Homes for Californians
in the New Century
Challenges and Opportunities
February 7, 2003
Presented by Henry Cisneros
Demographic
Change in California
Population Distribution
Year
Total
White /
Non-Latino
1995
262,820
193,566
26,936
31,598
1,931
8,788
2000
281,422
194,553
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
Latino
African
American
American
Indian
AsianAmerican
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
In Thousands
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
California Population by
Race / Ethnic Distribution
DOF, 2025
1995
Latino
28%
Latino
41%
White
54%
Asian &
Pacific
Islander
10%
Asian &
Pacific
Islander
15%
African
American
7%
American
Indian
1%
Source: Public Policy Institute of California
White
37%
African
American
6%
American
Indian
1%
Population Projections by
Race / Ethnicity
In Thousands (DOF)
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
Minority Populations Are
Young
% of population under 20
32.1%
38.7%
35.0%
25.7%
White Non-Latino
Asian-American
African-American
Source: Market Segment Research; Population Report, Middle Series, 1996
Latino
Minority Households Are Larger
Whites
Blacks
Hispanics
2.58
2.75
3.54
Household
Size
Source: 1998 Current Population Survey
Country of birth
Mexico
Philippines
China
Vietnam
India
Cuba
Dominican Republic
El Salvador
Jamaica
Russia
Ukraine
Haiti
Korea
Columbia
Pakistan
Poland
Canada
Peru
United Kingdon
Iran
Total
1997
Number
Percent
146,865
18.4%
49,117
6.2%
41,147
5.2%
38,519
4.8%
38,071
4.8%
33,587
4.2%
27,053
3.4%
17,969
2.3%
17,840
2.2%
16,632
2.1%
15,696
2.0%
15,057
2.0%
14,239
1.8%
13,004
1.6%
12,967
1.6%
12,038
1.5%
11,609
1.5%
10,853
1.4%
10,651
1.3%
9,642
1.2%
798,378
100.0%
Source: U.S. Dept of Justice, Immigration and Naturalization Service, Annual Report, Jan 99
Country of birth
Mexico
Philippines
China
Vietnam
India
Cuba
Dominican Republic
El Salvador
Jamaica
Russia
Ukraine
Haiti
Korea
Columbia
Pakistan
Poland
Canada
Peru
United Kingdon
Iran
Total
1997
Number
Percent
146,865
18.4%
49,117
6.2%
41,147
5.2%
38,519
4.8%
38,071
4.8%
33,587
4.2%
27,053
3.4%
17,969
2.3%
17,840
2.2%
16,632
2.1%
15,696
2.0%
15,057
2.0%
14,239
1.8%
13,004
1.6%
12,967
1.6%
12,038
1.5%
11,609
1.5%
10,853
1.4%
10,651
1.3%
9,642
1.2%
798,378
100.0%
Over 249,000
--31%-come from
Source: U.S. Dept of Justice, Immigration and Naturalization Service, Annual Report, Jan 99
Spanishspeaking
countries
Country of birth
Mexico
Philippines
China
Vietnam
India
Cuba
Dominican Republic
El Salvador
Jamaica
Russia
Ukraine
Haiti
Korea
Columbia
Pakistan
Poland
Canada
Peru
United Kingdon
Iran
Total
1997
Number
Percent
146,865
18.4%
49,117
6.2%
41,147
5.2%
38,519
4.8%
38,071
4.8%
33,587
4.2%
27,053
3.4%
17,969
2.3%
17,840
2.2%
16,632
2.1%
15,696
2.0%
15,057
2.0%
14,239
1.8%
13,004
1.6%
12,967
1.6%
12,038
1.5%
11,609
1.5%
10,853
1.4%
10,651
1.3%
9,642
1.2%
798,378
100.0%
Over 194,000
--24%-come from
Source: U.S. Dept of Justice, Immigration and Naturalization Service, Annual Report, Jan 99
Asian
countries
States
1997
Number Percent
Entire nation
798,378
1 California
203,305
25.5%
2 New York
123,716
15.5%
3 Florida
82,318
10.3%
4 Texas
57,897
7.3%
5 New Jersey
41,184
5.2%
6 Illinois
38,128
4.8%
7 Virginia
19,277
2.4%
8 Maryland
19,090
2.4%
9 Washington
18,656
2.3%
10 Massachuestts
17,317
2.2%
11 Michigan
12 Pennsylvania
13 Georgia
14 Conecticut
15 Arizona
16 Minnesota
17 Ohio
18 Oregon
19 Colorado
20 Hawaii
Total top 20 states
Source: U.S. Dept of Justice, Immigration and Naturalization Service, Annual Report, Jan 99
1997
Number Percent
14,727
1.8%
14,553
1.8%
12,623
1.6%
9,528
1.2%
8,632
1.1%
8,233
1.0%
8,189
1.0%
7,699
1.0%
7,506
0.9%
6,867
0.9%
719,445
90.2%
1
2
3
4
5
6
7
8
9
10
11
12
1997
