“I’ve been talking to the school district about their declining enrollment. We’re at 180 this year, 200 next year, and it’s not looking any better,” Councilmember Swanson said on Tuesday night. “I said, as a Councilperson, what is the one thing that I can do that can help make a difference and it’s resounding. ‘We know you’re not a fan of growth but we’ve got to have some market-rate affordable housing, we have to have something for the families to come here. Otherwise we are going to continue to see declining enrollment.’”
It is a relatively easy fix to talk about the need for more workforce housing. But if declining enrollment truly is going to be a continued problem, then a 600-unit housing development is simply a band-aid applied to temporarily stop the bleeding.
Also, Ms. Swanson’s numbers are a bit inflated. The decline in enrollment was just 86, at 8440 down from 8526. The district had projected a drop of 39 students, so the actual drop was a bit larger than expected. There appears to be no projected loss of 200 students either, so it is unclear where she was getting her information.
The question is really where the projections take us and what the district plans to do about it. Right now the projections are for mostly flat, with a slight decline in enrollment over the next decade.
On Friday, the school board candidates, three of whom will have to grapple with school funding issues, were asked about declining enrollment.
Sheila Allen acknowledged that the land use policies are issues for the other side of the aisle, for her counterparts at the city council, however, she did profess the need for more workforce housing, echoing the sentiment of Rochelle Swanson.
“I imagine it’s because of flat housing growth (few new homes being built) and houses are fairly expensive here. … I’m not sure that’s going to change too much in the near future.”
Tim Taylor noted that West Village could generate some students for the district, and the possibility of new housing at the Cannery Park site could do the same.
“But we live in a time when not a lot of residential expansion is going on,” Taylor said.
Back in 2008, the district appeared to be caught flat-footed by a huge drop in attendance, combined with cuts at the state level that led to actions threatening to close schools, cut back on programs and lay off employees.
However, since then the district has been able to plan much better.
Trustee Gina Daleiden stated on Friday, “I can’t tell you with certainty if enrollment declines are a thing of the past, but I can tell you that a thing of the past is the failure to plan for what will be changes.”
One change that the incumbents made was hiring Davis Demographics to do a modernized and updated assessment of Davis demographics based on ten-year projections. This is done so the board can keep their eyes on a moving target.
The district will have to deal with declining enrollment in two ways. First, they will have to rely more on local funding sources. Right now the state bases their money on Average Daily Attendance, an amount paid per student per year. That amount has been set by the state legislature, however it has declined each year due to the budget crisis in Sacramento.
The amount of money thus declines when the district has fewer students. Fewer students, most of whom are spread throughout the district, means that the set costs, personnel and infrastructure, do not decline but the amount of money the district receives does. This leads to the need to contract, whether it is cutting personnel or closing schools.
Mike Nolan argued on Friday, “It’s easier to deal with a decrease in students than an increase.”
But that is not accurate. Increases in students mean more money for the district. At some point, that means the need to build more schools, but right now the district has a good amount of capacity to accommodate increases and thus it is easier to deal with more money than less.
To supplement the state money, the district has passed a series of parcel taxes in 2007 and 2008, and is now looking at one in May of 2011 that would fund up to $600 per parcel.
The more the district can rely on local funding sources, the less the impact from declining enrollment, but as Tim Taylor put it, “declining enrollment is devastating” any way you cut it.
The other way the district has been able to deal with declining numbers of students in Davis is by taking more interdistrict transfers.
Tim Taylor argued, “If we can bring students into the Davis district, they bring money with them.” He mentioned the district’s Da Vinci Charter Academy as “a magnet that has successfully lured students into the district.”
The bottom line here is that this is a difficult issue. Some of the decline may be stayed temporarily by the development at West Village. The city can attempt to develop some of the infill sites and possibly ConAgra. But that is, at the very most, going to temporarily halt the decline. The city is simply not going to grow a lot in the coming years, and property values will remain high.
That means that the solutions to declining enrollment have to come from school district policies rather than land use decisions. The district must plan well and figure out ways to anticipate the problems.
The district must become more reliant on local sources of revenue.
And the district must stay innovative and continue to produce high quality schools that attract others from outside of the area.
Declining enrollment does not have to be the death knell to land use policies or to high quality schools.
—David M. Greenwald reporting
[quote]The district must become more reliant on local sources of revenue.[/quote]
THe Serrano Decision in 1971 ruled that California’s previous method of funding, which like most traditional school districts relied on local property tax revenues: [quote]”fails to meet the requirements of the equal protection clause of the Fourteenth Amendment of the United States Constitution and the California Constitution.”[/quote]
If we are to move back to local sources of revenue such as additional parcel taxes wouldn’t this violate Serrano? Or has the mood/courts shifted so much in 40 years that this no longer matters?
dmg: ““I’ve been talking to the school district about their declining enrollment. We’re at 180 this year, 200 next year, and it’s not looking any better,” Councilmember Swanson said on Tuesday night. “I said, as a Councilperson, what is the one thing that I can do that can help make a difference and it’s resounding. ‘We know you’re not a fan of growth but we’ve got to have some market-rate affordable housing, we have to have something for the families to come here. Otherwise we are going to continue to see declining enrollment.’””
Just bc 600 housing units are built, doesn’t necessarily mean they will be purchased. The housing market is not good at the moment, and it does not look as if it will rebound for a while. Secondly, building houses in Davis will not make them affordable to the average worker. In fact, the people that are apt to be able to afford the new housing could be wealthy seniors with no children. Thirdly, what is being said here? That the town of Davis needs to continually grow bigger to accommodate/effectuate increased enrollment every year bc the school district is incapable of managing its own budget? Is the school district going to provide police/fire protection and other city services to this burgeoning town as it continually grows ever larger for the sake of increasing school enrollment? Does this town exist for the sake of our primary and secondary school system, or do the schools exist because of our town?
For purposes of clarity, what you are calling “DMG” is actually Rochelle Swanson’s statement at the council meeting on Tuesday.
I concur with Elaine’s statement, “Just bc 600 housing units are built, doesn’t necessarily mean they will be purchased.” Further, the developer needs to price the houses at an affordable price. As we saw during the WHR debates, what a developer feels is affordable can be quite different from what “the workforce” feels is affordable. Additionally, banks are putting lots of hudles in the path of granting mortgages even in high income situations. How are they going to handle an application from a family with a “workforce” income?
The realistic approach IMHO is to determine a “right size” that fully factors in the current and continuing demographics of the community and then develop a zero-based budget for that “right-sized” district . . . including both revenues and expenses. The result will accept the fact that Davis will continue to age and the average number of residents per household will continue to decline as a result of that aging.
Once that “right size” has been calculated, then the District can consider enrollment increase initiatives that draw tuition-paying students from outside the District who covet the quality of education the Davis schools provide.
People like me, who are well past the point where children will live permanently in my household, will have to accept that high quality schools are part of the definition of the high Quality of Life we enjoy in Davis, and that paying Parcel Taxes is simply the cost we took on when we came to Davis because of its high Quality of Life.
Interesting question, Dr. How much will we be allowed to improve our schools before they’ve again become “too good” to allow on that track? What a Catch-22. And, a model of unintended consequences theory.
Did Serrano foresee the drop in California’s school support rank–from one of the highest in the nation to one of the lowest? Or, the resulting reduced-quality education throughout the state based on the lowest common denominator (rather than a better state-wide system based on improved funding to poor districts)? The decision’s promise was an improvement on California’s already top-notch education quality, not a downward spiral to 48th or 49th.
Did Serrano foresee the subsequent Proposition 13 aimed, in part, at keeping “our district’s” tax money from being shipped from to “their districts.” Or, Proposition 218 requiring votes on all manner of government assessments which further increased competition for available scarce local resources? Or, the Proposition 13 provision requiring two-thirds votes on budgets, which has pretty much has brought the state legislature to its knees, encouraging unhealthy deals to operate.
