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The Central Valley is slowly becoming a society of renters.
New numbers from the U.S. Census Bureau show that many counties have seen double-digit growth in renter-occupied households and only modest gains in homeownership — if not single-digit declines since 2011.
In the period between 2011 and 2017, the number of owner-occupied homes in the valley fell by three-tenths of a percentage point, whereas renter-occupied households grew to 103,000, an 11 percent increase, data shows.
It’s perhaps one of the remaining scars left by the Great Recession 10 years ago when the housing boom dropped with a thud. Experts say the trend is not surprising but the consequences could be dire for families in poverty since homeownership is a ticket to creating wealth.
“Parts of the San Joaquin Valley have never really recovered from that. We saw families — especially families of color — who lost all of their family wealth,” said Rob Wiener, director of the California Coalition for Rural Housing.
“So many families in the Valley have not recovered from that economically and moreover, banks are much pickier about the loans they make. There may (be) a whole generation of households in the San Joaquin Valley for whom homeownership is not going to be a possibility, at least not for some time to come.”
- Fresno, Madera, Merced, Placer, Tehama and Yuba counties saw between a 1 and 6 percent increase in the number of owner-occupied households. Homeownership is highest Placer County where 71 percent of households are homeowners.
- Amador, Butte, Calaveras, Kings, Mariposa, Sacramento, San Joaquin, Shasta, Stanislaus, Sutter and Tuolumne counties each saw declines in owner-occupied households between one and six percent.
- Only three counties saw declines in renters: Calaveras, Mariposa and Tehama counties.
The middle of the state has long been considered a bastion of affordable life. Central Valley residents were the least likely to say housing costs are an issue when compared with other major regions in the state, according to a 2017 survey by the Public Policy Institute of California.
Still, the region took the economic downturn on the chin. The rampant building stopped. Homeowners fell underwater. Banks foreclosed on thousands of properties. And in some places, investors swooped in to buy up the leftovers.
“Investors came in and scooped up a lot of property at very low prices just like you’ve seen in Sacramento. That had positives and negatives,” said Jeff Michael, an economist who directs the Center for Business and Policy Research in Stockton.
“The positive is it did stabilize the housing market. The downside is you have a lot of houses owned now by these out-of-town landlords which are not necessarily positive and results in a lower homeownership rate.”
It’s unclear whether the trends point to less interest in homeownership or reflects the tight housing market and the high cost of living. Affordable housing is a dominant subject of conversation in the state with most attention, at least in recent years, focusing on renters.
Michael said renters generally have lower incomes than homeowners so that’s really where the crisis has been hitting.
“Part of the reason the affordable housing crisis is so focused on rentals is that that’s where the biggest affordability problems have been,” he said. “More people are in the rental market as the homeownership rate has declined and we’ve seen rents really escalate at high rates.”
Carolina Reid, a researcher at the Terner Center for Housing Innovation at UC Berkeley, said policymakers have been “gun-shy” to promote homeownership given how the financial crisis played out.
“I think that’s a mistake. A lot of that foreclosure crisis was driven by very predatory lending practices,” Reid said. “If we had given people responsible loan products there would have been not nearly as many foreclosures.”
California’s homeownership rate was the same in 2016 as it was in 1987. Reid authored a report last year on “lease-purchase agreements” as a way to move more low-income people into homeownership. She said the arrangement would have been ideal when real estate prices were still low.
However, low-income and communities of color were largely left on the sidelines at that time, she said.
“At that same moment when we see homeownership being incredibly affordable, banks are saying ‘we’re not going to lend’ and so the only people who can buy homes at the bottom of the market are people who already have wealth or have extremely pristine credit scores,” Reid said. “So who benefits from the house price recovery? It’s white people who already have wealth.”