Number Percent
All Metropolitan Areas
798,378
New York, NY
107,434
13.5%
Los Angeles-Long Beach, CA
62,314
7.8%
Miami, FL
45,707
5.7%
Chicago, IL
35,386
4.4%
Washington, DC-MD-VA
31,444
3.9%
Orange County, CA
18,190
2.3%
Houston, TX
17,439
2.2%
San Jose, CA
17,374
2.2%
San Francisco, CA
16,892
2.1%
Oakland, CA
15,723
2.0%
San Diego, CA
14,758
1.8%
Boston-Lawrence, MA
13,937
1.7%
13
14
15
16
17
18
19
20
21
22
23
24
25
1997
Number Percent
Dallas, TX
11,061
1.4%
Philadelphia, PA-NJ
10,858
1.4%
Newark, NJ
10,801
1.4%
Seattle-Bellevue-Everett, WA
10,692
1.3%
Fort Lauderdale, FL
10,646
1.3%
Detroit, MI
10,019
1.3%
Atlanta, GA
9,823
1.2%
Bergan-Passaic, NJ
9,788
1.2%
Riverside-San Bernadino, CA 9,518
1.2%
Nassau-Suffolk, NY
9,167
1.1%
Sacramento, CA
7,654
1.0%
Jersey City, NJ
7,529
0.9%
Minneapolis-St. Paul, MN-WI
6,859
0.9%
Source: U.S. Dept of Justice, Immigration and Naturalization Service, Annual Report, Jan 99
Fact: Minority Families Have More
Workers Per Household
Households with Three or More Workers, 1990
The Middle Class - 5 County Area
52.5%
27.2%
25.6%
19.4%
U.S. Born
Latino
Foreign-Born
Latino
13.5%
14.0%
U.S. Born
White
Foreign-Born
White
AfricanAmerican
15.3%
U.S. Born
Asian
Source: Pepperdine University Institute for Public Policy “The Emerging Latino Middle Class” 1997
Foreign-Born
Asian
Growth of the Middle Class:
1989-1999
Total
Households
African
American
Households
Hispanic
Households
Asian
Households
72.3%
64.6%
29.5%
32.3%
Middle Class Defined:
1989: $23,663 - $36,201
1999: $33,001 - $52,174
Source: U.S. Census Bureau
Projected Owner Occupied
Household Growth in Millions
2000 - 2010
Total
African
American
10.9 m. 1.8 m.
Source: 1998 Current Population Survey
Hispanic
2.2 m.
Asian/
Other
1.0 m.
Total
Minority
5.0 m.
There Is Still a Significant Gap
in the Rate of Home Ownership
Home Ownership Rate: 4th Quarter - 2001
74.4%
White
Source:
48.7%
48.8%
Black
Hispanic
Department of Housing and Urban Development – Office of Policy Development & Research,
US Housing Market Conditions, 4th Quarter 2001
The Housing Continuum
Owner
Occupied
Public Sector
Investment
First-Time
Homebuyer
Rental
Housing
Assisted
Housing
Public
Housing
Transitional
Housing
Homeless
Shelter
Private Sector
Investment
The Housing Continuum
Owner
Occupied
Public Sector
Investment
First-Time
Homebuyer
Rental
Housing
Assisted
Housing
Public
Housing
Transitional
Housing
Homeless
Shelter
Private Sector
Investment
• More homeless facilities are needed
and more beds at existing sites.
• Concerted efforts are required to
bring homeless people in from the
streets to safe, clean, and wellmanaged emergency shelters.
• Interventions must extend from
street outreach to mental health
and substance abuse programs.
The Housing Continuum
Owner
Occupied
Public Sector
Investment
First-Time
Homebuyer
Rental
Housing
Assisted
Housing
Public
Housing
Transitional
Housing
Homeless
Shelter
Private Sector
Investment
More units are needed to provide
decent apartments for persons with
AIDS, persons with medical and
emotional disabilities, and mothers
with children.
That means at least 150,000 units of
suitable housing over ten years, or
15,000 incremental units of
supportive housing each year.
The Housing Continuum
Owner
Occupied
Public Sector
Investment
First-Time
Homebuyer
Rental
Housing
Assisted
Housing
Public
Housing
Transitional
Housing
Homeless
Shelter
Private Sector
Investment
Continue large-scale renovation
of deteriorated, overly dense
public housing through full funding
of HOPE VI.
Reduce concentrations of poverty by
creating smaller-scaled mixed-income
developments matched to Section 8
and other programs, to open housing
opportunities in neighborhoods with
stronger economic prospects.