I guess we can’t be too critical of the Court for not staying true to the framers’ original intent since our now-massive state constitution is so easily changeable and rapidly changing.
Elaine: Does this town exist for the sake of our primary and secondary school system, or do the schools exist because of our town?
Because Davis has good schools, it is a more attractive place to live if you have kids. I know you and I have gone back and forth on whether Davis schools as they are now are good or not based on your personal experience, but if you look at what else is available in the Sacramento area, this is as good as it gets. A kid friendly environment that Davis has (relative to other Sacramento area communities) means that there is less overall youth crime in Davis. Accessible good schools go far to help stabilize a community.
The housing market is not good at the moment, and it does not look as if it will rebound for a while. Secondly, building houses in Davis will not make them affordable to the average worker. In fact, the people that are apt to be able to afford the new housing could be wealthy seniors with no children.
An underlying false assumption that is being made in this discussion is that the population of school kids is constant over time and that it’s only the economic situation that is keeping families from moving to Davis.
Clearly the economic cycle is a factor, but there has also been a natural decline in kids being born in recent years. Davis has avoided as steep a decline in enrollment as other districts. But that decline will continue for several years because the current birthrate continues to decline due to this recession.
Also, families are not only looking at home ownership. There is a rental market in Davis that is often cheaper and probably worth it if you’re shopping around for good schools for your kids. In Davis, I suspect that the rental market is very mobile, because of the university student population.
wdf1: “Because Davis has good schools, it is a more attractive place to live if you have kids.”
I would agree. But I don’t think our land use policies should be driven solely by what is best for our primary and secondary schools. The schools are not going to have to pay for the extra city services/higher taxes that will be the result if new housing is built. The town does not exist for the sake of our schools… It should be the other way around IMHO…
wdf1: “Clearly the economic cycle is a factor, but there has also been a natural decline in kids being born in recent years. Davis has avoided as steep a decline in enrollment as other districts. But that decline will continue for several years because the current birthrate continues to decline due to this recession.”
And more housing is not necessarily going to fix this issue…
dmg: “For purposes of clarity, what you are calling “DMG” is actually Rochelle Swanson’s statement at the council meeting on Tuesday.”
Thanks for the clarification. I’ll try and be more careful w my attibutions in the future…
Elaine, I am a bit more ambivalent about city planning policy than I am about district schools. But I think we agree that building more houses mainly to improve the school situation is an unsustainable strategy.
But there is a role that the city can play in supporting a kid friendly environment — pools, city sports leagues, etc.
Only other thing I would add is reiterate that it isn’t a decline in enrollment that is really hurting the schools right now. It’s the lack of funding for K-12 education in the state budget.
Bottom line, 75% of Davis doesn’t want more housing at this time or anytime in the near future. The city counsel works for us, they need to start complying to the people’s mandates.
[quote]Did Serrano foresee the drop in California’s school support rank–from one of the highest in the nation to one of the lowest? [/quote]
I doubt it.
For the record I was just asking a question. BTW I think there is a connection between Serrano, Prop 13 and the decline in our schools. Like it or not people are more inclined to support local schools than some statewide mandate. Some cities have already reached a tipping point where the middle class have abandoned the public schools; even in affluent San Francisco that vast majority of white kids go to private schools.
WDF: I think you sum up my sentiments in your post. This is one more reason why I think we have to seriously reform our public compensation system. The more we eat up paying for public employees and their retirement, the less resources we have to provide the kinds of city services that we need.
ban sale of condoms in city limits…
don’t laugh, it makes as much sense as a way to make more kids in Davis as building houses in the hopes that fertile people will fill them, and then refill schools to some unnatural state not supported by our actual residents.
Come on folks- quit with the social engineering!
“… I think you sum up my sentiments in your post. This is one more reason why I think we have to seriously reform our public compensation system. The more we eat up paying for public employees and their retirement, the less resources we have to provide the kinds of city services that we need.”
Are robots performing these services? Public employees perform those duties and, as inconvenient as you seem to find it, they must be paid.
biddlin… in all fairness to DMG, he’s not talking about ALL public employees… just City employees, particularly those earning more than 100k per year with retiree medical benefits, and having a 2.5% @ 55 retirement system or better… I suspect he’d support much higher salaries for those in DJUSD, and much better benefits than they currently enjoy… perhaps a 10% cut for higher paid city employees, with the savings passed on to DJUSD would be in order, in DMG’s view…
As I have discussed many times in the past, and also at the last meeting, new subdivision growth leads to fluctuating enrollment and its attendent problems. When a new subdivision is built, it tends to be populated by people of an age cohort. As their children come along, new schools are built to accomodate the high number of children. The children soon grow up and go to college, and enrollment declines.
This is what happened in the 150’s subdivision where I grew up. New schools were built to accomodate us, and then, when we left home, schools had to be closed down.
The problem is not increasing or declining enrollment, because the school district is funded on a per capita basis. The challenge is to have exactly the right number of schools for the students, and this is always difficult in communities that are building new subdivisions.
Sooner or later, all communities are built out, and they developed mature, mixed-aged neighborhoods with a fairly constant number of students. This has happened in the neighborhood where I grew up. Many empty nesters moved to condos towntown to be closer to ammenities, many retired and moved elsewhere, and many passed on over the years, families with young children moved in, and the neighborhood now has people of all ages. The number of school children is fairly constant.
The school districts in the build-out communities where I have lived have been among the best in the nation, even though they do not build new subdivisions.
Building new subdivisions leads to more, not less, instability in enrollment with alternating overenrollment and underenrollment. If we try to match the number of children with the number of schools via new subdivision growth, any solution will be temporary and will just kick the can down the road.
One little point that no one brings up: I was just talking with a friend who works in Davis but can’t afford to live here. Because of the space in our schools, he can now enroll his children in Davis schools. It is his belief and mine that building a new subdivision would not bring prices down to a level that would allow him to live here, but might mean that people like himself who work in Davis would not be allowed to enroll their children here.
What you are saying might be true in a situation where supply is not being artificially constrained but isn’t true for Davis. You build enough housing and prices come down and people with kids will be able to afford to live here. Restricting supply causes a hollowing out and a move towards student rentals not an even age demography.
If you can’t afford to live here but work here and put your kids in Davis schools you are a victim of Davis housing policy not a beneficiary. More than anything you are an example of the unintended consequence of restrictive housing policy, de-facto leapfrog development ala Spring Lake.
I agree with Sue and Gunrock’s tongue-in-cheek statement. I don’t know the history of Davis school enrollment, but I am sure that sometime in the last 20 years or so there were fewer students in the system than there is today, and the schools were still excellent. The myth of endless growth being essential to maintain good schools is just that. Davis will mature, the overall population will stabilize, as will the student population, and everything will be just fine.
[quote]I am sure that sometime in the last 20 years or so there were fewer students in the system than there is today, and the schools were still excellent. [/quote]
While this is a true statement, at the same time it misunderstands the dynamics of what a shrinking enrollment does in terms of putting stress on the system to contract in uneven increments – which means less money overall and difficulties in cutting personnel and possibly closing schools.
Mr.Toad said . . . “What you are saying might be true in a situation where supply is not being artificially constrained but isn’t true for Davis. You build enough housing and prices come down and people with kids will be able to afford to live here. Restricting supply causes a hollowing out and a move towards student rentals not an even age demography.”
I’m not sure I understand your last sentence, so I’ll simply respond to your first two sentences. How is supply being artificially constrained? There is no evidence that prices will come down in Davis. The high prices are a result of the very high Quality of Life that Davis delivers to its residents and its workforce. Each year UCD graduates approximately 7,000 – 8,000 students. Well over 50% of those students would like to come back to Davis to live. So in order to create a supply of houses that could keep up with the demand, Davis would have to add 5,000 new houses each year just to keep up with the demand from a single class of graduates. Prices would not come down until the supply exceeded the demand, and given the existing inventory of alumni and alumnae from prior graduated classes, that won’t happen unless Davis’ population reaches 250,000.
