Fewer Californians, More Housing Units

I have been in California real estate since 1976. Every model I have ever built, and every model anyone has ever handed me at a seminar, rests on the same assumption: more people are coming, and we are not building enough houses for them.

That assumption has been correct for half a century. It is no longer correct.

What follows is my read on what that means for someone who owns one or two rental houses or condominiums in Ventura County — five years out, and ten. I am going to be specific about where I think the risk actually sits, because it is not where most owners are looking. And I am going to tell you what the last real downturn looked like from inside my office, because I think that is the most useful thing I have.

The crossover already happened

The California Department of Finance (DOF), the agency that produces the state's official population and housing estimates, reported that California's population fell to 39,593,000 as of January 1, 2026. That is a loss of about 54,000 people, and it is the first annual decline after three consecutive years of growth.

The mechanism matters more than the headline. Net legal international migration into California dropped by more than half in one year, from 248,400 people in 2024 to 126,400 in 2025, as federal policy tightened and humanitarian migration programs ended. Meanwhile net domestic out-migration — Californians leaving for other states — rose to 288,600. Births still outnumbered deaths, by 108,200, but that margin is narrowing, and the Public Policy Institute of California reports births are down roughly 30 percent since 2008.

One more figure from that same DOF release, and it is the most important number in this article: absent the federal immigration changes, California would have gained about 66,000 people instead of losing 54,000.

Hold onto that. I come back to it at the end.

The Ventura County number that changed my thinking

Statewide averages are no use to someone who owns two houses in Camarillo. So look at the county.

Ventura County's population fell 0.6 percent in 2025, to 824,306. Thousand Oaks fell 1.1 percent. Moorpark fell 1.2 percent. Simi Valley fell 1.0 percent. Ojai fell 1.0 percent.

In that same year, Ventura County's housing stock grew 0.6 percent, to 302,619 units.

Population down six-tenths of a point. Housing units up six-tenths of a point. That is a swing of more than a full percentage point in housing units per resident, in twelve months, in a county that has spent fifty years being told it can never build enough.

Statewide, the same thing: California added 115,165 net housing units and crossed 15 million units for the first time, while losing population.

One year is not a trend. But it is the first year in my career where the arithmetic pointed this direction, and I would rather adjust early than be the last operator still underwriting the old assumption.

The competition nobody counts

Accessory dwelling units — ADUs, the second units, converted garages, and backyard cottages that state law has progressively legalized — are now a serious share of new supply. California added 29,710 of them in 2025, an increase of 11.4 percent, and they accounted for 27.9 percent of all new single-family housing in the state.

Think about what an ADU actually is from a competitive standpoint. It is a one- or two-bedroom rental with no homeowners association dues, in an established neighborhood, owned by somebody whose land cost is already sunk. It competes directly with the bottom third of the detached rental market and with nearly every entry-level condominium rental in the county.

If you own a two-bedroom condo, your competition is no longer the other units in your complex. It is the granny flat three streets over, and it does not show up in anybody's inventory count.

Five years out: to 2031

I would plan on Ventura County landing somewhere between 790,000 and 805,000 people. Household count will hold up better than headcount, because household size keeps shrinking — but the household type that contracts fastest is the workforce renter, because immigration was the channel producing it.

Here is how I would run a property against that:

Assume no rent-growth tailwind. The University of Southern California's Casden Real Estate Economics Forecast projects roughly 1.19 percent average annual rent growth for Ventura County. Apartment rents in the city of Ventura moved 0.5 percent over the past year, from $2,810 to $2,825. Plan on nominal growth of 1.5 to 2.5 percent. After inflation, plan on nothing.

The turnover reset stops being worth much. Single-family homes and condominiums are exempt from the statewide rent cap, which means you can reset to market at vacancy. That exemption is only valuable when market rent is moving. In a flat market, a vacancy is pure cost with no offsetting upside — which moves the entire game to days vacant and turnover expense. Those are the two lines you actually control, and they are where the margin now lives.

January 1, 2030 is on the calendar. That is the sunset date for the statewide rent cap and just-cause eviction requirements created by Assembly Bill 1482, the Tenant Protection Act of 2019. It falls inside this five-year window. Assembly Bill 1157, which would have lowered the cap and stripped the single-family and condominium exemption entirely, died in the Assembly Judiciary Committee in January 2026 — but it will return in some form. My read: the law gets extended, and the single-family exemption is the price paid for the extension.

Insurance becomes an acquisition screen. The California FAIR Plan — Fair Access to Insurance Requirements Plan, the state's insurer of last resort — received approval for a 29.1 percent average rate increase effective October 15, 2026. A FAIR Plan dwelling-fire policy covers fire, smoke, lightning, and internal explosion; it does not cover theft, liability, or water damage, which is why it usually needs a Difference in Conditions policy wrapped around it. The combination can run several times a private-market premium. Insurability is now a go/no-go test on a purchase, the same way a flood zone is.

