Economic Forecast: Housing Costs In California Expected To Go Even Higher

LOS ANGELES (CBSLA.com) — An economic forecast released Monday says California housing will become even more expensive over the next two years because construction will be unable to keep up with demand.

Government agencies need to reconsider their policies surrounding affordable housing if they hope to make a dent in the problem, according to UCLA Anderson Forecast Senior Economist Jerry Nickelsburg.

"The economics are clear," Nickelsburg wrote in the forecast. "When affordable housing is provided, say by requiring developers to have a fixed percentage of their new units 'affordable,' then the demand for that housing will be in excess of the supply."

The typical response of "just build more housing" is unrealistic since such a move would require major changes in zoning codes, environmental requirements and building regulations, Nickelsburg said.

On an economic front, Nickelsburg predicted total employment growth in California of 2.7 percent this year, 2.2 percent next year and 1.4 percent in 2017. The unemployment rate will drop below 6 percent for the balance of the year, then average 5.2 percent next year and 4.8 percent in 2017.

On the national front, UCLA Anderson director Edward Leamer predicted GDP growth of 2 to 3 percent over the next two years, with a generally healthy economy.

"This comes with an improving labor marker, declining unemployment rate and a rising employment to population ratio," Leamer wrote.