Of course with a population of 250,000 Davis wouldn’t be Davis anymore. It would be Tucson.
I do know the history of Davis school enrollment. My kids were in the schools here in the last 20 years.
The district’s ability to project accurately has never been good, to put it mildly. Mace Ranch and Wild Horse came were built in the 1980’s and 90’s. Over-enrollment then caused major dislocations. The junior high schools were bursting at the seams: when my daughter attended Holmes, there were 1100 students there. Using faulty assumptions, two new elementary schools and a new junior high were built. Re-drawing the attendance boundaries caused passionate outcry. When enrollment was steady — instead of growing, as had been projected — the oversupply of facilities led to the closure of Valley Oak.
I agree that declining enrollment is easier to manage than increasing enrollment.
Further, Mr. Toad, unless the developers of new housing price their new houses differently than they have been doing over the past 10-20 years, there will be no decline in housing prices. There is nothing artificial about a developer wanting to extract the highest possible price for the houses he/she builds. Its capitalism pure and simple.
David M. Greenwald said . . . “While this is a true statement, at the same time it misunderstands the dynamics of what a shrinking enrollment does in terms of putting stress on the system to contract in uneven increments – which means less money overall and difficulties in cutting personnel and possibly closing schools.”
David, all businesses deal with stresses. All businesses find cutting personnel challenging. All businesses face challenges that can cause them to close plants, or offices, or storefronts, or restaurants. Why do you think that schools are (should be) immune to that reality?
Some Sacramento-area stats:
Davis/El Macero
On the market: 328
Sold in September: 25
(12 Davis, 13 El Macero)
median price drop in last year, Davis: 6%
El Macero: 20%
Median price Davis: $406,000
Dixon: 270
Sold in September: 21
median price drop: 17%
Median price: $330,000
West Sacramento: 755
Sold in September: 23
median price drop: 5%
Median price: $237,000
Woodland: 582
Sold in September: 57
median price drop: 4%
Median price: $200,500
Total on the market: 1945
Total sold: 126
So how many homes would have to be built in Davis to cause the home prices in Davis to drop faster than the home prices are dropping in surrounding communities?
Matt: I am not suggesting that schools shouldn’t, but trying to offer the full picture.
Matt, adding to supply will eventually bring prices down. The notion that we can’t build enough to do so defies the laws of supply and demand. The only reason that developers still want to build here is because restricting supply has left this the only economically viable place to build in the area. Adding to supply will cause prices to moderate either for the new construction or for the existing supply. A worst case scenario for the developers is a diminishing returns model that will still be profitable for a quite some time. I agree that to build oversupply to bring prices down to the $100/sq ft level we see in Woodland or Dixon would not happen here simply because we have self inflicted restrictions on land available for development.
One of the problems that exists in the housing market is the expectations that people have after the long run up in prices for real estate. Many many people think that it is only a matter of time until the up trend returns. Of course they could be right but only if the feds quantitative easing causes so much inflation that the dollar devalues. Of course this would not really be an increase in intrinsic value but it might be enough to keep more people from being so upside down in their mortgages that they don’t strategically default or be unable to refinance. However if that level of inflation occurs interest rates will tick up. This uptick will also bring prices down since housing costs for a mortgage have two variables; principal and interest rates. Right now the fed is trying to prop up the real estate market by suppressing interest rates so that people can afford a mortgage without putting more existing home owners under water.
The result is that prices won’t be going up for a long time, therefore adding to supply will in fact reduce prices going forward. If developers can still make good money with reduced margins they will build. Since Conagra already owns the land they are in a good position to make money while adding to supply even if it causes prices to come down by doing so. This will make Davis a better place to live; more affordable, more diverse and more economically powerful. Davis doesn’t need a business park it already has one, its called UC Davis. It is a post-industrial powerhouse with a multi-billion dollar annual budget. What we need is housing.
Mr. Toad: What we need is housing.
Huh? Let’s try this again:
Total on the market: 1945
Total sold: 126
How many more do we need?
Lots more until median incomes can buy the median priced home say around 150/square ft
The problem is, as soft as the market is, with the amount of housing on the market, if it hasn’t dropped yet, it just isn’t going to drop. You keep hanging on a hollow hope here. Your best strategy would be limited equity and other market-controlled devices. The open market has too much pent up demand to reduce housing prices in a place like Davis until and unless it is no longer “Davis”
Mr. Toad said . . . “Matt, adding to supply will eventually bring prices down. The notion that we can’t build enough to do so defies the laws of supply and demand.”
MT, you clearly didn’t understand my point, which was that there is so much demand in the Davis housing supply/demand equation that the supply numbers needed to balance the equation (much less unbalance it so that prices come down) is to all intents and purposes astronomical.
Restating my original point in more understandable terms, the current inventory of unmet demand for Davis housing is somewhere in the vicinity of 100,000 units. That is over 20 years of upwards of 7,000 annual UC Davis graduates who would in the perfect world like to move back to Davis to experience Davis’ Quality of Life for the rest of their lives. That doesn’t even include the non-UCD graduates like my wife and myself who came here 12 years ago and quickly recognized how good Davis’ Quality of Life is, and never left, and won’t be leaving any time soon. Until those 100,000 units are built, the supply and demand curve for housing in Davis will continue to thrive at its current levels.
Mr. Toad: What we need is housing.
Huh? Let’s try this again:
Total on the market: 1945
Total sold: 126
How many more do we need?
I’m not sure I understand why this statistic is relevant, for two reasons. First, if the planning process begins today for a new housing development, it will be years before the first new house is built. If an appropriate amount of demand is not available once the planning process is complete and approved, then no new houses will be built. Secondly, the point that some folks have been making in this thread is that we need to do things that stabilize/increase the primary school student population. Unless the 328 houses that are on the market in Davis are vacant, then selling the existing stock doesn’t help with the student population.
Restating my original point in more understandable terms, the current inventory of unmet demand for Davis housing is somewhere in the vicinity of 100,000 units. That is over 20 years of upwards of 7,000 annual UC Davis graduates who would in the perfect world like to move back to Davis to experience Davis’ Quality of Life for the rest of their lives. That doesn’t even include the non-UCD graduates like my wife and myself who came here 12 years ago and quickly recognized how good Davis’ Quality of Life is, and never left, and won’t be leaving any time soon. Until those 100,000 units are built, the supply and demand curve for housing in Davis will continue to thrive at its current levels.
Matt – I’ve seen this argument posited by you and others from time to time. I just don’t buy the proposition that Davis, San Luis Obispo, and the myriad of other college towns for whom the college experience is something they would like to relive for their entire lives, are somehow immune to the natural phenomenon of supply and demand. It has also been posited on this column recently that the opposite is true – that the limitation of the availability of housing has helped prices remain strong. I’m pretty sure that housing prices in Davis would decline, perhaps substantially, if we added just 10,000 homes within a couple of mile radius of Davis over the course of say, 10 years.
BTW, where might I find the statistics that you are referencing regarding the annual housing demand from graduating UCD students? This seems awfully high, since for them to live here, they’d also have to find jobs in close enough proximity to Davis to choose to live here. Oh yeah, perhaps if we built that business park that we’ve been discussing on this blog….
That is over 20 years of upwards of 7,000 annual UC Davis graduates who would in the perfect world like to move back to Davis to experience Davis’ Quality of Life for the rest of their lives.
How do you figure that 7000 UCD graduates per year want to settle in Davis?
Adam: I think Davis is more likely than San Luis Obispo. San Luis Obispo does not have a lot of jobs that graduates can get, but Davis is surrounded by a huge metro-area and a large regional population.
WDF: I think Matt’s point, somewhat exaggerated in numbers is mechanically correct. Given housing, a large number of people would move to Davis whether grads or not grads given the character of the community.
Adam: “First, if the planning process begins today for a new housing development, it will be years before the first new house is built.”