Condominiums split into two asset classes. Fannie Mae, the Federal National Mortgage Association, and Freddie Mac, the Federal Home Loan Mortgage Corporation, acting under direction from their regulator the Federal Housing Finance Agency, eliminated the Limited Review shortcut for established condominium projects effective August 3, 2026, and are raising the minimum reserve contribution from 10 percent to 15 percent of an association's annual operating budget. Reserve studies must now follow the highest recommended funding level rather than the bare-minimum baseline many boards chose to keep dues down. An association that falls short becomes non-warrantable, which means conventional financing is unavailable for units in that building. Higher dues also count against a buyer's debt-to-income ratio, shrinking the pool that can qualify at all. The Community Associations Institute counted more than 5,400 associations already ineligible for agency financing before these changes took effect.

Call the value gap between warrantable and non-warrantable 15 to 25 percent, and treat it as a permanent feature rather than a paperwork problem.

Ten years out: to 2036

The ten-year story is not about migration at all. It is about mortality and Proposition 19.

Roughly three-quarters of California homeowners hold mortgages under 5 percent, against a market rate near 6.6 percent. That lock does not break because rates fall. It breaks because those owners die or move into care.

And under Proposition 19, approved in 2021, an heir who does not occupy the inherited property loses the parent-child transfer of the low Proposition 13 assessed value and faces a full reassessment at current market value. That single change converts "hold it as a rental" into "sell it" for a large share of inheritances.

That is the inventory event. It is not a rate story, and it is concentrated in exactly the coastal suburbs that are losing population right now.

More listings. Fewer domestically formed buyers. No immigration backfill. That is the setup for the first genuine price stagnation since the 1990s.

Composition matters more than headcount by then. The remaining demand skews older, smaller, single-person, and multi-generational. California's housing stock is three-bedroom, two-bath detached product built for the 1975 nuclear family. That mismatch is the opportunity: the asset that wins is a single-family lot that legally holds two households — two income streams, one property tax bill, one insurance policy, one roof. The asset that loses is a two-bedroom condominium in a forty-year-old association with a deferred maintenance backlog and a reserve study it cannot fund.

The politics move against owners too. A state that is not growing loses its supply-side argument, and the electorate that remains skews renter. Ten years out I would put the single-family rent-cap exemption at gone, with high confidence.

What the last one looked like from the inside

I was working through California's last real downturn, and the part people forget is that it was not primarily about price. It was about the loan.

Between 1990 and 1996, homes in Los Angeles, Riverside, and Ventura counties lost roughly a quarter of their value. In Los Angeles, median prices fell somewhere between 3 and 9 percent every year from 1991 through 1996. The recession driving it took out aerospace and banking, so owners lost income at the same moment their exit price dropped below what they owed. California's foreclosure record was set in 1996, and it stood until the fourth quarter of 2007.

What I saw in this office was a fork. Some owners could not sell for the amount of the loan and walked away — defaulted, handed it back, took the credit damage. Others rented the house out, covered what they could, and waited for the market to turn. When it finally did, they sold.

That second group is a large part of why this firm exists in the form it does. Not one of them planned on being a landlord. They became landlords because selling was not available to them, and what they needed was somebody to keep the property rented, maintained, and intact for as long as the waiting took. That was years, not months.

Why the next one will not look the same

Today's owner is the mirror image of 1992's owner: substantial equity, a fixed loan at a rate they will never see again, and a Proposition 13 basis worth defending. A flat market does not put that person underwater. It puts them stuck. That is a different problem and it needs different advice — usually about holding period, tax basis, and cash flow, not about survival.

But the old pattern rhymes in one specific place, and I want to name it plainly: condominiums bought near the peak with minimum down payments, in associations now facing the new reserve and review requirements. Rising dues, a special assessment, and a buyer pool narrowed to cash can push the realistic exit price below the loan balance. A special assessment behaves the way the income shock did in 1992 — sudden, non-negotiable, and it arrives at precisely the moment the exit is closed.

There is one more difference, and it is the one I would want any owner to sit with. The people who waited out the nineties were rescued by a growth engine that was still running underneath them: falling rates, loosening credit, and a state still adding people every year. If what is broken this time is the population engine itself, then waiting has a weaker floor under it. The hold may need to run ten or twelve years instead of six or eight, and the price at the end of it may be flat rather than recovered.

I am not predicting that. I am saying the strategy that worked last time carries a different risk profile this time, and anyone planning to rent and wait should price that in.

What holds value, and what does not

Holds: a low property-tax basis. A lot with a legal path to a second unit. A property that is insurable, hardened, and documented. A well-funded, warrantable association. An operator who controls expense lines and days vacant.

Does not hold: a high-basis purchase underwritten on appreciation. A thin-margin condominium in an underfunded association. Any model whose returns depend on resetting rent at turnover.

The one thing that breaks all of it

Immigration policy. The DOF's own arithmetic — a loss of 54,000 against a gain of 66,000 absent federal change — says renter demand in California is now a policy variable, not a demographic destiny. One administration change and the contraction reverses inside a year.

So underwrite the contraction. Price acquisitions for flat rents and rising carry. Screen for insurability before you screen for cap rate. Read the reserve study before you read the listing.

But do not sell a low-basis coastal asset on the assumption the contraction is permanent. A population trend is reversible in a single election. A 1978 Proposition 13 basis is not.

That asymmetry is the whole strategy. Plan for the worse case. Keep holding the thing that cannot be replaced.