Worsened by the pandemic, surge in home prices keeps ownership out of reach for many

David Benda
Redding Record Searchlight

Even before COVID-19, California had a tremendous need for more affordable housing.

But the pandemic has exacerbated the situation as home prices have shot up during the past year, spurred by the virus, which has squeezed the number of homes for sale and increased demand, especially in rural towns like Mount Shasta as some families flee urban areas for a less hectic lifestyle.

“We are definitely feeling the crunch of the lack of affordable housing, or just even housing in general,” said Tessa Clure, who sits on the Mount Shasta City Council.

Home building is booming at the Stonesfair at Shastina Ranch in southeast Redding.

The median sales price for a house in Mount Shasta is just under $580,000, said Brett Waite, a real estate agent in Siskiyou County who also is public policy chair for the California Association of Realtors.

Home values in Mount Shasta were nearly 80% more than the median sales price of $327,500 in Siskiyou County in August, according to the California Association of Realtors.

In Shasta County, the median sale price in August was $389,900, a 24% jump from the same month a year ago, the California Association of Realtors said.

And the affordability crunch in California isn’t expected to improve anytime soon.

In its 2022 “California Housing Market Forecast,” the state association of realtors said “housing affordability is expected to drop to 23% next year from a projected 26% in 2021." That means less than a quarter of households will be able to purchase a median priced home in California.

RELATED: Here's why some believe COVID-19 could be boost to rural real estate markets

The California Association of Realtors forecasts the median sales price in the state will increase 5.2% to $834,400 in 2022. That would be on the heels of a projected 20% increase this year.

While homes are more affordable in the North State, still less than half of all residents in Shasta and Siskiyou counties can afford to buy a median-priced home there, according to the California Association of Realtors' 2021 second-quarter affordability index.

Meanwhile, Tehama County experienced one of the highest declines in the state in affordability as the percentage of households that could afford to buy a house in the second quarter went from 54% in 2020 to 38% in 2021.

"The plunge in affordability was due primarily to the surge in the counties’ median prices from a year ago," the California Association of Realtors said of its second-quarter affordability index.

Also fueling rural markets like Mount Shasta is the ability of people to telecommute, so finding a job before or after they move isn't a necessity.

“I think that we really discovered when the COVID-19 surge hit, when everybody was working remote, we got a ton of Bay Area coming up. At first it was for the recreation but once they were up here, a lot decided they can relocate,” Mount Shasta City councilor Clure said.

The recent spike in housing costs has priced some locals out of the market, especially first-time home buyers, Waite said. 

Paul Engstrom, a former Mount Shasta city councilman who co-owns Shasta Real Estate Group, has lived in Mount Shasta for more than 40 years. He said the place has changed a lot since he first arrived, when it was a lumber town fueled by blue-collar workers.

The first phase of the Kennett Court Apartments on north Lake Boulevard in Redding were quickly leased out.

“Without any logging and that kind of stuff, people moved to other areas where it’s more affordable to build things,” Engstrom said.

Waite said there hasn’t been any large-scale housing development built in Mount Shasta for more than 30 years. She believes there is land appropriately zoned to build on, but it comes down to the cost to build, an issue homebuilders raise in communities throughout the state.

“So, if it doesn’t pencil out for builders to build, they are not going to do it,” she said. “It either has to come to landowners reducing the price of land or you got to have a reduction in fees and taxes involved in building,” Waite said.

Dan Dunmoyer, president and CEO of the California Building Industry Association (CBIA), said the time it takes in California to get a housing subdivision from paper to shovel is significantly longer than other states. And, he added, ultimately that raises the cost of a home.

In a 2018 housing crisis study, the Legislative Analyst’s Office said California’s labor, materials and development fees costs are the highest in the nation.

RELATED: How low inventory of homes for sale is helping boost the North State's housing market  

“Until we address that, we really are not making any headway to build more homes and build more affordable ones,” Dunmoyer said.

Earlier this year in Mount Shasta, the city started the process of updating its general plan, which included what became a controversial proposed land-use element.

Clure said the land-use proposal included higher density zoning, creating greater opportunity for multi-family units like duplexes and fourplexes.

“As we started, there was some contention in our community with a lot of people who did not agree with the land-use element,” Clure said.

The city has paused its general plan update while it waits for its new city manager to start in November, Clure said. They also recently hired a new city planner.

Meanwhile, in Shasta County, Kent Dagg and the Shasta Association of Realtors has asked the city of Redding for money to help build affordable workforce housing.

Their target is single-family homes that could be purchased for around $300,000.

Dagg, the association of realtors government affairs director, has asked the city to set aside $350,000 in American Rescue Plan Act funds. The money would be put into a revolving fund that contractors could draw from to help build the homes. 

Dagg said the city of Redding would administer the fund. At the close of escrow the contractor would pay back the money used from the fund, "so that the next house can be built."

“I would suggest that we establish the fund for one year, and at the end of the year, we build between two and four houses, and we evaluate it,” said Dagg, who was the executive director of the Shasta Builders’ Exchange for nearly 25 years. “If the program worked, we continue it, and if it doesn’t work, the $350,000 goes back” to the city.

Earlier this year, the city of Redding received $16.6 million in federal disaster recovery funds related to the Carr Fire that will be used to build new and rehabilitate old multi-family housing units.

With projects like Kennett Court on Lake Boulevard, Market Center downtown and the Block 7 project in construction downtown, Dagg believes the city of Redding is doing a good job building income-eligible housing.

“What my angle is, is the affordable workforce housing because nobody, public or private, is addressing that,” he said.

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David Benda covers business, development and anything else that comes up for the USA TODAY Network in Redding. He also writes the weekly "Buzz on the Street" column. He’s part of a team of dedicated reporters that investigate wrongdoing, cover breaking news and tell other stories about your community. Reach him on Twitter @DavidBenda_RS or by phone at 1-530-225-8219. To support and sustain this work, please subscribe today.