So do we plan our community in hopes that the market will increase or in response to market needs?
Adam: “Secondly, the point that some folks have been making in this thread is that we need to do things that stabilize/increase the primary school student population.”
And the question that many have is whether building housing will stabilize or increase the primary school student population or how many it will take.
What’s the vacancy rate on apartments in Davis these days? Based on travelling around town and seeing signs in front of apartments, well past Aug. 31, I suspect that it may be higher than it has been in recent years. When factoring in everything, there’s a point where renting maybe a better option for some.
Adam Smith: “I’m not sure I understand why this statistic is relevant, for two reasons. First, if the planning process begins today for a new housing development, it will be years before the first new house is built. If an appropriate amount of demand is not available once the planning process is complete and approved, then no new houses will be built. Secondly, the point that some folks have been making in this thread is that we need to do things that stabilize/increase the primary school student population….”
The point is that there is a massive oversupply of housing in the surrounding communities. Dixon, West Sacramento, and Woodland all approved and built large numbers of homes over the last decade. Those three communities are providing median-price housing for Davis employees, and have been for quite some time. Davis builders will just build more expensive homes to add to the existing stock of expensive Davis homes.
Building houses doesn’t “stabilize” enrollment. If anything, it destabilizes it. Anybody who was here during the 1990’s is aware of how difficult it is to project the age spread and actual enrollment figures. Interdistrict transfers are much more effective, as they can be regulated (up to a point; once a child is in, state education code says they really can’t be cancelled).
The reality is that workforce housing is already in our neighboring communities and I haven’t seen any builder propose median-price homes — much less lower-priced ones. Is ConAgra proposing homes that would sell for $200 – 250,000? I doubt it. So if you are concerned about the workforce, provide transit. If you are concerned about the school district, provide transfers. The housing/enrollment argument is stronger in theory than in practice.
Adam Smith: “If an appropriate amount of demand is not available once the planning process is complete and approved, then no new houses will be built.”
Has anyone asked the representatives from ConAgra what the timeline is for building on the site? If they aren’t planning to build soon, what is the hurry on rezoning?
The point is that there is a massive oversupply of housing in the surrounding communities. Dixon, West Sacramento, and Woodland all approved and built large numbers of homes over the last decade. Those three communities are providing median-price housing for Davis employees, and have been for quite some time. Davis builders will just build more expensive homes to add to the existing stock of expensive Davis homes.
I think the better way to make this point is that at the current price and market condition, there is backlog of existing homes for sale. The market is in a pretty precarious position now, and many potential owners are concerned about making an investment now. The same is true for almost all types of real estate. This situation could change drastically in a couple of years, or it may not. But is doesn’t mean the planning process should stop, or that communities like ours should stop trying to figure out how bring new jobs into our area. Davis, because of UCD and the proximity of SF and the state government in Sac has a lot to offer to businesses to locate here, if we have a suitable approval process and appropriate housing.
Don, if I understand your point, you are refuting Matt’s point about unmet demand in Davis – He says that we need 100k homes to meet demand (although that seems to be an outlandish figure), you say that the 1945 homes in a 10 mile radius and 326 in Davis is way too much. I do believe that Davis is a more attractive site than the surrounding cities,but not to the point that we suspend the laws of nature. The attractiveness of Davis is due to mulitple reasons, but IMO it is primarily because of the school systems, which was the original point of concern for this blog. If we let the school systems decline to the point that they are unattractive to those who care a lot about the educational choices for their children and are willing to make expensive,sometimes painful choices in order to provide a sound education for their children, we will see the Davis premium erode as families locate elsewhere.
Don Shor: “The district’s ability to project accurately has never been good, to put it mildly. Mace Ranch and Wild Horse came were built in the 1980’s and 90’s. Over-enrollment then caused major dislocations. The junior high schools were bursting at the seams: when my daughter attended Holmes, there were 1100 students there. Using faulty assumptions, two new elementary schools and a new junior high were built. Re-drawing the attendance boundaries caused passionate outcry. When enrollment was steady — instead of growing, as had been projected — the oversupply of facilities led to the closure of Valley Oak.”
Sue Greenwald: “Sooner or later, all communities are built out, and they developed mature, mixed-aged neighborhoods with a fairly constant number of students. This has happened in the neighborhood where I grew up. Many empty nesters moved to condos towntown to be closer to ammenities, many retired and moved elsewhere, and many passed on over the years, families with young children moved in, and the neighborhood now has people of all ages. The number of school children is fairly constant.
The school districts in the build-out communities where I have lived have been among the best in the nation, even though they do not build new subdivisions.
Building new subdivisions leads to more, not less, instability in enrollment with alternating overenrollment and underenrollment. If we try to match the number of children with the number of schools via new subdivision growth, any solution will be temporary and will just kick the can down the road.”
And this is why using land use policies to increase residential development as a way to continue increasing student enrollment is a bad idea. Eventually Davis would no longer be a small desirable town w a good educational system, but a much, much larger city with a whole new host of problems. For every new house that is built, comes city services that must be paid for by existing taxpayers for starters… for example a fourth fire station, more police, and the list goes on. Davis loses its small town character, and is forced to sprawl out (infill will only accommodate so much additional housing) which so many in this town decry… Be careful what you wish for if you want huge amounts of new housing to be built to keep up the numbers for increasing school enrollment…
And frankly, it is very, very unlikely building more houses will result in declining housing prices in Davis…
Adam: I think Davis is more likely than San Luis Obispo. San Luis Obispo does not have a lot of jobs that graduates can get, but Davis is surrounded by a huge metro-area and a large regional population.
Adam: “First, if the planning process begins today for a new housing development, it will be years before the first new house is built.”
So do we plan our community in hopes that the market will increase or in response to market needs?
David – I think the market in SLO is very similar to Davis. Your point regarding proximity of SF and Sac is fair, but the price behavior of residential real estate in the two communities is similar. SLO is generally more expensive than Davis, and I think it’s price performance has been similar over the last 3 years has been similar, although I have not checked on the SLO market in a few months.
I think the answer for planning is that it has little to do with current market conditions. It should be very forward looking. It has to do with making the community into what it wants and needs, not at the moment today, because planning has little ability to immediately impact supply or demand, but it can certainly influence/control how the community looks and works over time. At this point in time, I believe community planning should be working to increasing the diversity of the job base, working to stabilized the funding for the schools (theoretically this would mean stabilizing the school age population since it is directly related to funding) and providing adequate housing nearby to job location, so that carbon footprint and petroleum based energy consumption are minimized.
wdf1 said . . . “How do you figure that 7000 UCD graduates per year want to settle in Davis?”
First, I don’t. That would be 100% of the UCD graduates. However, I would say that, if polled, over half of each year’s UCD graduates would say that they would like to have davis as their permanent home . . . as long as they could be gainfully employed.
Adam Smith said . . . “Matt – I’ve seen this argument posited by you and others from time to time. I just don’t buy the proposition that Davis, San Luis Obispo, and the myriad of other college towns for whom the college experience is something they would like to relive for their entire lives, are somehow immune to the natural phenomenon of supply and demand. It has also been posited on this column recently that the opposite is true – that the limitation of the availability of housing has helped prices remain strong. I’m pretty sure that housing prices in Davis would decline, perhaps substantially, if we added just 10,000 homes within a couple of mile radius of Davis over the course of say, 10 years.”
Regarding your bolded words Adam, the key difference San Luis Obisbo or Santa Barbara or Chico or Arcata all have when compared to Davis is that they are regional hubs. Davis is anything but. The impact that has on the likelihood a graduating student pines for a return is simple, they can commute to work in Sacramentoor the Bay Area, and live in Davis. Ithaca NY was a truly superb place to go to school, but the jobs realities there are that they have PhD’s bagging groceries just to make a living. As a result when it came time to pick a Viticulture Graduate School, the choice between Cornell and Davis was very easy when the jobs situation was factored in.