Horner Neighborhood
Old
New
Atlanta, Georgia: Perry Homes
Atlanta, Georgia: Centennial Place
Harbor Point
Norfolk: Diggs Town
The Housing Continuum
Owner
Occupied
Public Sector
Investment
First-Time
Homebuyer
Rental
Housing
Assisted
Housing
Public
Housing
Transitional
Housing
Homeless
Shelter
Private Sector
Investment
More than 5.4 million
renter families and elderly
pay more than half of
their incomes for housing
or live in severely
distressed housing.
Source: U.S. Dept of Housing and Urban Development
57% of all renters – or
20 million households – earn
less than $30,000 annually.
For them, affordable rent is
$750/month or less.
Median asking rent for a new
apartment is $920/month.
In order to build units for the 6.4
million households with severe
affordability problems, provide
capital subsidies for the production of
units for occupancy by extremely
low-income households.
To preserve the current stock of
subsidized rental housing, enact exit
tax relief via a preservation tax
incentive to transfer properties to
preservation entities.
It is important to sustain funding for
public housing vouchers at the level of
100,000 per year, and to fund expiring
contracts on subsidized rental units.
Expansion of funding for low-income
tax credits assures that a proven and
effective program can be a more
substantial part of the rental housing
equation.
Specialized rental housing,
such as the Senior 202
Program, warrants expansion.
The national network of highly
capable non-profit housing
providers is an essential
extension of Federal capability
to address specific
demographic needs.
The Housing Continuum
Owner
Occupied
Public Sector
Investment
First-Time
Homebuyer
Rental
Housing
Assisted
Housing
Public
Housing
Transitional
Housing
Homeless
Shelter
Private Sector
Investment
Affordability Pressures Are Mounting
as the Moderate-Income Rental
Supply Plummets
Change in Affordable Units 1985-99, in Millions
3.0
Extremely
Low
Very Low
Low
Moderate
High
30-50% of AMI
2.5
2.0
1.5
50-60% of AMI
1.0
0.5
Over 120% of AMI
Under 30% of AMI
0.0
-0.5
-1.0
100-120% of AMI
60-80% of AMI
-1.5
-2.0
80-100% of AMI
Note: HUD income limits are adjusted for inflation and real income growth for both 1985 and 1999.
Source: HUD tabulations of the American Housing Survey, prepared for the Millennial Housing Commission Report
A family with one full-time
worker earning the minimum
wage cannot afford the local
fair-market rent for a twobedroom apartment
anywhere in the country.
In 24 states, households with
two full-time minimum wage
earners lack the income to
cover fair-market rents on
such a unit without exceeding
the “30% of income”
threshold which defines
affordability.
Multifamily construction
slowed in the 1990s despite
a population increase.
1970s – 5 million units
1990s – 2.5 million units
Attract private capital to
the production of mixedincome, multi-family rental
housing through state bond
programs.
The Housing Continuum
Owner
Occupied
Public Sector
Investment
First-Time
Homebuyer
Rental
Housing
Assisted
Housing
Public
Housing
Transitional
Housing
Homeless
Shelter
Private Sector
Investment
Allocate a flexible new tax
credit to stimulate the
production of affordable
units for homeownership.
The Housing Continuum
Owner
Occupied
Public Sector
Investment
First-Time
Homebuyer
Rental
Housing
Assisted
Housing
Public
Housing
Transitional
Housing
Homeless
Shelter
Private Sector
Investment
Projected Homeownership Rate:
2000 - 2010
2000
2010
Projected
Change
U.S. Total
66.4 %
69.1 %
+ 2.7 %
African American
46.2 %
51.1 %
+ 4.9 %
Hispanic
44.5 %
49.1 %
+ 4.6 %
Asian
52.6 %
55.9 %
+ 3.3 %
Source: U.S. 2000 Census
Fannie Mae and Freddie Mac
have set homeownership goals
for target populations.
For example, Fannie Mae’s American
Dream Commitment targets:
•
•
•
•
•
•
Minorities
New Immigrants
Female heads of household
Young households
Families in redevelopment areas
Families in rural areas
AFFORDABILITY
AND
HOMEOWNERSHIP
Affordability
Now at Near Record Lows
Ratio of Median House Price to Median Income
4.5
4.0
3.5
3.0
2.5
1975
1978
1981
1984
1987
1990
1993
Ratio of 3.1 in 1975; 4.1 currently
Source: U.S. Census Bureau, Milken Institute
1996
1999
2002
Affordability: Three Dimensions
• Mortgage Interest Rates
• Income
• Home Prices
Mortgage Interest Rates
National Average 30 Year Conventional Fixed Rate Home Mortgage
18
16
14
12
10
8
6
4
2
0
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
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)
Household Income
200
Thousands of $
150
100
50
0
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
Median Household Income
Over the last 25 years, incomes have increased steadily.
