S.B. Economy Looking Good, But Rental Market a Mess

Unlike the rest of the world’s economies, which generally “kinda suck,” Santa Barbara’s is looking up, said Peter Rupert on Thursday. The director of the UCSB Economic Forecast Project spoke to a Granada Theatre packed with South Coast business elite for the think tank’s 34th annual summit. “Everything seems to be moving in the right direction,” he said. “Things are basically positive.”

During his speech and in an accompanying report, Rupert described how our area’s GDP is still rising, employment growth is outpacing California’s, new businesses are springing up, and home values are increasing. Those sunny statistics are expected to continue over the next few years, he said.

The report ​— ​which also addresses lingering issues, like the drought and tough post-Recession regulations on banks ​— ​puts finer points on those topics. (Most of the data, however, only goes up to the end of 2013 because of slow responses from government agencies.)

• In 2013, onshore oil production went through its largest growth spurt since 1996, jumping 26 percent over the previous year. Offshore production grew 10 percent.

• Santa Barbara’s total agricultural crop value rose 10 percent between 2012-2013. Wine industry output grew by 79 percent. The drought has had only a “moderate effect” on agricultural production so far, the report claims, with avocados, apiary products, and cattle feeling the worst of it.

• Real estate remains the biggest industry in Santa Barbara County, comprising 19 percent of its GDP. The ag industry had the largest growth rate (12 percent); mining shrunk the most (-14 percent).

• Retail sales grew the fastest for clothing and clothing accessory stores (10.6 percent) and building material and supply dealers (9.4 percent).

• Total employment throughout all industries increased by 3,145 workers, a gain of 1.6 percent. The forecast suggests 2,692 more jobs will be added in the county between December 2014 and December 2015

• Home values continued to rise across all cities, ranging from 4.12 percent to 30 percent year-over-year growth. The speedy increase in value during 2013, which peaked at an average annual growth rate of 21 percent, started to decline in early 2014.

The report’s mostly happy bulletins were tempered by a less-than-positive update on Santa Barbara’s rental market. Analyst Dawn Dyer with Dyer Sheehan Group, Inc., wrote that 2014 was a “tough time” for renters as “record-breaking” demand for housing “spiraled out of control.” Millennials deciding to finally set out on their own and thousands of foreign students flocking to the area forced the average South Coast rent to soar 7.1 percent in the last year.

Dyer noted “VERY few housing units have been built” recently to soften the demand; vacancy rates have hovered above 99 percent since October 2013. In the 1980s, she said, the state’s Department of Housing and Community Development gave the county’s housing supply as lagging by nearly 12,000 units. “[The] situation has not improved,” she declared, pointing to political and geographic constraints. According to UCSB’s report, the City of Santa Barbara permitted just 12 new residential units in 2014; Carpinteria approved two. Santa Maria, on the other hand, permitted 344 new homes.

Fearing for the “young educated adults” and “middle-income families” who tend to migrate out of high-cost areas with little housing diversity, Dyer called for more options on the South Coast to accommodate ever-growing demand for one- and two-person households. In the short term, Dyer expects rents to rise 4-6 percent in 2015.

In his presentation, economist Peter Rupert cautioned that many county jobs created in the coming years ​— ​like in the farming, leisure, and food industries ​— ​will pay very little, well below $40,000 a year. “We’re going to create a lot of bad jobs,” he said. “It always happens. … How we can get more high-paying jobs is always a big question.”