Adam Smith said . . . “BTW, where might I find the statistics that you are referencing regarding the annual housing demand from graduating UCD students? This seems awfully high, since for them to live here, they’d also have to find jobs in close enough proximity to Davis to choose to live here. Oh yeah, perhaps if we built that business park that we’ve been discussing on this blog….”
I believe you know I wasn’t referencing any statistics. It is possible that UCD surveys its graduates on this question, but I doubt it. For all the reasons noted above, and from random conversations with students and graduates over the past 12 years, it is my firm belief that demand for Davis housing is Regional, not Local. Feel free to disagree if it serves your argument.
David M. Greenwald said . . . “WDF: I think Matt’s point, somewhat exaggerated in numbers is mechanically correct. Given housing, a large number of people would move to Davis whether grads or not grads given the character of the community.”
David, are you accusing me of hyperbole? 8>)
Adam Smith said . . . “I think the answer for planning is that it has little to do with current market conditions. It should be very forward looking. It has to do with making the community into what it wants and needs, not at the moment today, because planning has little ability to immediately impact supply or demand, but it can certainly influence/control how the community looks and works over time. At this point in time, I believe community planning should be working to increasing the diversity of the job base, working to stabilized the funding for the schools (theoretically this would mean stabilizing the school age population since it is directly related to funding) and providing adequate housing nearby to job location, so that carbon footprint and petroleum based energy consumption are minimized.”
Adam (or should I call you Mr. Toad?), IMHO your bolded words above are the existential core of the issue. With that said, what is your vision for Davis over the next 5 – 10 – 25 years? When you state “community planning should be working to increasing the diversity of the job base . . . “ do you include jobs in Sacramento and the Bay Area as part of the community jobs? Said another way, is housing in Davis “nearby” to Sacramento job locations?
Further, is stabilizing housing supply a reasonable proxy for stabilizing the school age population?
Adam Smith said . . . “Don, if I understand your point, you are refuting Matt’s point about unmet demand in Davis – He says that we need 100k homes to meet demand (although that seems to be an outlandish figure), you say that the 1945 homes in a 10 mile radius and 326 in Davis is way too much. I do believe that Davis is a more attractive site than the surrounding cities,but not to the point that we suspend the laws of nature. The attractiveness of Davis is due to mulitple reasons, but IMO it is primarily because of the school systems, which was the original point of concern for this blog. If we let the school systems decline to the point that they are unattractive to those who care a lot about the educational choices for their children and are willing to make expensive,sometimes painful choices in order to provide a sound education for their children, we will see the Davis premium erode as families locate elsewhere.”
Actually he isn’t trefuting my point at all. In the current economic situation 1) all potential home buyers are extremely leery of taking on additional risk, 2) banks are so risk averse that to all intents and purposes they aren’t lending mortgage money in any situation that isn’t a “sure thing”, 3) a “remote” UCD grad who would [u]like to[/u] move back to Davis is much less able to in the current job market, and because of 1) and 2) above they aren’t likely to make a move to Davis unless they already have a job offer in the Davis employment quadrant.
Bottom-line, the current economy dampens the actionable demand.
Which begs the question, developers will only build new houses if they see actionable demand. Do you think your proposed buyers of $150/squre foot housing are in the postion to make their demand actionable?
As a parent of a toddler (with another on the way), as well as newly minted Davis homeowner, I’d like to offer my perspective on declining enrollment.
The barriers to joining the Davis community as a young family are staggering. The job market is extremely soft (not to mention highly specialized), real estate is extremely expensive, and for those of us that have children that are not yet in school, daycare is another huge expense. My point is that housing is but one of many issues facing families looking to grow or to settle down here in Davis.
I think additional housing has little potential to solve this particular issue and I’m of the opinion that there would be numerous unintended consequences, most of which are counterproductive. Promoting transfers from other districts, perhaps to parents who work in Davis, may be an achievable short term solution, and might turn into a tool to help dampen the slump-overshoot cycle by leveraging the reputation of Davis schools.
Also, I’m glad that others have pointed out that stable enrollment may be an exception rather than the rule.
AeroDeo said . . . As a parent of a toddler (with another on the way), as well as newly minted Davis homeowner, I’d like to offer my perspective on declining enrollment.
First, welcome to Davis AeroDeo.
Second, thank you for your insightful contribution to the discussion. Definitely food for thought.
Sac Bee, Oct. 10, 2010: Housing Bust was Crueler to South Sacramento
[url]http://www.sacbee.com/2010/10/10/3093097/housing-bust-was-crueler-to-south.html[/url]
This article above gives an overview of the state of the housing market in the Sacramento area. Several times it speaks favorably of Davis and its slow/no- growth policy.
Matt Williams: As a result when it came time to pick a Viticulture Graduate School, the choice between Cornell and Davis was very easy when the jobs situation was factored in.
I would think climate is a bit more of a factor in this. I didn’t know that Ithaca, NY was a notable grape growing region. Is it?
I’m not Adam Smith.
Over building in nearby communities brought prices down and it would here as well. The saddest part though is the notion that Davis is somehow a green community when it advocates policies that cause leap frog development for its workforce. increasing the carbon footprint of the total population.
wdf1, the climate was definitely a factor, but being able to earn a paycheck was much, much more of a factor.
Virtually every jar of grape jelly sold in America originated in Upstate New York. In addition, Hammondsport was once the Champagne capital of the US. NorCal has long since eclipsed Upstate New York in wine production, but the Upstate New York wine legacy lives on in the form of the world’s largest wine company Canandaigua Wine Company (recently renamed Constellation Brands) owners of Robert Mondavi, Ravenswood and Yolo County’s own RH Phillips.
Mr. Toad said . . . “I’m not Adam Smith.”
Thanks for ending that confusion.
Mr. Toad said . . . Over building in nearby communities brought prices down . . . “
And your evidence for that is . . . ??
Are you serious?
Absolutely!!
Go to zillow.com pick a house for sale they will give you a graph of the price over time of the house, the zip code and the community. Go to MLS for Woodland and you will see housing prices are now in the 100/sq ft range. I’m not a contractor but my guess is that new construction costs more than this. The only way for houses to cost less than their replacement cost is by over supply driving prices down. Now I will qualify that easy lending helped keep the bubble going but the result was that too many houses were built to satisfy demand that would not have existed had it not been for these additional buyers who qualified because the lenders were being imprudent. Still there is a huge price differential in Davis because Davis did not build during the bubble. Everyone thinks that their house is something special but houses are just a high priced commodity subject to the laws of supply and demand.
I don’t dispute your premise that it would take some additional supply to satisfy demand in Davis and bring prices down and that there would be opportunity costs for that housing. This is because of pent up demand from both lack of growth and people wanting to put their kids in Davis schools. This is of course exactly why developers can still make money here. As they say the cure for high prices is high prices.
Matt –
I have a better idea than having Mr. Toad or anyone else waste their time providing explanations that can easily be read in any newspaper. You seem to have a different theory than most others, so it is probably much more useful for you to explain the parallel universe theory of what is generally causing the distress in the residential real estate market in most locations in the country today (other than, of course, there are more houses for sell than there are people to buy them at their current prices).
AeroDeo – Welcome to Davis – my family moved here about three years ago, and chose Davis primarily because of the public school system. We share your concerns re: real estate prices. However, we have found that daycare help is actually less expensive here than other locations because of the availability of very qualified UCD students available to help in home or in the daycare facilities. Also, the job situation in Davis seems much better than in surrounding communities like Woodland, Vacaville, Dixon, Fairfield etc, because of the stability of the UCD jobs vs private industry. Best of luck.
Mr. Toad and Adam, the following numbers are excerpted from Zillow. They cover the time period from September 2000 to December 2005 (November/December was when the housing bubble burst).
