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TRANSCRIPT
Orange County Business Council December 2016
SEVENTH ANNUAL SOUTHERN CALIFORNIA ECONOMIC RECOVERY & JOB CREATION
SUMMIT
ORANGE COUNTY ECONOMIC UPDATE
Prepared for the
Southern California Association of Governments
Table of Contents Page | i
Table of Contents
Section 1 - Introduction .................................................................................................................. 3
Section 2 – Current Economic Conditions ...................................................................................... 4
Section 3 - Key Existing and Emerging Industries ......................................................................... 10
Section 4 – Innovation in Orange County ..................................................................................... 15
Section 5 - Occupational Employment and Salary Growth........................................................... 20
Section 6 - Income and Poverty Statistics ..................................................................................... 24
Section 7 - Educational Attainment Demographics ...................................................................... 27
Section 8 - Housing Market and Construction Activity ................................................................. 30
Section 9 - Final Thoughts ............................................................................................................. 34
List of Figures Page | ii
List of Figures
Exhibit 2.1 Unemployment Rates (Jan. 2008 – Aug. 2016) ..............................................................4
Exhibit 2.2 Orange County Labor Force Characteristics (2008-2016) ................................................5
Exhibit 2.3 Orange County Labor Force Participation Rate (2001 – 2016 YTD) ..................................5
Exhibit 2.4 Orange County Projected Population Change by Age Group (2010-2060) .......................6
Exhibit 2.5 Orange County Projected Population Change (2010-2060).............................................7
Exhibit 2.6 Orange County Population Growth (2000-2015) ............................................................8
Exhibit 3.1 Orange County Industry Employment Breakdown (September 2016) ........................... 10
Exhibit 3.2 Orange County Annual Industry Trends (2010-2016 YTD) ............................................ 11
Exhibit 3.3 Orange County Annual Industry Cluster Employment Trends (2009-2015) ................... 12
Exhibit 3.4 Orange County Annual Industry Cluster Salary Trends (2009-2015) .............................. 13
Exhibit 3.5 Projected Changes in Orange County Employment by Industry (2012 – 2022) .............. 14
Exhibit 4.1 Top 10 Orange County Industry Clusters by Location Quotient .................................... 16
Exhibit 4.2 Venture Capital Investments in Orange County, 2006 – Q1 2016 ................................. 17
Exhibit 4.3 Annual Patent Counts and Growth in Orange County, 2001-2015 ................................ 18
Exhibit 4.4 Top Orange County Organizations by Patent Count, 2009-2013 ................................... 18
Exhibit 5.1 Orange County Occupational Employment Distribution............................................... 20
Exhibit 5.2 Orange County Occupational and Salary Year-over-Year Absolute Growth ................... 21
Exhibit 5.3 Projected Orange County Employment Growth by Occupational Group (2012-2022) .... 22
Exhibit 5.4 Average Salaries of Fastest-Growing Occupations in Orange County (2012-2022) ......... 23
Exhibit 6.1 Orange County Income and Poverty Rates (2000-2015) ............................................... 24
Exhibit 6.2 Orange County Household Income Profile................................................................... 25
Exhibit 6.3 Percent of Orange County Households Earning Above or Below $50,000 ..................... 26
Exhibit 6.4 Poverty Rates by Region (2013) .................................................................................. 26
Exhibit 7.1 Orange County Educational Attainment, Population over 25 (2015) ............................ 27
Exhibit 7.2 Orange County Tech-Related Degrees Granted (2000 – 2015) ...................................... 28
Exhibit 7.3 Median Wages by Educational Attainment, Orange County Workers over 25 (2015) .... 28
Exhibit 7.4 Orange County Unemployment & Poverty Rates by Educational Attainment (2015) ..... 29
Exhibit 8.1 Orange County Median Home Prices (2008-2016): New vs. Existing Homes ................. 30
Exhibit 8.2 Orange County Housing Permits (2009-2016) .............................................................. 31
Exhibit 8.3 Orange County Average Apartment Rental Rates, 2012 – 2016 YTD ............................. 32
Exhibit 8.4 California Association of Realtors Affordability Index .................................................. 33
Exhibit 8.5 Orange County Renter and Owner Housing Costs as a Percent of Income (2015) .......... 33
Section 1 – Introduction Page | 3
Section 1 - Introduction
This report is intended to provide a general overview of current 2016 economic and related
trends in Orange County, along with projections for the short and long-term future, in
preparation for the seventh annual Southern California Economic Summit to be held on
December 1, 2016 and co-hosted by Southern California Association of Governments (SCAG)
and the Southern California Leadership Council.
Metrics highlighted in this report include measures and projections of demographics,
employment, industry clusters, educational attainment levels, income and poverty, and the
housing market, broken down into the following sections:
Current Economic Conditions
Key Existing and Emerging Industries
Innovation in Orange County
Occupational Employment and Salary Growth
Income and Poverty Statistics
Educational Attainment Demographics
Housing Market and Construction Activity
Where relevant, current and emerging regional, state, and national economic trends are
highlighted so that elected officials, policymakers, and region-wide stakeholders might amplify
the benefits of these trends while mitigating their potential negative impacts. Analyzing these
issues will help elected officials, community leaders, policymakers, and business leaders
respond to potential economic and societal changes: demographic shifts, technological
advancement, and the seemingly ever-widening skills gap between employees’ skills and
employers’ needs.