Source: U.S. Census Bureau, Milken Institute.
Household Income vs. Home Prices
200
Thousands of $
150
100
50
0
1975
1978
1981
1984
Median House Price
1987
1990
1993
1996
1999
2002
Median Household Income
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.
Source: U.S. Census Bureau, Milken Institute.
Home Prices
New Privately Owned Housing Units (In Thousands)
2,500
2,000
1,500
1,000
500
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
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
Recommended Ratio:
1 new housing unit
for every 1.5 jobs created
In Fact:
California:
Los Angeles:
San Jose:
1 to 3.6
1 to 5
1 to 7.8
Affordability of Housing by
Minorities
How much Home
can the median
household
income support?
10th
Percentile
30th
Percentile
50th
Percentile
70th
Percentile
90th
Percentile
U.S. Average
$ 49,438
$ 122,912
$ 205,521
$ 318,894
$ 687,091
African
Americans
$ 30,954
$ 83,182
$ 147,345
$ 231,385
$ 479,081
Hispanics
$ 43,665
$ 100,638
$ 161,977
$ 244,771
$ 477,752
Home Price is calculated assuming a 20% down payment on a 30 Year Fixed Rate Mortgage with payments equal
to 30% of gross annual household.
Median home price, June 2002:
$182,600
Source: Bloomberg, U.S. Census Bureau, Milken Institute
Home Prices are Beyond the Reach
of California’s Middle-Class
City
Occupation
Average
Income
Downtown
Los Angeles
Teacher
$ 38,570
$ 333,250
$ 111,083
Firefighter
$ 42,300
$ 338,500
$ 112,883
Palo Alto
Police
Detective
$ 62,230
$ 815,000
$ 270,667
San Jose
Registered
Nurse
$ 56,650
$ 430,000
$ 143,333
Yorba Linda
(Orange
County)
Median
Home Price
Qualifying
Income
Affordability
• Land Cost
• Public Role
• Fiscal Issues
• Financial Institutions
• Gentrification
• Homebuyers Assistance
• Local Government
Homeownership Priorities
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.
Homebuyer Assistance
Alliances
First-time home buyers, especially immigrant and nonEnglish speaking urban residents, need to be educated
and introduced to the fundamentals of homeownership.
• Housing Fairs – multiple providers of services;
• Non-profit neighborhood organizations;
• Training programs for currently non-qualifying homebuyers;
• Employer assistance programs;
• Full participation of banking and mortgage lenders.
Homebuyer Assistance
Alliances
• Professional & Business Groups
• In Cooperation With Employers as
Employee Benefits
• Immigrant Self-help Advocacy Groups
• Community-based Organizations
• Church Communities
• Person-to-person Explanations
Targeted Mortgage Products
The Key to Affordable Urban Home Ownership
SPECIAL LOAN PROGRAMS:
•
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 …
Targeted Mortgage Products
An Exclusive Financing Option Through Fannie Mae &
KB Mortgage Company
• Zero Down
• Zero Closing Cost
• Targets:
- Firefighters
- Healthcare Professionals
- Teachers
- Police Officers
URBAN PROGRESS
AND
HOMEOWNERSHIP
Homeownership
•Traditional Infill Approach
•Large Sites:
– Military Facilities, i.e., Mather AFB
– Brownfields
– Large tracts,
KB Home at Mather AFB
Sacramento, CA
1,716 – 4,028 sq. ft.
$239,500 – $344,000
Urban Realities
• Land cost can be substantially higher than
regional suburban alternatives; land
configuration and previous uses increase costs
• Smaller & difficult to develop sites
• Costs and entitlement processes dictate more
expensive and/or higher density products
Urban Realities
• Social conditions can be as complex
as the physical sites
• Older, poorer and more diverse
educational institutions
Yet, More American
Homeowners Are Seeking
Central 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 Green
Los Angeles, California
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
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
Downtown South
(So. Garey @ 7th St.)
Pomona, California
Downtown South
(So. Garey @ 7th St.)
Pomona, California
Downtown South
(So. Garey @ 7th St.)
Pomona, California
Strategic Partnerships:
The Key to Urban Projects
•
School districts
•
Neighborhood leaders
•
Local business
•
Police
•
Community colleges
•
Corporate partners – i.e. telecom/digital
•
Financial institutions - make
homeownership a reality
Expand the concept of empowerment
or enterprise zones to create
“homeownership zones.”
Encourage local governments to
assemble sites, clean up brownfields,
create land banks, rehabilitate
properties, reconstruct infrastructure,
and prepare land for large-scale infill
neighborhoods.
Concluding Points
1. The availability of quality,
affordable rental units is important
to creating a pipeline of future
homeowners:
- 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:
- 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:
- Effective outreach to minority
populations
- Design of targeted financial
products
- Give core business priority to the
new demographics of
homeownership