of our city, yet a high percentage are being bought as investment properties by those in the U.S. and beyond, we will not solve the need for more affordable housing.
Requirement for Developers and Real Estate Professionals to Market Locally
Developers and realtor estate professionals marketing to distant or overseas buyers, whether intentional or not, subvert our housing policies in California. Implementing a policy restricting developers and realtors to market locally may help make sure the homes that are being built go to those who need them.
Dates for Affordable Housing Update Process
For those who are interested in following the issue of Affordable Housing in Irvine and the plans to revise our Zoning Ordinance, see the schedule below.
Affordable Housing Requirement & In Lieu Fee Update Draft Study
The August 3rd Planning Commission meeting has agendized a study on the affordable housing requirement and in-lieu fee update. Information on how to watch or participate can be found here. The staff report and attachments are provided: