Real estate accounts for 14 percent of the gross domestic product (GDP) -- a measure of all the goods and services produced in the United States -- and if you build enough homes you can just about stave off a recession.

So says the California Building Industry Association which recently told an economic summit in California that if the state constructed the 250,000 homes needed last year -- instead of only 148,000 that were actually produced -- the state could have put off the recession.

"As remarkable as these numbers are, if California had actually produced the housing construction it needed in 2000 -- 40 percent more according to the California Department of Finance, nearly $40 billion more would have been pumped into the economy and some 200,000 more Californians would have been employed," said Mick Pattinson, President of the California Building Industry Association.

He could be on to something.

In the waning days of the longest economic expansion on record, real estate was largely credited with bracing the listing economy and preventing it from falling into recession sooner. While only 14 percent of the GDP is comprised of real estate transactions, much more consumer spending is tied to owning a home.

Consumers who buy homes also buy things to put in them, to fix them up and to improve and add on to them. Home owners use real estate equity to buy still more stuff and then they buy bigger, more expensive, larger homes to continue the home-related cycle of spending.

Consumer spending is the real lubricant that keeps the economic engine churning -- it accounts for at least two thirds of the GDP.

"While consumers have managed to keep the U.S. out of a recession for several years now, that soon may no longer be the case," said Lynn Franco, director of the Conference Board's Consumer Research Center.

California's home building industry alone generated $28 billion to the economy -- nearly $69 billion when you add indirect benefits. The Real Estate and Land Use Institute at California State University in Sacramento says every $1 spent on residential construction produces $2.59 in economic output.

During 2000, more than 330,000 people were directly employed in the state's home building industry, while another 830,000 people worked in related and induced jobs, according to the Burbank, CA-based Construction Industry Research Board.

Pattinson was one of the business, labor, and political leaders invited to Walt Disney Studios to discuss options for jump-starting California's lagging economy. He noted that the home building industry is one of the pillars of the economy -- but that the industry could be contributing far more.

"By promoting housing and home ownership around the state, we can help rebuild the economy and finally ease a decade-long housing shortage. There has never been a better time to promote housing -- it's a true win-win solution that won't cost the state a nickel," said Pattinson said.

After 11 years of chronic under-production, California remains in a severe housing crisis which creates a highly volatile market with severe price spurts. The state is home of nine of the 10 least-affordable housing markets in the nation. The state's ownership rate is only 57 percent, the third-lowest in the nation.

While the state's population grew by an average of 600,000 people a year during the 1990s, housing construction was less than half what's been needed to accommodate the added population and job growth during the decade.

The ongoing problem has reduced the quality of life in the Golden State where more and more people are forced to spend hours commuting to and from work because the only affordable housing is far from job centers.

"Much of our state's housing woes are the direct result of failed regulatory and legislative policies that can and must be corrected, from excessive litigation that has stifled condominium production, to fiscal constraints that force cities and counties to favor retail developments over housing," Pattinson said.

"Abuses of environmental policies and an increased 'not-in-my-backyard' (NIMBY) mentality have all but squandered new home ownership opportunities in the areas -- and for the people -- who are most in need," he added.

Pattinson urged Gov. Gray Davis to call on local officials around the state to expedite the processing of new home projects and to clear away impediments to development, and to issue an executive order directing state regulatory agencies to immediately review pending regulations to ensure they will not further increase the cost of housing.

"When the Legislature returns in January, its leaders and its members should go to work immediately on a pending, comprehensive housing reform agenda -- sponsored by a broad-based coalition of concerned business, labor, housing advocacy and community organizations -- that simply removes unnecessary policy and regulatory obstacles to building homes that Californians can afford," Pattinson said.

For more articles by Broderick Perkins, please press here.

Published: November 9, 2001

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.