The last few years have put a big emphasis on commercial construction. Urban renewal in areas like Los Angeles opened up billions of dollars in projects on the docket for years into the future. But residential construction still has a long way to go before housing exceeds demand in the state. If you’re thinking about getting into residential construction, here are the risks and rewards you should consider.

California’s Housing Needs
If you had to put a label on the need for new housing in California, it might be something like “stressed and pressed.” Governor Gavin Newsom campaigned on the idea that he would fight to build 3.5 million homes by 2025. Well, it’s 2020, and that is five years away. He argued that California could have a population as high as 50 million by 2050. And while that seems like a long time to go, the pressure to build new housing is already here.

For construction professionals looking into residential development, demand is not the biggest arbiter of their success. There is so much demand that you may have a ton of options to consider. Access to skilled workers and the ability for people to afford the housing that is built makes a more significant difference in how it works out for your contracting business.

Fluctuations in Demand
If you want a sense for how variable the market can be for residential development, just read a few newspapers from the past year. In the summer of 2019, experts were proclaiming that housing was down far below 2018 levels. They hinted that the market was just starting to slow down as people have predicted would happen nationwide. But then in the fall, applications for housing permits positively exploded, blowing away the previous year’s numbers. Demand in construction tends to fluctuate by season, but this is a completely different situation. Residential construction companies have to be able to meet the demand when it comes. This might be cyclical or a constant onslaught.

Varying Housing Types
Part of the reason that housing development seems to be shifting is that it is. With a lot of cities that are already built-up, housing can only go in two directions: up or out. Out is proving to be trickier to manage, with the kind of urban sprawl that makes housing difficult to manage. No one wants Eureka to become a bedroom community for San Francisco. This leaves up. And sure enough, the dramatic increase in housing permits came mostly for multifamily units. This means that if you’re looking to specialize in single family homes, you may want to rethink that idea. By comparison, getting into multifamily housing may be an excellent consideration for long-term viability.

Housing Market Pressure
Of course, there’s what builders want to do, what property owners want to do, and what people can afford. This, plus the general trends of the housing market as a whole, creates a unique set of complications that can spur or stymie the market where you live. Right now, housing prices continue to rise virtually unchecked in many parts of the state. This means that there may be housing available, but most people can’t afford to buy it.

If you live in a particularly expensive region or you’re looking to specialize in luxury homes, you have to keep a close eye on the market. If housing prices plummet, demand for developments in certain areas may also decrease. Affordable housing always has a market, but what counts as affordable changes by the year. Researching these concerns may help you determine the best part of the state for you to establish your business.

The industry for residential housing in California is big but somewhat underprepared to meet demand. If you want to take advantage of the push for housing that people can afford in the state, now’s a great time to get started. Visit CSLS today to find out how you can begin the path to your own contracting business!