Southern California Real Estate Essay, Research Paper

There is shortage of housing in Southern California, because the builders have failed to keep up with the robust job and population growth related to the communities clamoring against urban sprawl and overcrowding. But Southern California has a bigger supply of affordable houses than it knows. This article focuses on San Bernardino, which is a region desperate for affordable housing. Ironically, the housing that is needed already exists and is vacant. In the first place, the city is not very appealing to newcomers, because of its reputation for high crime, unemployment and poverty rate. Despite the fact, that a lot of these issues have been improved, there is still about “1,000 foreclosed houses, almost all owned by Department of Housing and Urban development”(Lee C4). Some nine thousand of other housing is said to be rentals. “Although the high share of rental houses isn’t itself a bad thing, the problem in San Bernardino is that typical home prices are just about the lowest in Southern California”. Owned by out-towners, the houses are not taken care of and there is no one to find customers for them. Furthermore, the owners have no motivation to renovate the houses, so Mrs. Ohlasso’s, an economist, proposition about giving first-0time homebuyers incentives won’t work. The landlords are holding on to the houses in hope of good rental income with minimal taxes, and in hope of rising prices. The sales have picked up, but the houses are bought by investors, meaning more rentals, which does not point to a quick turnaround in San Bernardino.

The general problem, upon which this article touches, is the supply and demand for housing. Due to a price ceiling, which is a legal maximum on the price that may be charged for a commodity, set on the price of housing, a shortage has occurred, for at the lowered price more people are willing to buy but property owners are not satisfied and thus do not provide enough housing to meet the public’s demand. In San Bernardino, this problem is visible through the following: Obviously, the landlords don’t get the amount of money they could be earning if this were different area, therefore they are unsatisfied. Discouraged by the low rents, they allow their property to be inadequately maintained, and now, such abandoned buildings become a threat to public safety. This leads to a viscous cycle, for the area already is not very popular due to the public’s opinion about it. In such case, more possible customers are repelled. The author also writes that more investors decide to buy property for rental purposes, however that just diminishes the amount of good, affordable housing that might have attracted private buyers. Those future landlords will also become discouraged and cause the deterioration of perfectly good houses.

My suggestion is to first, convince the present landlords to default on their properties or sell them back to the Housing Department. This should be started with those landlords who are currently losing a lot of money, because for them the opportunity cost (the cost of the next best alternative) of this transaction will be much more appealing and reasonable than keeping the house. Secondly, the Housing Department should invest some money into renovating as many of the houses as possible, as well as improving the neighborhood and the life quality in general. Such houses could be released into the market and made available to seeking private buyers.