Yu: The City of Los Angeles, especially under Mayor Eric Garcetti, is very eager to attract more international attention and investment. I think that is good. In terms of infrastructure, we are facing a problem. We are facing a limited housing supply, but there is another type of infrastructure that is a barrier for our housing supply, and that is transportation infrastructure. We don't have a very good or widespread transportation transit, so when we have a high density project proposed by developers, it is easy to use traffic congestion as a reason to block development. It is unfortunate. The lack of transportation infrastructure makes it harder for us to build up as opposed to other cities like New York City, where they don't have to worry about traffic congestion. More people are aware in the private sector, and I think they are going to do more to improve this infrastructure.

GlobeSt.com: In addition to transportation, we also hear a lot about CEQA reform and general plan updates. Are these also contributing to the housing crisis?

Yu: All of these things have to be changed: zoning, general plan, and so on. Right now, there is a trend toward mixed use, and part of it is residential. It used to be illegal, but the city has become more welcoming of this kind of development, but we still see local resistance to this high density development. Everything has to be changed, including the suburban mentality. Los Angeles is such a great city, but unfortunately is becoming unaffordable to a lot of young people. Most of West Los Angeles is single-family housing, and that means that we can't accommodate more people here. It would help to make these into three or four story properties that could accommodate more people and reduce home prices.

GlobeSt.com: What are the economic impacts of a housing affordability crisis?

Yu: Right now, we have normal 2% growth, but if we don't have the additional housing supply and demand is still increasing. Then, you would see much higher home prices and the cost of living would increase. Los Angeles right now is number one in price to income ratio, which means we are the least affordable for homebuyers and renters. Essentially, Los Angeles is competing for talent with Seattle and other cities, and those places will be able to offer higher wages because the cost of living is lower. That means that our businesses would have to pay higher wages in order to attract talent here. It is harder for us to attract talent here and it is harder for businesses to sustain because costs are higher. The housing crisis, as a result, could drive businesses out of California, and in fact, we have seen almost all manufacturing businesses leave California.

GlobeSt.com: What is your forecast for this crisis?

Yu: I would say that if we could provide more supply to meet the demand, we could create more opportunity and make it good for business. Right now, the city is trying to build very aggressively, and I think they are providing some relief. The situation will get better if they continue, but the home prices are not going to become affordable overnight. It is still going to be expensive, but the high growth is going to slow down. As we see more housing supply coming to the market, rent will slow down, and rent is an indicator of home prices.

The housing affordability crisis in Los Angeles is getting worse. Home prices and rental rates are the most unaffordable in the country, according to William Yu, an economist at the UCLA Anderson Forecast. The Anderson Forecast recently released its economic outlook for California, and Yu, one of the economists who worked on the report, found that that Los Angeles has the highest income to price—both home and rental prices—ratio in the country. To find out more about the housing affordability crisis and the economic impacts, we sat down with Yu for an exclusive interview.

Globest.com: What is causing the housing crisis in California?

William Yu: It is good to see higher home prices as a result of higher demand, but it is not good to see higher home prices because of a limited supply. I personally think this is a bad situation we are seeing in California. This is more of a problem in the long term than in the short term, not only for Los Angeles but for all of coastal California metros. We see this is as a fundamental supply and demand problem. We have strong demand because of the natural cultural amenities in California, which makes the housing market attractive to both the American buying market as well as wealthy international investors. On the other hand, we have a supply problem, and that is happening for many reasons: because of CEQA; because of NIMBY culture. As a result, the supply cannot catch up with demand and there are unaffordable rents.

GlobeSt.com: What is driving the increasing demand, and do we have the infrastructure to accommodate it?

Yu: The City of Los Angeles, especially under Mayor Eric Garcetti, is very eager to attract more international attention and investment. I think that is good. In terms of infrastructure, we are facing a problem. We are facing a limited housing supply, but there is another type of infrastructure that is a barrier for our housing supply, and that is transportation infrastructure. We don't have a very good or widespread transportation transit, so when we have a high density project proposed by developers, it is easy to use traffic congestion as a reason to block development. It is unfortunate. The lack of transportation infrastructure makes it harder for us to build up as opposed to other cities like New York City, where they don't have to worry about traffic congestion. More people are aware in the private sector, and I think they are going to do more to improve this infrastructure.

GlobeSt.com: In addition to transportation, we also hear a lot about CEQA reform and general plan updates. Are these also contributing to the housing crisis?

Yu: All of these things have to be changed: zoning, general plan, and so on. Right now, there is a trend toward mixed use, and part of it is residential. It used to be illegal, but the city has become more welcoming of this kind of development, but we still see local resistance to this high density development. Everything has to be changed, including the suburban mentality. Los Angeles is such a great city, but unfortunately is becoming unaffordable to a lot of young people. Most of West Los Angeles is single-family housing, and that means that we can't accommodate more people here. It would help to make these into three or four story properties that could accommodate more people and reduce home prices.

GlobeSt.com: What are the economic impacts of a housing affordability crisis?

Yu: Right now, we have normal 2% growth, but if we don't have the additional housing supply and demand is still increasing. Then, you would see much higher home prices and the cost of living would increase. Los Angeles right now is number one in price to income ratio, which means we are the least affordable for homebuyers and renters. Essentially, Los Angeles is competing for talent with Seattle and other cities, and those places will be able to offer higher wages because the cost of living is lower. That means that our businesses would have to pay higher wages in order to attract talent here. It is harder for us to attract talent here and it is harder for businesses to sustain because costs are higher. The housing crisis, as a result, could drive businesses out of California, and in fact, we have seen almost all manufacturing businesses leave California.

GlobeSt.com: What is your forecast for this crisis?

Yu: I would say that if we could provide more supply to meet the demand, we could create more opportunity and make it good for business. Right now, the city is trying to build very aggressively, and I think they are providing some relief. The situation will get better if they continue, but the home prices are not going to become affordable overnight. It is still going to be expensive, but the high growth is going to slow down. As we see more housing supply coming to the market, rent will slow down, and rent is an indicator of home prices.