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Housing market hurt by stay-at-home adult children


Thursday, June 12, 2014

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The IPR report noted that San Diego's population has grown by 4.2 percent since the recession began in December 2007, but the number of households has grown only 1.7 percent, suggesting that a lower percentage of people are living on their own.

If trends in household formation had remained unchanged from 2007, the county would have 27,500 more households than it has, estimated Kelly Cunningham, who wrote the report.

Instead, the trend translates into less demand for housing, meaning fewer job opportunities in construction and finance, as well as slower growth for the economy, said economist Kelly Cunningham, who also wrote the report.

"While there are signs that [the homebuilding] part of the economy is starting to recover, lower rates of household formation are likely to dampen new residential construction and place an upward lid on new housing demand," Cunningham said.

Last year, San Diego County added 8,315 new housing units. Although that was a vast improvement from the depths of the recession, it was less than half of the record-setting pace before the recession and nearly 30 percent less than the homebuilding rate between 1990 and 2006, when an average of 11,300 houses and apartments were added each year.

Similarly, there are 25 percent fewer jobs in the construction, real estate and mortgage industries than at the peak before the recession, despite four years of recent growth.

The slowdown in household creation could reflect several factors, including elderly retirees moving in with their adult children or low-wage workers doubling up with roommates to make ends meet.

But Cunningham said research indicates that the trend is largely tied to young people either "choosing or being forced by circumstances to remain in their parents’ home longer than they would have in previous generations."

One reason may be that the bulk of jobs created in San Diego since the beginning of the recession do not pay enough for workers’ rent.

IPR policy research analyst Vince Vasquez released a report in May showing that 37 percent of workers in San Diego earn less than $11 per hour, and 33 percent of those workers are between 22 and 30, including a significant number who appear to be living with their parents.

A report last week by the San Diego County Taxpayers Association indicates that such a salary could not cover the rent. The association calculated that a worker would need $12.76 per hour to rent a studio apartment and pay for other necessities.

"Many people opt to share two-bedroom apartments, regardless of income level," said Sean Karafin, the association's interim president, who drafted the report with the San Diego Regional Chamber of Commerce.

San Diego's Center for Policy Initiatives calculates that local workers would need to make $13.09 per hour to pay for a one-bedroom apartment. City Council President Todd Gloria has proposed setting $13.09 as the city's minimum wage in 2017 after a three-year phase-in period. His proposal, which cleared the council's economic development committee Wednesday, will go to the full council July 14.

IPR analyst Vasquez suggests that a lower wage may be appropriate for people who are in "a transitory part of their career" — for instance, college graduates just entering the labor force.

But Vasquez's statistics show that nearly half of the area's low-wage workers do not appear to be in that transitional phase.

Some 45 percent are older than 30; 32 percent are older than 40 and 18 percent older than 50.

Statistics suggest that as with the younger people, some of those older workers appear to be doubling up with other workers to lower rental costs, translating into less demand for new housing.