Report: To cut housing prices 10 percent, California needs 20 percent more units

Sheet metal worker Benjamin Voget prepares to install a gutter on a home under construction in Sacramento, Calif. Gov. Jerry Brown and Democratic legislative leaders promised to tackle California's housing crisis in the final weeks of the legislative session by pushing a package that includes money for low-income housing and regulatory reforms. Lawmakers say the housing shortage is affecting people throughout the state at nearly all income levels. less Sheet metal worker Benjamin Voget prepares to install a gutter on a home under construction in Sacramento, Calif. Gov. Jerry Brown and Democratic legislative leaders promised to tackle California's housing ... more Photo: Rich Pedroncelli, Associated Press Photo: Rich Pedroncelli, Associated Press Image 1 of / 79 Caption Close Report: To cut housing prices 10 percent, California needs 20 percent more units 1 / 79 Back to Gallery

It could take decades and cost billions to build enough housing to make even a modest dent in home prices in the Bay Area and across the state, a team of economists reported Wednesday.

The quarterly UCLA Anderson Forecast casts doubt upon efforts in San Francisco and surrounding communities to lower the cost of living, suggesting that investments far beyond what is contemplated would be needed to stop folks from paying exorbitant prices for wallpapered shoeboxes within a scooter’s distance of San Francisco Bay.

Jerry Nickelsburg, director of the UCLA forecast team, said it would take 20 percent more housing to achieve a 10 percent reduction in prices. Such a reduction throughout California would bring costs down roughly to 2014 levels, he said, citing figures provided by the Legislative Analyst’s Office.

An increase of 20 percent would, by all accounts, be a daunting task. Starting in 1980, it took 30 years for Los Angeles and San Francisco to increase housing stock that much, according to a study by the legislative analyst.

California needs to build 180,000 units of housing a year to keep up with demand, but falls 80,000 units short, according to Gov. Jerry Brown’s housing department. Catching up to the demand, the department said, would cost an additional $26 billion.

“In California, we are building 100,000 new homes for the whole state,” Nickelsburg said. “So, to make a significant dent requires a very large commitment by the state to build lots of housing.”

The issue has beleaguered Bay Area politicians and residents as housing shortages have pushed median prices of homes into seven figures in many areas and added gridlock to the roads as workers are pushed farther from their jobs. Surveys show that wide majorities of Bay Area residents view affordable housing as one of the region’s most critical issues.

A poll by the UC Berkeley Institute of Governmental Studies found that 51 percent of Bay Area voters have considered leaving the area as a result of rising housing costs.

Brown declared in his recent budget summary that about half of all California households are spending more than 30 percent of their income on housing costs, while nearly one-third — about 1.7 million households — are spending more than 50 percent.

A central problem is that building housing that meets affordability standards costs an average of $332,000 per unit, with San Francisco construction costs soaring well above the norm, topping out at $591,000 per unit.

Gov. Brown is now deciding whether to sign 15 bills passed by the state legislature that seek to spur affordable housing development, address homelessness and tackle rising housing costs.

In his report, Nickelsburg looked at what Sacramento is doing to mitigate the crisis and concluded that current legislative action “will not do much to alleviate the high cost of living in California in the near term.”

To fill the gap, he said, cities will have to target construction for certain segments of society, as San Francisco did recently when it committed a plot of land and $44 million in public funds toward building affordable housing for teachers.

“If one takes the position that affordable housing in San Francisco is not going to happen anytime soon — and I think that is accurate — then the political decision has to be made that there are certain individuals, because of their characteristics or employment, who you want to provide access to housing,” Nickelsburg said.

Another way to lower prices would be to expand the area in which people can live and still reasonably commute to work. One way to do that, he said, would be to hurry and build the long-planned bullet train between San Francisco and Los Angeles.

“The way to look at this is that the demand for housing in the Bay Area is not just people living in the Bay Area, but all of the people in California, the United States and internationally who want to live in the Bay Area,” he said. “You need to build a large number of new homes in the Bay Area to drive down the price in any significant way.”

Peter Fimrite is a San Francisco Chronicle staff writer. Email: pfimrite@sfchronicle.com. Twitter: @pfimrite