Dixon Annual Increase_____4.8%___11.1%___19.5%___14.6%___27.7%___13.5%___148.2%
Woodland Annual Increase__0.6%___17.5%___22.6%___10.8%___26.5%___13.5%___145.0%
Davis Annual Increase_____4.4%___19.0%___19.4%____9.3%___16.7%___11.1%___122.1%
Year______________________2000___2001____2002____2003____2004____2005____Cummulative
122.1%
The numbers tell the story. During the period when you both (in your own ways) say that Davis was artificially constraining housing supply, and Dixon and Woodland were not, home prices in Woodland and Dixon went up approximately 20% FASTER than they did in Davis. So exactly how is it that building more houses kept prices down in Dixon and Woodland during that 51-month period?
Mr. Toad and Adam, the following numbers are excerpted from Zillow. They cover the time period from September 2000 to December 2005 (November/December was when the housing bubble burst).
Year
____2000___2001___2002___2003__2004___2005__Cummulative
Dixon Annual Increase
_____4.8%__11.1%__19.5%__14.6%__27.7%__13.5%__148.2%
Woodland Annual Increase
_____0.6%__17.5%__22.6%__10.8%__26.5%__13.5%__145.0%
Davis Annual Increase
_____4.4%__19.0%__19.4%___9.3%__16.7%__11.1%__122.1%
The numbers tell the story. During the period when you both (in your own ways) say that Davis was artificially constraining housing supply, and Dixon and Woodland were not, home prices in Woodland and Dixon went up approximately 20% FASTER than they did in Davis. So exactly how is it that building more houses kept prices down in Dixon and Woodland during that 51-month period?
Now, Adam, would it have been a waste of your time for you to have gone and gotten those numbers yourself? This has nothing to do with the current “stories of distress in the residential marketplace.” Although the seeds of that distress were sown prior to December 2005, the reality is that the spigot of new construction was quickly shut off in the period from January 2006 onward, and the lessons to be learned about housing supply/demand curves come from the period prior to the bubble bursting.
All, sorry for the alignment problem in my table. David or Don, if you can clean it up so it aligns, and is therefore easier to read, please feen free to edit my post. Also, feel free to delete the first one.
Said another way, Davis has significantly outperformed other areas in the post-Burst “run down,” but the lessons that apply to what we have been talking about are from the pre-Burst “run up.”
Williams: The numbers tell the story. During the period when you both (in your own ways) say that Davis was artificially constraining housing supply, and Dixon and Woodland were not, home prices in Woodland and Dixon went up approximately 20% FASTER than they did in Davis. So exactly how is it that building more houses kept prices down in Dixon and Woodland during that 51-month period?
I look at your numbers, and instinctively I see a different narrative.
Dixon and Woodland build up during the boom, and all at once people are buying somewhat inflated houses, many under somewhat questionable circumstances. The bubble bursts and many of these buyers go into foreclosure all at once. Davis doesn’t follow the housing boom, not as many new buyers are showing up all at once, and so the number of foreclosures is significantly smaller, and more easily absorbed. In hindsight, it makes slow-growth planning look like a pretty smart move. Am I missing something?
Here are the enrollment trends for DJUSD; figures through 2008 – 9 from Ed-Data, with the last two years added from David’s article above.
2010-118440
2009-108526
2008-98573
2007-88484
2006-78647
2005-68537
2004-58642
2003-48705
2002-38827
2001-28760
2000-18642
1999-20008336
1998-997943
From the peak in 2002-3, there has been about a 5% drop in total enrollment. When the board justified the closure of Valley Oak in 2007, it was based in part on the consultants’ projection of a much steeper decline in enrollment. In fact, enrollment barely changed since then, though the distribution among grades has changed.
Using a formula from an analysis of Dixon schools, we can project that Cannery Park at full build out would add about 350 students to the Davis schools. These would be spread over K – 12 at unknown levels, probably skewing to the higher grades if the homes are priced high. That is not enough students to re-open Valley Oak, so it would add students to the existing facilities. Some would be overburdened, others wouldn’t, and it is impossible to predict how that would play out.
One thing I can tell you from long experience: the consultants will be totally unable to advise the district as to how many students will be added at which grade levels. They have never accurately predicted the rate of increase or decline. Ever. Rochelle’s figures aren’t even close to accurate. Furthermore, there is no correlation between increased revenue from students and expanded facilities, because that isn’t how facilities are funded.
Using housing policy to try to address enrollment problems is very problematic, usually has unintended consequences. Anytime you hear anyone suggesting housing growth to help the schools, ask them how things are going in Elk Grove.
wdf1: “Dixon and Woodland build up during the boom, and all at once people are buying somewhat inflated houses, many under somewhat questionable circumstances. The bubble bursts and many of these buyers go into foreclosure all at once. Davis doesn’t follow the housing boom, not as many new buyers are showing up all at once, and so the number of foreclosures is significantly smaller, and more easily absorbed. In hindsight, it makes slow-growth planning look like a pretty smart move. Am I missing something?”
I think this is a very accurate assessment of what happened.
Don Shor: “One thing I can tell you from long experience: the consultants will be totally unable to advise the district as to how many students will be added at which grade levels. They have never accurately predicted the rate of increase or decline. Ever. Rochelle’s figures aren’t accurate. Furthermore, there is no correlation between increased revenue from students and expanded facilities, because that isn’t how facilities are funded.
Using housing policy to try to address enrollment problems is very problematic, usually has unintended consequences. Anytime you hear anyone suggesting housing growth to help the schools, ask them how things are going in Elk Grove.”
Amen.
I think there is a chorus of agreement to the fact that we cannot build our way out of any enrollment issues. Hopefully the council will see this and dump this idea of developing Conagra prematurely for housing once and for all…
ps- David, best way to fund the Vanguard is to just charge for comments 😉
wdf1 said . . . “I look at your numbers, and instinctively I see a different narrative.
Dixon and Woodland build up during the boom, and all at once people are buying somewhat inflated houses, many under somewhat questionable circumstances. The bubble bursts and many of these buyers go into foreclosure all at once. Davis doesn’t follow the housing boom, not as many new buyers are showing up all at once, and so the number of foreclosures is significantly smaller, and more easily absorbed. In hindsight, it makes slow-growth planning look like a pretty smart move. Am I missing something?“
No I don’t think you are missing anything. That is thasame narrative I see. Whether the Dixon and Woodland people were “buying somewhat inflated houses” or simply buying market-priced houses, the bottom-line is that Mr. Toad’s and Adam’s assertion that increased building produces lower prices is demonstrably false.
One thing I can tell you from long experience: the consultants will be totally unable to advise the district as to how many students will be added at which grade levels. They have never accurately predicted the rate of increase or decline. Ever.
I’ve watched maybe 3-4 of these enrollment projection presentations given to the school board, and what I notice is that the projection models are based mostly on static conditions. In other words, as you project into the future, you don’t make any assumptions as to what will happen to the economy, whether it will go up or down.
I think the school board could probably save a little money by paying for a demographic study every consecutive year. They would probably get just as much useful information if they did a study every 2 or 3 years.
The state Department of Finance projects enrollment by county.
[url]http://www.dof.ca.gov/research/demographic/reports/projections/k-12/2009/[/url]
For the record, they are predicting a slight increase in enrollment county-wide of about 1% per year. I imagine the grade-progression ratios are particularly hard to calculate for DJUSD compared to other districts.
“…the bottom-line is that Mr. Toad’s and Adam’s assertion that increased building produces lower prices is demonstrably false.”
I’m not sure I’d agree with this, I think it might be a bit of the tail wagging the dog.
If you’re suggesting that correlation does not mean causation then I wholeheartedly agree. However, I don’t think you can look at only one side of the bubble and draw any meaningful conclusions from the data.
IMHO the housing mess was indeed a result of classical supply/demand economic theory, but driving force was the lending side of the equation and building, as a whole, was reactionary.
AeroDeo said . . .
“…the bottom-line is that Mr. Toad’s and Adam’s assertion that increased building produces lower prices is demonstrably false.”