As the Great Recession fades into memory, Southern California must look forward instead of
backward. In Orange County, which helped lead Southern California’s economic recovery and
has surpassed pre-recession highs in terms of employment and the housing market, elected
officials and policymakers should look to the future, and focus on addressing long-standing and
emerging macro socio-economic issues by continuing to leverage Orange County’s strengths
and address potential threats to the county’s continued economic prosperity.
Section 2 – Current Economic Conditions Page | 4
Section 2 – Current Economic Conditions
Orange County continues to boast a lower unemployment rate than state and national averages
as 2016 draws to a close, demonstrating the strength and resilience of its economy. The
county’s unemployment rate, in fact, dropped below pre-recession lows in May 2016 (3.6
percent) before rising in July, as part of a national increase in unemployment rates. The
unemployment rate was 4.1 percent in September 2016, 0.1 percent lower than the previous
year and lower than the statewide (5.3 percent) and national (4.8 percent) unemployment
rates. Exhibit 2.1 shows county, state, and national unemployment rates over the past nine
years, highlighting Orange County’s strong recovery from the ravages of the Great Recession.
Exhibit 2.1 Unemployment Rates (January 2008 – September 2016)
Orange County’s strong economic recovery in the aftermath of the Great Recession continues
to build momentum. Exhibit 2.2 shows the county’s labor force from 2008 to 2016; the county’s
current employment has surpassed 2008 levels by over 40,400 employees, reducing its
unemployed population by over 19,400 during the same period.
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Un
em
plo
yme
nt
Rat
e
Orange County (4.1%) California (5.3%) United States (4.8%)
Source: California EDD
Section 2 – Current Economic Conditions Page | 5
Exhibit 2.2 Orange County Labor Force Characteristics (2008-2016)
While still below pre-recession levels, the labor force participation rate has improved, reaching
a five-year high of 51.4 percent in September 2016, an increase of 0.7 percent from the
previous year. This increase, another display of Orange County’s economic resilience, while still
subdued, suggests a growing economy and improved job creation that encourages many
residents to re-engage in the job market. In the longer term, however, major demographic and
social changes – an aging population, the retirement of large portions of the Baby Boomer
workforce, and the potential loss of jobs due to increasing automation – will likely serve to limit
growth in labor force participation.
Exhibit 2.3 Orange County Labor Force Participation Rate (2001 – 2016 YTD)
1,570,100
1,525,600
1,489,200
1,464,900
1,443,400
1,408,300
1,388,900
1,451,700
1,529,700
66,400
71,500
86,400
101,900
122,700
139,800
149,700
137,600
85,800
2016 YTD
2015
2014
2013
2012
2011
2010
2009
2008
Employment Unemployment
48%
49%
50%
51%
52%
53%
54%
55%
Pe
rce
nt
of
Po
pu
lati
on
in L
abo
r Fo
rce
September 2016 - 51.4%
Source: California EDD
Source: California EDD, California Dept. of Finance
Section 2 – Current Economic Conditions Page | 6
Orange County is currently undergoing a large demographic shift in terms of age groups and
ethnicities. According to projections by the California Department of Finance, the School Age,
College Age and Working Age groups will experience 9 percent, 13 percent, and 1 percent
decreases, respectively, between 2010 and 2060. Older age groups, on the other hand, will
experience dramatic growth: 111 percent for Young Retirees, 167 percent for Mature Retirees,
and a massive 312 percent for Seniors, as Exhibit 2.4 illustrates. County stakeholders and
policymakers must address the impacts of these changes, which will affect everything from
industry employment, as an older population increases demand for healthcare services, to
senior services, to the housing market, as retirees may seek to find smaller, more affordable
living accommodations.
Exhibit 2.4 Orange County Projected Population Change by Age Group (2010-2060)
Orange County’s demographic makeup is also shifting, as shown in Exhibit 2.5; the California
Department of Finance estimates that the white ethnic group will see a 31 percent decrease by
2060 as the Asian and Hispanic groups increase by 34 and 53 percent, respectively, over the
same period. The county’s diverse population has already provided major economic benefits by
attracting well-educated and talented workers, a trend that will hopefully continue in the
future. As the county becomes more diverse, policymakers should ensure support for all ethnic
groups. Improving English language programs for young students, for example, will help
guarantee a steady supply of young workers to fill job openings created by the retirement of
older workers.
-1%
-9%
-13%
-1%
111%
167%
312%
-50% 0% 50% 100% 150% 200% 250% 300% 350%
Preschool Age (0-4 Years)
School Age (5-17 years)
College Age (18-24 Years)
Working Age (25-64 Years)
Young Retirees (65-74 Years)
Mature Retirees (75-84 Years)
Seniors (85+ Years)
Percent Change
Source: California Department of Finance
Section 2 – Current Economic Conditions Page | 7
Exhibit 2.5 Orange County Projected Population Change (2010-2060)
Source: California Department of Finance, Demographic Research Unit
Before the turn of the Millennium, Orange County’s population growth stemmed from
migration into the region rather than natural increase (births minus deaths), a trend that has
since reversed. Since 2000, natural increase has increased the county’s population by 399,144,
an average of almost 25,000 per year, whereas net migration (both national and international)
has reduced its population by 36,887. While international migration into Orange County has
been a steady source of population growth, domestic outmigration has largely been the culprit,
being primarily a source of population decline over the last decade. The county’s net migration
first turned negative in 2002 and persisted until 2010, reflecting the effects of rising home
prices and the Great Recession. As the recession took hold, individuals and families saw their
savings depleted, causing housing-related investments to turn negative and many residents to
leave Orange County for more affordable areas.
