Real Estate News

Sacramento builds more homes than any California city north of LA. See where other cities rank

California’s capital city was a bright spot last year in the state’s uphill battle to build more housing.

Sacramento experienced the most new home construction of any California city north of Los Angeles in 2018, new state data show. Bustling Roseville was not far behind, ranking third in the north state. Fresno ranked fourth, with Rocklin also near the top.

The new housing numbers, though modest, offer continued signals that the Sacramento region economy is healthy and that the area remains a choice landing spot for coastal emigres tired of skyrocketing housing costs and long commutes.

Builders added 2,400 dwelling units in Sacramento last year, most of them detached single-family residences. That’s even more than San Francisco, a city of nearly 900,000 people where new towers have altered the skyline.

Overall, neither Sacramento nor California produced nearly the same amount of new housing that occurred during the state’s big building boom more than a decade ago, when home construction in Sacramento peaked at 4,000 new units, city officials said.

California built 97,000 new housing units total last year, not near the frenetic pace of 2006 when 200,000 housing units were built. The net growth, however, was only 77,000, minus homes burned in wildfires or otherwise demolished.

Housing production slumped during the recession, leading to a what many say is a housing crisis. Gov. Gavin Newsom is pushing at the state level for changes that will promote more housing, setting aside $1.75 billion in his budget to spur home construction.

Much of Sacramento’s construction came in the city’s Natomas community, across the Sacramento River from downtown and the capital city’s boom town on and off for more than a decade.

A notable number of new condos and apartments recently opened or are under construction in the central city, thanks in part to a series of new infill-oriented incentives described recently by a noted housing research institute as “thoughtful.”

Those include more than 140 apartments at the cutting-edge Ice Blocks project, Sacramento’s first true infill style master development, a several-block area that merges housing, restaurants, gyms, stores and offices adjacent to downtown and light rail.

Sacramento city officials say they are seeing signs their efforts to encourage housing are reaping some rewards. “This isn’t just a one year thing,” city development manager Ryan DeVore said. “There’s a good diversity of product out there now.”

The city of Roseville was number three in new housing in the north state with 1,300 new units. Notably, though, almost all of those units were also single-family homes. Few were apartments.

Sacramento County as well saw the most new housing construction of any county north of Los Angeles in 2018, with a total of 4,200 new units, according to Department of Finance data. That included the first homes in what eventually will be a massive 10,000 unit series of communities in the city of Folsom south of Highway 50.

Sacramento officials say they have enough planned housing construction in the pipeline in 2019 to top last year’s numbers.

Sacramento housing analyst Greg Paquin said builders in the Sacramento region are reacting to population growth here, including from Bay Area refugees.

There is “a general feeling that the economy is sound, job growth is strong and more importantly, wages are rising,” Paquin said. “People are generally feeling optimistic and not necessarily worried about a recession this year or next. All of this together results in greater consumer confidence and a greater willingness to purchase a home and, more importantly, greater buying power.”

Sacramento also won notice last month from the Terner Center for Housing Innovation at the University of California, Berkeley, which cited the city’s recently reformed housing fee structure.

Typically, California cities and counties impose development fees on new homes that can top $30,000, driving up the ultimate cost of the home for buyers.

A Terner Center review found that Sacramento’s fee system, after a series of recent changes, was estimated at $17,257 for a multi-family unit and $21,174 for a single-family unit, not including utility fees. The Terner Center said those were among the lowest of a handful of cities studied.

However, the report stopped short of concluding the fee changes were having an immediate impact on the level of housing development.

David Garcia, policy director at the Terner Center, said it’s too early to know for sure and that researchers would have to control for other factors, such as the cost of labor, materials and land. At least compared to other places, the fee changes appear to be better, he said.

“We’ve observed that a lot of cities don’t necessarily take into account the impact that a change in fees might have on the ability of the market to deliver homes in their city,” Garcia said. “Sacramento stands out as being more thoughtful than many other cities in determining what their fees should be and balancing them with their housing priorities.”

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