I’m not sure I’d agree with this, I think it might be a bit of the tail wagging the dog.
If you’re suggesting that correlation does not mean causation then I wholeheartedly agree. However, I don’t think you can look at only one side of the bubble and draw any meaningful conclusions from the data.
IMHO the housing mess was indeed a result of classical supply/demand economic theory, but driving force was the lending side of the equation and building, as a whole, was reactionary.
If we are looking at “the housing mess” I completely agree with your assertion about not looking at only one side of the bubble. However, neither Mr. Toad nor Adam were making assertions about the housing mess, they were both focusing on the assertion that increasing housing supply (by building more houses) would drive down housing prices in Davis. In his 11/01/10 – 05:22 PM post, Mr.Toad said, “Over building in nearby communities brought prices down and it would here as well.” The September 2000 to December 2005 data on the Zillow.com website from the two nearby communities communities, Dixon and Woodland, clearly show, when compared to the same time period in Davis, that over building did not bring prices down at all, and in fact the prices in both those nearby communities rose 20% faster than Davis prices did during that smae period.
I completely agree that the lending side of the equation was a significant driver of the overbuilding, but that is separate from the pricing side of the equations.
I completely agree that the lending side of the equation was a significant driver of the overbuilding, but that is separate from the pricing side of the equations.
I have a hard time with that statement. Questionable lending allowed more buyers to purchase at those prices. With tighter lending regulations, there would have been fewer purchases at as high a price, and that would have created resistance to those price increases. No?
Housing prices and housing costs are two different things.The boom was fueled by negatively amoritized loans and other gimmicks that made houses affordable to more and more marginal borrowers until the bell tolled. Now even though the bust has come the gov is still trying to prop up the real estate market with subsidies that pulled demand forward, ultra low interest rates courtesy of the federal reserve, allowing banks to keep houses off the market with relaxed mark to market accounting rules and god knows what else. All of this distorts supply and demand equilibria as does your shortened time frame. Clearly the last five years have not been as good for housing as the years you cited. It would be interesting to see the numbers after the top included and to adjust for inflation. Five years is a small time frame. Japan is 20 years off its top. Treasury bonds are almost 30 years off their top and the housing boom that just ended started in the late 1940’s.Yes at the peak of the bubble irrational exuberance made houses almost as valuable as tulips in Holland during the tulip mania but now these distortions are coming unwound and if Davis gets more housing because so many are looking in the mirror the additional supply will help moderate the still too high housing costs found in Davis.
Matt,
thanks for the data series from zillow; I have not seen this data before and I could not find it on the zillow web site. Unfortunately, I think it does not prove your point. There are numerous ways that the data series may not be appropriate for proving your point. Further, if you had extended the data series, I think you would have found that prices have declined much more rapidly in Woodland and Dixon than in Davis. IMO, that is due to the fact that so many houses were built in in the surrounding communities that it has overwhelmed longer term demand.
Matt, I have no doubt that you have good reasons for not wanting to add housing to Davis. But the argument that you are trying to make is irrational and inconsistent with well known and generally accepted principles of economics. The laws of supply and demand are well known, world wide, to have a significant impact on prices. If you and a few others want to convince yourselves with data mining and contorted statistics that Davis, Woodland and Dixon are not bound by those principles, its ok with me. But it doesn’t mean that your conclusions are facts or true.
Adam Smith said . . . “Matt, I have no doubt that you have good reasons for not wanting to add housing to Davis.”
Adam, I have absolutely no aversions to adding housing to Davis . . . as long as those houses are preceded by commensurate increases in the inventory of jobs in Davis. For example, ConAgra, one of the largest agricultural companies in the world, needs to look at ways to add at least as many ag research jobs to Davis as they add houses. Their major competitors have seen the wisdom of aligning with UCD, there is no reason why ConAgra can’t figure out how to do the same. Housing by itself (unless the sale price of the house is over $450-500,000) is a net fiscal loss for the City, consuming more dollars in annual services than it produces in annual tax revenues. We already have a Budget deficit in Davis. More housing without added jobs will only make that Deficit worse. The source of that Budget reality is Paul Navasio in his presentation to the Housing Element Steering Committee.
Adam Smith said . . . “But the argument that you are trying to make is irrational and inconsistent with well known and generally accepted principles of economics. The laws of supply and demand are well known, world wide, to have a significant impact on prices.”
Adam, I aced my micro-econ and macro-econ courses at Wharton when I got my MBA. I believe the law of Supply and Demand was very much at work during the 2000-2005 period cited. You are choosing to look only at the Supply side of the equation, and in the process fail to give the Demand side its due. Without Pent-up Demand in Dixon and Woodland, prices would never have done what they did from 2000-2005. When demand exceeds supply prices will rise subject to limitations of price elasticity. Why is it that you (and Mr. Toad) choose to consistently ignore the fact that Yolo County’s Quality of Life causes it to have a significant inventory of Pent-up Demand for housing? As long as that Pent-up Demand exists, then there will be little or no downward pressure on housing prices.
I think Matt is largely correct here. I don’t think we can build our way into affordability in the short-term unless we change our land use and build very small dwellings. The problem then is that people will be able to buy larger and cheaper outside of town.
That means Davis is probably going to have to find an alternative route to smart-growth and that means linking up with some sort of public transit service that gets people out of their cars and can deliver people in Davis for jobs and schools.
Adam Smith said . . . “Matt, thanks for the data series from zillow; I have not seen this data before and I could not find it on the zillow web site.”
To get the data just click on the [u]More Dixon Local Info[/u] link under the price graph and then the [u]Download Chart Data[/u] link above the graph that appears
Adam Smith said . . . “Further, if you had extended the data series, I think you would have found that prices have declined much more rapidly in Woodland and Dixon than in Davis. IMO, that is due to the fact that so many houses were built in in the surrounding communities that it has overwhelmed longer term demand.”
With one minor modification I completely agree with your point about the post-Burst period; however, again this fits well within the realities of Supply/Demand. Regardless of location, each foreclosure represents an increase of one unit of supply and a decrease in one unit of demand. Both Dixon and Woodland had many, many foreclosures while Davis had virtually none. Until Dixon and Woodland fully absorb the foreclosure supply their supply will exceed their demand. Here’s the data
Dixon Annual Increase____-4.7%_-26.2%_-18.1%__-8.1%__1.1%
Woodland Annual Increase_-9.8%_-13.5%_-21.8%__-3.7%__1.8%
Davis Annual Increase____-8.2%__-8.4%__-3.0%___0.7%__3.3%
Year______________________2006__2007___2008___2009___2010
Davis has 80 homes in some stage of foreclosure right now.
Yes David, change land use policies build more houses. You’re are starting to come around.
Matt, building more houses would add more jobs.
Mr.Toad said . . . “Matt, building more houses would add more jobs.”
Now you are really grasping at straws. First, the proportion of the construction workers who would be building those houses who are Davis residents would be miniscule. I would expect it to be less than 10%, maybe less than 5%. So, the Davis jobs gain would be infinesimally small. Second, those Davis residents who actullay would fill those jobs already are employed, and therefore wouldn’t represent added jobs to Davis. The locale of their construction work would simply move from being in non-Davis to being in Davis. Third, even if there are some davis residents who would be added to the jobs rolls for a house building project, that job is by definition transient. We don’t need transient jobs. We need permanent jobs that ideally leverage the key differential asset of the community . . . UC Davis.
It is really quite simplistic to only focus on the supply side of the equation, and to suggest that Davis is a stand-alone real estate market. But if we want to fully apply Econ 1 principles to the regional housing market, I’ll take a stab at it. Feel free to correct me; my degree was in plant science.
There was a long run-up in demand.
There has been a severe contraction in demand.
There has been a major expansion of supply in the regional housing market.
Most economists believe that over-supply will not reduce soon; i.e., market equilibrium with the current housing supply is a long way off.