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
White
Hispanic or Latino
Asian
American Indian
African American
Multi-Race
Percent of Population
2060
2015
2010
Section 2 – Current Economic Conditions Page | 8
Exhibit 2.6 Orange County Population Growth (2000-2015)
As Orange County continues to recover from the Great Recession, shifting demographic trends,
generational differences, and technological improvements have begun to transform the
county’s economic landscape. Analysts have identified several potential issues that may impede
the county’s future economic growth. Orange County’s growing skills gap, as highlighted in
several recent OCBC reports, has already had a negative impact on both businesses and
workers. Technological change has outpaced educational and training programs in many
disciplines, resulting in a shortage of employees with skills needed for in-demand jobs. Finally,
many educational programs have neglected the “soft skills” necessary for today’s team-based
work environments.
The combination of these factors suggests that traditional concepts of the career are quickly
becoming obsolete. The aforementioned skills gap – the discrepancy between the skills, often
technically-oriented, needed by employers and those possessed by potential employees – has
led many employers to hire individuals with specific technical skills certifications rather than
those with 4-year degrees. In addition, many employers have opted to hire contract and temp
workers rather than salaried employees, a strategy that gives them more flexibility in
addressing current needs and mitigates the need for annual or semi-annual employee training
sessions to ensure that workers have up-to-date skills. These trends will undoubtedly have
-50,000
-40,000
-30,000
-20,000
-10,000
0
10,000
20,000
30,000
40,000
-10,000
0
10,000
20,000
30,000
40,000
50,000
60,000
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Po
pu
lation
Gro
wth
Du
e to
Natu
ral Incre
ase an
d
Migratio
n
Ove
rall
Po
pu
lati
on
Gro
wth
Population Growth Natural Increase International Migration Domestic Migration
Source: California Department of Finance, Demographic Research Unit
Section 2 – Current Economic Conditions Page | 9
significant direct and indirect consequences on job creation and the labor market, economic
growth and competitiveness, and regional prosperity.
High cost-of-living is another major concern, primarily driven by high housing (both
homeownership and rental) prices. While wages increases have started to accelerate over the
past year in Orange County, wage growth has not kept pace compared with increases in the
cost of living. The high cost of housing, education and healthcare in Orange County, along with
general inflation, prevents many individuals and families from living in the county. This limits
economic growth as many talented and up-and-coming workers decide to move elsewhere,
draining the county’s talent pool. The county’s high housing costs, in particular, encourage
many residents to choose to relocate their residence to surrounding lower cost-regions and
commute to Orange County for work. Additional housing supply and affordability metrics are
provided in Section 8 of this report that further describe and highlight the extent and impacts of
this significant issue for Orange County.
Finally, rapid technological advancement threatens the county’s future economic prosperity, as
a large percentage of recent employment growth has been in relatively low-skill retail and
tourism jobs with a high likelihood of automation in the near future. Restaurant cashiers and
servers may be replaced by touch-screen kiosks, routine manufacturing positions by robots that
never take breaks, transportation occupations by self-driving vehicles. Higher-skill positions are
also at risk, as accountants, auditors, and even attorneys find themselves competing with
software that can potentially perform their jobs more efficiently. While automation has the
potential to substantially increase productivity, it may also have a significant effect on the
employment landscape.
Section 3 – Key Existing and Emerging Industries Page | 10
Section 3 - Key Existing and Emerging Industries
Recent data from the California Employment Development Department (EDD) shows that
Professional & Business Services, Leisure & Hospitality, and Educational & Health Services
continue to be Orange County’s largest industries in terms of employment. Construction saw
the largest percentage growth of employment (9.9 percent) over the past year, followed by
Educational and Health Services (4.6 percent) and Leisure and Hospitality (4.5 percent).
Exhibit 3.1 Orange County Industry Employment Breakdown (September 2016)
Exhibit 3.2 provides a six-year overview of employment trends by industry in Orange County,
showcasing changes in the county’s key industries. The chart’s employment totals are current
as of September 2016.
18.7%
13.6%
13.2%
9.4%
9.6%
7.4%
7.4%
6.4%
5.3%
3.1%
2.5% 1.8%
1.6%
0.0%
Professional & Business Services
Leisure & Hospitality
Educational & Health Services
Retail Trade
Government
Financial Activities
Durable Goods
Construction
Wholesale Trade
Other Services
Nondurable Goods
Transportation, Warehousing & Utilities
Information
Mining and Logging
Source: California EDD
Section 3 – Key Existing and Emerging Industries Page | 11
Exhibit 3.2 Orange County Annual Industry Trends (2010-2016 YTD)
Alongside traditional industries, Orange County has been able to cultivate a number of industry
clusters which promote higher economic growth by creating a self-sustaining, virtuous cycle of
innovation, productivity, and employment creation. Cluster formation can create economic
competitiveness in a region by generating greater cash inflow, attracting and retaining a skilled
labor pool, and providing a clear pathway from specialized education towards in-demand
careers. Moreover, industry clusters are associated with reduced environmental impact
through efficient supply side management, and a growth in supporting professional and
business service industries such as accounting, legal and management consulting services, all of
which improve the region’s overall economy. By encouraging the development of industry
clusters, the County can strengthen the economic activity in the region and provide a variety of
employment opportunities within the clusters themselves and across all industries in the
region.
Driven by a continually recovering economy providing increased employment opportunities and
slightly higher wages, the Tourism cluster in Orange County added the most jobs between 2014
and 2015, increasing by 4.8 percent or 9,220 jobs. Reflection increasing demand for housing
and corresponding home construction, the Construction industry experienced the second
highest increase in jobs ― up 9.7 percent, and representing an addition of 7,906 jobs. The
Healthcare sector ranked third with an increase of 4.9 percent over the past year for an
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
2010 2011 2012 2013 2014 2015 2016 YTD
Tota
l Em
plo
yme
nt
Professional & Business Services Leisure & HospitalityEducational & Health Services Retail TradeGovernment Financial ActivitiesDurable Goods ConstructionWholesale Trade Other ServicesNondurable Goods Transportation, Warehousing & UtilitiesInformation Mining and Logging
Source: California EDD
Section 3 – Key Existing and Emerging Industries Page | 12
additional 7,843 jobs, likely a result of the increasing need for healthcare services by an aging
population as well as from the implementation of the Affordable Care Act (ACA). The
Information Technology and the Biotechnology sectors, which represent the technological base
of the county, saw an overall increase in employment of 1,208 and 2,650, respectively; a
significant improvement over employment trends experienced the year before which registered
drops in employment for both of these industries. This increase represents the improving
standing and competitiveness of Orange County as an innovation and research center.
Exhibit 3.3 Orange County Annual Industry Cluster Employment Trends (2009-2015)
Source: California Employment Development Department, Quarterly Census of Employment and Wages
Overall, the average salary for major industry clusters in Orange County experienced
considerable increases in 2015, with all industry clusters registering wage increases. The overall
average salary for cluster employment in Orange County in 2015 was $66,962, an increase of
6.2 percent compared to 2014 salary averages. The highest increase in average percent salary
over the past year occurred in Biotechnology, which increased significantly by 28.9 percent; this
was largely driven by wage growth in one particular sub-industry group, Physical, Engineering
and Biological Research. The second highest percent increase in cluster salaries was in the
Transportation industry cluster, which increased by 9.1 percent, followed by Logistics and
Transportation which increased by 7.6 percent and followed by Information Technology which
increased by 6.2 percent.
0
50,000
100,000
150,000
200,000
250,000
Emp
loym
en
t
2009
2010
2011
2012
2013
2014
2015
Section 3 – Key Existing and Emerging Industries Page | 13
Exhibit 3.4 Orange County Annual Industry Cluster Salary Trends (2009-2015)
Source: California Employment Development Department, Quarterly Census of Employment and Wages
EDD projects that Professional and Business Services will add 75,100 jobs by 2022, followed by
Educational and Health Services with 42,500, and Leisure and Hospitality with 38,700. Two
industries are expected to contract over the same time period: Mining and Logging, expected
to lose 100 jobs, and Durable Goods Manufacturing, expected to lose 7,700 jobs. These
employment trends, especially the increase in Healthcare employment, reflect expected
demographic changes, as an increasingly older population will require additional healthcare-
related services. One worrying trend is the stagnation of the manufacturing industry
throughout the Southern California region, a historically strong industry with high multiplier
effects. As technology continues to improve operational processes and strategies, industries
reliant on low-skill, repetitive tasks will see a large decrease in their required employment
levels, as software and robotics reduce the need for on-site employees.
$-
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
An
nu
al A
vera
ge S
alar
ies
2009
2010
2011
2012
2013
2014
2015
Section 3 – Key Existing and Emerging Industries Page | 14
Exhibit 3.5 Projected Changes in Orange County Employment by Industry (2012 – 2022)
-7,700
-100
0
300
2,100
3,000
5,600
19,100
24,200
24,300
24,500
38,700
42,500
75,100
-20,000 0 20,000 40,000 60,000 80,000
Durable Goods Manufacturing
Mining and Logging
Other Services
Nondurable Goods Manufacturing
Transportation, Warehousing, & Utilities
Information
Government
Wholesale Trade
Financial Activities
Construction
Retail Trade
Leisure and Hospitality
Educational, Health Care, & Social Assistance
Professional and Business Services
Change in Employment
Source: California EDD
Section 4 – Innovation in Orange County Page | 15
Section 4 – Innovation in Orange County
Innovation is the lifeblood of economic growth and job creation, helping drive not only
significant employment growth in that particular industry, but job creation and economic
activity throughout other sectors and the region as a whole due to both high multiplier effects
and above-average wages. Industry clusters are regional concentrations of related companies
and industries in a particular geographical location that play a unique role in innovation,
regional competitiveness, economic growth, and job creation. These industries typically exhibit
high clustering effects allowing them to benefit from their proximity to one another, as well as
proximity to complimentary industries and their customer base. This section briefly highlights
Orange County’s key innovation industry clusters, their ability to drive economic activity, the
multiplier effects of various industries, and Orange County’s innovative landscape.
At the heart of a regional industry cluster is usually a world-class employer, or core group of
companies, that both compete and collaborate. An ecosystem coalesces from the combination
of interrelated suppliers, service providers such as legal and accounting, capital providers such
as venture capital, research organizations, and educational institutions such as the University of
California that provide specialized training and education, information, research, and technical
support.
Competitive industry clusters that develop innovative, high-value added products and services
are central to regional economic development, paying dividends many times over and provides
a myriad of benefits to the rest of the cluster constituents. Clusters typically generate high-
wage employment, enhance productivity, and spur innovation by creating a virtuous cycle that
brings together a powerful combination of intellectual capital technology, new knowledge and
information, large pools of specialized talent, and venture capital and other financial resources.
There is an emerging understanding in recent regional economic development academic
literature about the key role that the high-tech, high-pay innovation economy plays in
economic growth and job creation and the significant benefits it confers on regional economies.
For example, University of California, Berkeley economist Enrico Moretti’s 2013 book, “The
New Geography of Jobs,” finds that not only do innovative industries bring good-paying jobs to
the regions where they cluster, but that the true impact is much greater than direct effects and
ripples throughout the economy due to high multiplier effects. Dr. Moretti observes that one of
the best ways for a city or state to generate jobs for less-skilled workers is to develop and
attract high-tech companies that hire highly skilled workers as well.
The U.S. Cluster Mapping Project, an interactive website created to highlight regional industry
clusters, provides a detailed view of Orange County’s strongest industries. An industry cluster is
defined as a regional concentration of related industries that arise out of the links between
Section 4 – Innovation in Orange County Page | 16
several interconnected industries in a particular area, such as the automotive industry in
Detroit, the wine industry in Napa and Sonoma, and the entertainment business in Hollywood.
The concentration of these industries is measured by the “location quotient:” the ratio of an
industry’s share of total state employment in a location relative to its share of total national
employment. The location quotient, in other words, measures the specialization or
concentration of a cluster in a particular location relative to the national average.
Medical Devices, the most concentrated industry in the county, boasts a location quotient of
5.54, indicating industry employment in Orange County is more than 5 times more
concentrated than at the national level. As of 2014, Orange County’s Medical Devices industry
employed 18,289, the highest in the nation and 7.2 percent of national Medical Device
employment. Apparel, the second most concentrated industry in Orange County, employed
3,671 employees, or 2.9 percent of the national share, with an LQ of 2.20. Biopharmaceuticals,
Communications, and IT & Analytical Instruments also have notable concentrations in Orange
County. Exhibit 4.1 shows industry clusters with the highest Location Quotients in Orange
County, illustrating the local and national importance of these industry clusters.
Exhibit 4.1 Top 10 Orange County Industry Clusters by Location Quotient
O.C. Industry Clusters by Location Quotient
Industry Cluster Location Quotient
Employment (2014)
Share of National Employment
National Ranking
Medical Devices 5.54 18,289 7.20% 1
Apparel 2.20 3,671 2.86% 3 Biopharmaceuticals 2.12 6,499 2.75% 6 Communications 1.94 10,648 2.52% 4 IT & Analytical Instruments 1.90 26,164 2.47% 5 Hospitality and Tourism 1.83 73,864 2.38% 5 Lighting and Electrical Equipment 1.79 6,585 2.33% 5 Metalworking Technology 1.79 11,391 2.33% 6 Financial Services 1.59 39,022 2.06% 6 Recreational Goods 1.53 3,025 1.99% 4
Orange County’s highly concentrated industry clusters help to not only drive general economic
activity but also increase the regional specialization and subsequent innovative capabilities. As
a result, Orange County has been able to improve its innovative climate serving to attract and
inspire many start-ups in the area. Exhibit 4.2 highlights the annual venture capital investments
in Orange County from 2006 to year-to-date 2016. After a significant influx of venture capital
funding in 2011 totaling over $900 million, investments in Orange County continually decreased
eventually hitting approximately $500 million in 2014 before a large jump was experienced in
2015 where venture capital funding jumped up to $855.5 million. More recently, venture
Source: U.S. Cluster Mapping
Section 4 – Innovation in Orange County Page | 17
capital investments in Orange County have slowed somewhat but have already surpassed levels
experienced in 2014. As of the third quarter of 2016, venture capital investments in Orange
County totaled $581.4 million according to PricewaterhouseCoopers and the National Venture
Capital Association. Venture capital investments in Orange County have been focused on high-
tech start-ups largely located in the Irvine area; thanks to the large number of incubators and
various other business support organizations such as UCI Applied Innovation located at The
Cove which will be highlighted later, Irvine has served to attract a large number of start-ups into
the region helping to drive innovation, patent growth and venture capital investments.
Exhibit 4.2 Venture Capital Investments in Orange County, 2006 – Q1 2016
Source: National Venture Capital Association
Adding to venture capital investments and further highlighting Orange County’s local innovative
spirit, Exhibit 4.3 provides the annual patent count and growth over the past 15 years. While
patent growth stagnated until 2009, between 2010 and 2014 Orange County consistently
registered an increasing number of patents per year before falling slightly from 2,855 patents in
2014 to 2,851 patents in 2015. Overall, Orange County organizations registered a total of
31,541 patents between 2000 and 2015.
