California's population growth never seems to change much - a half-million more people per year, give or take. But where all those people come from and what the growth means for the future of the state are always changing.
Here's a good example, courtesy of demographer Hans Johnson of the Public Policy Institute of California: During the 1990s, California added 4 million people - but only 60% of them (2.5 million) were adults, while 40% (1.5 million) were children. In the first decade of the 21st Century, we're looking at adding about 5 million people. But this time around, 90% of them (4.5 million people) will be adults and only 10% (500,000) will be children.
The reason is simple: The vast increase in Latino population during the 1990s was due largely to extremely high Latina fertility rates that are typical of first-generation immigrants. But Latina fertility rates are decreasing, and all the Latino kids born during the '80s and '90s are growing up. The result is a bubble - a kind of “Latino baby boom” - that is going to drive the demand for all kinds of things in California over the next several decades.
As Johnson pointed out during a recent conference of housing data nerds in Berkeley, the Latino baby boomers have been driving the vast need for additional K-12 schools over the last decade. Now this group of kids is beginning to generate an enormous demand for higher education that the state will struggle to handle. And over the next decade or so, they'll hit the housing market like a tsunami.
Everybody knows that the housing market in California has been out of whack for more than a decade. After a boom during the 1980s, housing production died during the recession of the early '90s. Even after the recession ended, the state produced only about 100,000 to 150,000 units per year during the late '90s - half what the housing experts told us we needed.
California got away with low housing production for several reasons, not the least of which was the structure of the population growth. For the first time in the state's history, a huge portion of population growth came in the form of children, who, obviously, don't live in their own houses. And any demographer will tell you that immigrants are much more likely than natives to live in extended families.
Housing production has increased steadily during the last few years and recently hit an annual figure of 200,000 for the first time in decades. Even so, the long-term under-production is now catching up with us, as the ongoing increase in housing prices has proven. If Johnson and other demographers are right, even the recent, higher level of housing production will not come close to meeting demand in the next few years. Immigrants may live together in large extended families, but their children - the second generation - are much more likely to live in smaller households like other native-born groups.
“In 2000, California's second generation was concentrated in children,” Johnson told the Housing Statistics User Group West meeting at the University of California, Berkeley. “And that population, that second generation, in the next 10 to 20 years is going to be aging into the prime household formation years. We're not going to have the same kind of increase in immigrants that we saw in the 1990s. Instead, what we're going to have is a very large second generation that's going to be coming through the colleges, entering the labor market, and looking for housing.”
In the very long run, this pattern is actually going to mean fewer people than demographers previously expected. Last spring, the Department of Finance demographers adjusted their long-term population forecast downward because they now assume lower Latina fertility rates, a result of the second-generation phenomenon. The state is now expected to hit 51 million people by 2040. That's a few million less than the previous forecast. And the Latinization of the state will continue. The state demographers estimate that, by 2040, 53% of the state will be Latino, while only 23% will be white.
Still, there is little doubt that as a state, California must plan for more housing during the next two decades. The question is what kind. As Johnson says, “Not all population growth is equal when it comes to housing demand.”
Most of the recent population growth in California has been concentrated among lower-income groups that would typically be renters. But until the last few years, the vast majority of housing production in the state has been in the form of single-family detached ownership dwellings - seemingly an enormous mismatch between supply and demand. As this column has suggested before, this has meant that all kinds of households - large and small, rich and poor - have been shoehorned into traditional suburban housing.
We now see more multifamily construction, but this is occurring mostly in the coastal areas where land prices are extremely costly and entitlements are very difficult to obtain (see CP&DR Insight, June 2004). These expensive new apartments and condos are not being built for immigrant families. Meanwhile, three-quarters of housing production in the state is still in single-family detached dwellings, with lot size and unit price changing depending on where in the state the construction is taking place.
Is this a good match to the emerging market? Oddly enough, maybe. Again, as the demographers always point out, it depends on what kind of pattern emerges in housing demand. As Johnson notes, if you take today's income and educational levels and roll them forward by race and ethnicity, you would see a huge demand for low-cost housing. But that scenario is not likely to happen because second generation Latinos are ascending rapidly in educational attainment and income - and education and income are generally the best predictors of what housing demand is going to look like.
Simply put, as the children and grandchildren of Latino immigrants ascend into the middle class, they are going to be looking for housing that matches the traditional California dream. The big question is whether it will still be there for them. In the coastal areas, postage-stamp lots are now beyond the reach of the middle class. In the inland areas, the dream now involves a nearly intolerable commute that is likely to get worse. Sometime around 2015, something has got to give.