The rental market provides substitution effect as homeowners are forced into rental housing due to foreclosures. Unfortunately, the rental market locally has consistent and growing demand and no increase in supply, so prices (rents) are not falling. That is anomalous in Davis; rents have fallen in every surrounding community.
Adding to housing supply when there is little demand has lowered prices regionally. The variation in regional price drop can be partially attributed to growth policies constricting or increasing supply, as well as to continued higher demand in Davis due to demographics and possibly higher housing turnover.
From a planning standpoint, the mantra of “build more houses so the price will come down” raises many issues.
How many more houses would Davis have to build to bring the price of homes locally in line with the historic ratio that Davis home prices had to surrounding communities (10 – 20% higher for as long as I’ve lived here)?
What would be the intangible cost to the community?
Would the Davis schools be able to absorb a large number of new students arriving in a short period of time (assuming the homes were built quickly and actually sold)?
What is the long-term cost for city services from building new homes?
Those are all valid questions arising from the addition of 600 homes to the Davis housing market.
So you don’ t want housing without jobs but then you don’t want jobs unless you approve of them. You want UC jobs so I guess you don’t care about a business park. Of course building Covell Village would provide housing for the business park all in the same area. Now that would be good planning but since CV is off the table we still need the houses as Don says to restore the historic premium of 10-20%. How many would it take? Six hundred at the Cannery would be a good start.
Its not that I want to approve of them. I simply want them 1) to be permanent, not transient, and 2) to be incremental to those jobs we already have.
A business park would be fine. In fact I would fully expect ConAgra would want to locate any ag research jobs it brings to Davis in a business park. What ever caused you to think I opposed a business park?
A vacant business park would be a downer, but one with solid lead tenants would be good for the community.
Mr. Toad, if the six hundred houses were all priced in the $450,000 to $750,000 range would you think that was good for Davis?
Matt,
Thanks for the link to zillow, and for a history of your enviable ivy league education and classroom performance.
With the benefit of the additional data, it is clear that Matt’s preliminary conclusion about the addition of supply is incorrect . (The numbers tell the story. During the period when you both (in your own ways) say that Davis was artificially constraining housing supply, and Dixon and Woodland were not, home prices in Woodland and Dixon went up approximately 20% FASTER than they did in Davis. So exactly how is it that building more houses kept prices down in Dixon and Woodland during that 51-month period?
Over a 10 year period, Davis prices have clearly outperformed or strengthened relative to Woodland and Dixon. In fact, on a median sales price basis, since 2001, Davis prices have increased 68% cumulatively, while woodland and Dixon have increased 32% and 21% respectively. On a psf basis, Davis has increased approximately 57%, while woodland and dixon are 33% and 10% higher. At the moment, according to the Zillow information that Matt referenced, the Davis premium, is approximately 90% relative to Dixon and Woodland, well in excess of Don’s recollection of 10 – 20% premium. There are lots of mitigating factors, and no single factor determines relative or absolute price performance. But, in the end, supply and demand explains a very significant portion of price performance. Woodland and Dixon allowed housing starts to increase at more rapid pace than Davis, and Davis has become more expensive on a relative basis.
‘Nuff said, and no further explanation needed as to why I don’t want to “waste time” arguing against with contorted logic designed to fit a desired conclusion. Lets get back to figuring out how to make sure our school system provides a great education for our kids. I don’t have enough facts to determine whether an increased housing base would help, but if it does help, then by all means, it should be under consideration.
Yes if 600 houses were priced at that level then it would mean that on a per square foot level prices would moderate driving other prices down accordingly. Of course 600 new homes is more than a years supply at current levels. If you dropped them on the market from outer space all at once it would certainly drive prices down across the board. If you built them as you sold them, like Dell builds computers, the impact would take longer and the jobs would last longer. In the first case the jobs would be transient in the second they would be less so. In fact one of the reasons California is in such bad shape economically is because of the collapse of construction labor and the loss of manufacturing jobs to outsourcing. Your business park jobs are no more permanent than my construction jobs because of the creative destruction of the job market. With Davis being the last place where prices have not gone into the tank due to supply constriction we could help lots of people by both building homes and providing jobs.
Thank you Adam Smith for doing the math for me confirming my arguments. I wonder what happens if you adjust for inflation. It would seem 21%-31% over ten years would be about equal to inflation while 57% would exceed it. So adding supply has at least kept housing prices stable while failing to build as population growth occurred drove prices up. A flat real estate market would confirm Robert Schiller’s work that prices of real estate on an inflation adjusted basis have been flat for a hundred years until the bubble and suggest that prices in the surrounding areas will remain at current inflation adjusted levels going forward while Davis will eventually regress to the mean due to market forces. This means that the only way Davis property owners can maintain their home values at current levels is by continuing to restrict supply. Of course taking out the value added by being in the Davis schools might explain the additional differential but probably not all of it since that is already discounted by the historic premium of Davis housing prices.
Apparently Matt Williams got an excellent education in economics and is making the exact argument that would be in his own interest. Sadly he uses faulty statistics to mask his real concerns.
Mr. Toad said . . . “Apparently Matt Williams got an excellent education in economics and is making the exact argument that would be in his own interest. Sadly he uses faulty statistics to mask his real concerns.”
Personal attacks from a person who doesn’t have the courage to use his own name . . . classy. I do not make my argument in my own interest. I make it in the interest of the fiscal stability of the City of Davis Budget. I’ve made that clear from the beginning, continue to make it clear, and will be making it clear the whole time you hide behind a pseudonym.
Both you and Adam have chosen to include data from a period where there was no house building going on at all in any of the three cities, and therefore the downward pressures on house prices were from factors other than diffrerential increase in housing supply. Perhaps you should be a bit less smug and recognize that people declaring bankruptcy and/or undergoing foreclosure in different cities at differential rates will have a radical effect on the Demand side of the Supply/Demand equation. However, since that serves your argument go ahead and delude yourself into thinking the builing rate during the 2000-2005 period was the cause for housing price declines in 2006-2010. Feel free to join the Tea Party as well.
“Your business park jobs are no more permanent than my construction jobs because of the creative destruction of the job market. With Davis being the last place where prices have not gone into the tank due to supply constriction we could help lots of people by both building homes and providing jobs.”
Construction jobs by definition have limited duration. They are “piece work.” The researchers at Monsanto, or AgraQuest, or Novozymes, or DTL don’t stop working when the last nail is driven. They keep on truckin’. Since you know so much about new house building, answer a few questions for all the readers. 1) How many FTEs are employed during the construction of a new home? and 2) What percentage of those FTEs are likely to live in Davis?
With 12% unemployment all jobs are valuable. If we are to depend on only high tech we are going to have extremely high unemployment for a long time. Why have no houses been built? Because over supply has driven prices down to where it isn’t profitable. The only place left where developers can still make a buck is Davis because prices are too high here due to supply constraint not oversupply. Yes I took a cheap shot. I admit it and I am sorry.
We’re cool. I appreciate your manning up. It happens in the heat of the battle.
You are absolutely right that all jobs are valuable, but that doesn’t deal with the fact that construction jobs building Davis houses will almost exclusively be for non-Davis residents. That is why I asked the FTE questions. IMHO, our policy decisions should be directed toward [u]direct[/u] improvement of the City’s fiscal stability. Without the jobs income component injecting revenue dollars into the City’s coffers, every house built with a sale price under $450,000 will be a dead loser for the City. Is Davis supposed to subsidize the creation of jobs for non-Davis residents? In this economy, I believe the answer to that question is “No.”
In addition, I’m not sure your statement, “The only place left where developers can still make a buck is Davis because prices are too high here due to supply constraint not oversupply.” is accurate. The reality is that developers aren’t building any new houses in Davis. If they could make a buck by building houses in Davis now, I’m sure they would be doing so. Look at Willowbank 10, in 5 years there have only been 2 houses built out of 31 entitled lots. What does that tell you?