$6
27
.2
$5
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$6
94
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$3
07
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$100.00
$200.00
$300.00
$400.00
$500.00
$600.00
$700.00
$800.00
$900.00
$1,000.00
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD
Ve
ntu
re C
apit
al F
un
din
g
($ in
Mill
ion
s)
Section 4 – Innovation in Orange County Page | 18
Exhibit 4.3 Annual Patent Counts and Growth in Orange County, 2001-2015
Source: United States Patent and Trademark Office
Exhibit 4.4 highlights the top patent-generating organizations in Orange County, largely in
Information Technology and Life Science industries. With technology continually evolving and
demographic trends pointing to a population which will become increasingly reliant on tech-
and healthcare-related services, the fact that these patents are focused in these industries
suggests that local organizations are not only aware of these trends, but that they will be well
positioned to address these expected economic and demographic shifts.
Exhibit 4.4 Top Orange County Organizations by Patent Count, 2009-2013
Top 10 Organizations in Orange County by Recent Patent Count, 2009-2013
Company 2009 2010 2011 2012 2013 Total
Broadcom 255 333 418 449 393 1,848 Allergan, Inc. 50 78 94 69 133 424 Boeing 35 54 64 56 72 281 University of California, Regents 31 48 39 55 61 235 Western Digital 19 25 32 33 59 168
Hon Hai Precision 48 37 19 25 29 157 Qualcomm 8 19 28 35 43 133 Abbott Medical Optics 2 17 26 22 42 109 Samsung Electronics 29 12 14 27 11 94 Applied Medical Resources 10 16 17 26 21 90
Source: U.S. Cluster Mapping
1,5
74
1,6
20
1,6
45
1,6
17
1,5
34
1,8
52
1,5
41
1,5
74
1,6
48
2,1
75
2,3
10
2,5
67
2,7
21
2,8
55
2,8
51
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
0
500
1,000
1,500
2,000
2,500
3,000
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
An
nu
al Pate
nt G
row
th
Pat
en
t C
ou
nt
Patent Count Patent Growth
Section 4 – Innovation in Orange County Page | 19
While Orange County’s talented and well-educated workforce helps to attract and retain top-
tier, innovative organizations into the region, partnerships between educational institutions,
economic development organizations and private companies have helped to support and
encourage various start-ups in the region, thus cultivating local innovation and
entrepreneurship. The most notable example of a successful partnership in this area is the
University of California’s “The Cove”, a 31,000 square foot facility of collaborative work space
which provides locally based start-ups with access to discovery disclosure, sponsored research,
prototyping, funding, incubation and acceleration. As of early 2016, The Cove housed
approximately 30 start-ups at various stages of their business life-cycle and in a variety of
different industries including Information Technology, Health Care, and Education.
Alongside the emerging growth startups currently calling The Cove home, numerous related
groups also operate there including the UCI Invention Transfer Group, which assesses the
patentability and commercial potential of inventions by UCI faculty, physicians and researchers.
The Transfer Group helps bring these inventions to the market where they can be utilized by
industry professionals. In addition to the support provided by the Invention Transfer Group, the
Cove is also home to Industry Sponsored Research (ISR) which connects UCI faculty and
graduate-level researchers and corporate funding sources to facilitates new research ventures
and opportunities in the region, thus serving to further drive innovation in the Orange County.
The ISR creates business relationships between researchers and industry professionals while
guiding both sides through the funding process in order to create sustainable linkages and
relationships between business and academia. Overall, The Cove is the culmination of years of
collaboration between industry professionals and educational institutions localized in the
business and tech-hub of Orange County, with an overall goal to continually drive innovation
through a comprehensive support system designed to guide start-ups through various stages of
their business lifecycle.
Section 5 – Occupational Employment and Salary Growth Page | 20
Section 5 - Occupational Employment and Salary Growth
As seen in Exhibit 5.1, Office & Administrative Support is the largest single occupational
category in Orange County, accounting for 17 percent of employment, followed by Sales &
Related occupations at 11 percent and Food Preparation & Service-Related occupations at 9.5
percent.
Exhibit 5.1 Orange County Occupational Employment Distribution
Orange County has added 39,280 jobs over the past year alone for a year-over-year increase of
2.6 percent, while average salaries have increased by $1,320 or 2.4 percent. In terms of
absolute growth, Sales and Related occupations added the most occupations with 5,490, an
increase of 3.4 percent, followed by Business & Financial Operations occupations with 5,370
jobs, an increase of 5.5 percent, and Transportation and Material Moving, which added 5,000
jobs for a 6.7 percent increase.
17.0%
11.0%
9.5%
7.1%
6.7% 6.4%
5.2%
5.0%
4.5%
4.3%
3.5%
3.3%
2.9%
2.8%
2.5%
2.2% 1.7%
1.5%
1.1% 0.9%
0.8%
0.1%
Office & Administrative Support
Sales & Related
Food Preparation & Serving-Related
Production
Business & Financial Operations
Management
Transportation & Material Moving
Education, Training, & Library
Healthcare Practitioners & Technical
Construction & Extraction
Building & Maintenance
Computer & Mathematical
Personal Care & Service
Installation, Maintenance, & Repair
Architecture & Engineering
Healthcare Support
Protective Service
Arts, Design, Sports, & Media
Community & Social Services
Life, Physical, & Social Science
Legal
Farming, Fishing, & Forestry
Source: OCBC Analysis of California EDD Data, QCEW Dataset
Section 5 – Occupational Employment and Salary Growth Page | 21
Legal occupations experienced the largest annual increase in salary; the field’s average salary
increased by 10.2 percent, from $108,900 in 2015 to $119,974 in 2016. The average salary of
Sales and Related Occupations, on the other hand, experienced the largest drop over that time
period, decreasing by $1,016 or 2.2 percent.
Exhibit 5.2 Orange County Occupational and Salary Year-over-Year Absolute Growth
Projections provided by the California Employment Development Department predict that the
Office and Administrative Support, Food Preparation and Serving Related, and Sales and
Related occupational groups will add the most jobs between 2012 and 2022. While these three
occupational groups are expected to add a combined 93,620 jobs between 2012 and 2022, the
average wages provided by these occupations are relatively low: $41,221 for Office and
Administrative Support, $25,402 for Food Preparation and Serving Related, and $45,549 for
-$3,000
-$1,000
$1,000
$3,000
$5,000
$7,000
$9,000
$11,000
$13,000
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
Sale
s an
d R
ela
ted
Bu
sin
ess
& F
inan
cial
Op
era
tio
ns
Tran
spo
rtat
ion
& M
ate
rial
Mo
vin
g
Co
nst
ruct
ion
an
d E
xtra
ctio
n
Off
ice
& A
dm
inis
trat
ive
Su
pp
ort
Pe
rso
nal
Car
e a
nd
Ser
vice
Co
mp
ute
r &
Mat
hem
atic
al
Man
age
me
nt
He
alth
care
Pra
ctit
ion
ers
& T
ech
nic
al
Foo
d P
rep
arat
ion
& S
erv
ing-
Re
late
d
Bu
ildin
g &
Mai
nte
nan
ce
Arc
hit
ect
ure
& E
ngi
ne
eri
ng
Art
s, D
esi
gn, S
po
rts,
& M
ed
ia
Edu
cati
on
, Tra
inin
g, &
Lib
rary
Pro
tect
ive
Se
rvic
e
Lega
l
Farm
ing,
Fis
hin
g, &
Fo
rest
ry
Co
mm
un
ity
& S
oci
al S
erv
ice
s
He
alth
care
Su
pp
ort
Life
, Ph
ysic
al,
& S
oci
al S
cie
nce
Pro
du
ctio
n
Inst
alla
tio
n, M
ain
ten
ance
, & R
epai
r
Ch
ange
in O
ccup
ation
al Salaries C
han
ge in
Occ
up
atio
nal
Em
plo
yme
nt
Change in Employment Change in Salaries
Source: OCBC Analysis of California EDD Data, QCEW Dataset
Section 5 – Occupational Employment and Salary Growth Page | 22
Sales and Related occupations. Occupational groups providing above-average wages included
Business and Financial Operations, which is expected to add 22,830 jobs with average salaries
of $82,513, Management, expected to add 17,410 jobs with average salaries of $130,559 and
Healthcare Practitioners and Technical, expected to add 11,990 occupations with average
salaries of $93,972. Overall, Orange County is expected to add approximately 265,400 jobs
between 2012 and 2022 and, as of the first quarter of 2016, the county’s average salary across
all occupations is $55,343.
Exhibit 5.3 Projected Orange County Employment Growth by Occupational Group (2012-
2022)
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Off
ice
an
d A
dm
inis
trat
ive
Su
pp
ort
Foo
d P
rep
arat
ion
an
d S
erv
ing
Re
late
d
Sale
s an
d R
ela
ted
Bu
sin
ess
an
d F
inan
cial
Op
era
tio
ns
Co
nst
ruct
ion
an
d E
xtra
ctio
n
Man
age
me
nt
Pe
rso
nal
Car
e a
nd
Ser
vice
Bu
ildin
g an
d M
ain
ten
ance
He
alth
care
Pra
ctit
ion
ers
an
d T
ech
nic
al
Edu
cati
on
, Tra
inin
g, a
nd
Lib
rary
Tran
spo
rtat
ion
an
d M
ate
rial
Mo
vin
g
Co
mp
ute
r a
nd
Mat
he
mat
ica
l
Inst
alla
tio
n, M
ain
ten
ance
, an
d R
ep
air
He
alth
care
Su
pp
ort
Art
s, E
nte
rtai
nm
en
t an
d M
ed
ia
Pro
du
ctio
n
Lega
l
Life
, Ph
ysic
al,
an
d S
oci
al S
cie
nce
Co
mm
un
ity
and
So
cia
l Se
rvic
e
Pro
tect
ive
Se
rvic
e
Arc
hit
ect
ure
an
d E
ngi
ne
eri
ng
Farm
ing,
Fis
hin
g, a
nd
Fo
rest
ry
Ave
rage Salarie
s C
han
ge in
Em
plo
yme
nt
Projected Absolute Change (2012-2022) Q1 2016 Salary
Source: OCBC Analysis of California EDD Data, QCEW Dataset
Section 5 – Occupational Employment and Salary Growth Page | 23
EDD estimates that Fashion Designers (+54.3%), Personal Care Aides (+49.6%), and Brickmasons
and Blockmasons (+49.0%) will be the fastest growing occupations on a percentage basis
between 2012 and 2022. The latter two occupations are part of Orange County’s most rapidly
expanding industries, Healthcare and Construction; Information Technology is also experiencing
noteworthy growth.
Exhibit 5.4 Average Salaries of Fastest-Growing Occupations in Orange County (2012-2022)
$-
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
An
nu
al Salary P
erc
en
t Jo
b G
row
th
Projected Growth (2012-2022) Q1 2016 Mean Annual Wage
Source: OCBC Analysis of California EDD Data, QCEW Dataset
Section 6 – Income and Poverty Statistics Page | 24
Section 6 - Income and Poverty Statistics
Orange County continues to benefit from one of the highest median household incomes in
Southern California; the U.S. Census Bureau’s American Community Survey measured the
county’s median household income at $78,428 in 2015, a $2,265 (3 percent) increase from the
previous year. Orange County’s 2015 medium annual income was $14,000 (21.5 percent) higher
than the state average of $64,500, and $22,653 (40.6 percent) higher than the national
average. The county’s per capita income of $35,651 - the highest in Southern California -
increased by $765 (2.2 percent) between 2014 and 2015.
While both median household income and per capita income have steadily increased in Orange
County since the Great Recession, recovering by 10.6 percent and 13.6 percent since 2010,
respectively, the county’s poverty rate remains high at 12.7 percent in 2015. While the poverty
rate remains above the 12.2 percent rate in 2010, the past few years have registered slight
improvements after reaching a recent peak of 13.5 percent in 2013. Although the county’s
median income and job creation rate have both improved, they have failed to keep up with cost
of living in some communities. In addition, differing definitions of poverty mean that the official
poverty rate may fail to reflect actual conditions, particularly in ”Red-Zone” areas which suffer
from above-average unemployment rates and below-average income. While rising home and
rental prices, as mentioned before, have had a major impact on encouraging many young
professionals to move away from Orange County, they have had an even more drastic impact
on those living in poverty.
Exhibit 6.1 Orange County Income and Poverty Rates (2000-2015)
Exhibit 6.2 provides an illustration of household income distribution across various income
groups for 2000 and 2015. As shown in the chart, households making between $50,000 and
$74,999 a year were the county’s largest income group in 2000, representing 20.7 percent of
the population; by 2015, this income group fell to 15.2 percent and the $100,000 to $149,999
income group represented 17.2 percent of the county’s residents. Since the turn of the
-2.0%
3.0%
8.0%
13.0%
18.0%
$0
$20,000
$40,000
$60,000
$80,000
$100,000
1990 2000 2010 2014 2015
Po
verty R
ate
Pe
r C
apit
a an
d M
ed
ian
H
ou
seh
old
Inco
me
Per Capita Income Median Household Income Poverty Rate
Source: Census Bureau, 2015 American Community Survey, 1-year Estimates
Section 6 – Income and Poverty Statistics Page | 25
millennium, all income groups making over $100,000 annually have significantly increased, with
those making $150,000 to $199,999 and those making over $200,000 increasing by 4.7 and 7.5
percent, respectively. On the other hand, income groups making $75,000 and less decreased in
size. While these trends indicate rising incomes across the county, they fail to reflect the
economic climate of specific locations within the county, especially those that have not
benefited from countywide wage increases to the same degree. In addition, many areas have
seen cost-of-living rise faster than incomes due to several factors, including skyrocketing
student debt, increasing housing costs, and inflation.
Exhibit 6.2 Orange County Household Income Profile
4.9
%
3.8
%
8.7
%
9.9
%
14
.7%
20
.7%
14
.0%
13
.9%
4.7
%
4.8
%
4.8
0%
3.5
0%
7.1
0%
6.8
0%
10
.40
%
15
.20
%
13
.40
% 1
7.2
0%
9.4
0%
12
.30
%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Pe
rce
nt
of
Tota
l Ho
use
ho
lds
2000
2015
Source: Census Bureau, 2015 American Community Survey, 1-year Estimates
Section 6 – Income and Poverty Statistics Page | 26
Exhibit 6.3 Percent of Orange County Households Earning Above or Below $50,000
Additional concerns regarding affordability and poverty rates in Orange County are raised by
the major differences between the Orange County’s official poverty rate, measured using
federal poverty-level standards by the U.S. Census Bureau, and the California Poverty Measure
(CPM), developed by the Public Policy Institute of California (PPIC) and Stanford University. The
CPM, unlike the official poverty rate provided by the U.S. Census, takes into account trends
specific to California to provide a much more accurate account of the current economic
environment. While Orange County, as shown in Exhibit 6.4, has the region’s lowest poverty
rate according to the U.S. Census, its CPM was the second highest in Southern California.
Exhibit 6.4 Poverty Rates by Region (2013)
Poverty Rates by Region, 2013
County
Percentage in Poverty, Official Poverty Rate
Measure
Percentage in Poverty, CPM
Measure Differential
Percentage of Children Ages 17 and Below in Poverty, Official Rate
Orange 12.7% 21.8% 9.1% 18.2%
Los Angeles 18.3% 25.7% 7.4% 26.8%
Riverside 16.6% 20.1% 3.5% 23.8%
San Bernardino 19.2% 19.4% 0.2% 27.0%
California 16.2% 21.2% 5.0% 23.4%
United States 15.9% 21.7%
42.0% 36.9% 35.7%
32.6%
58.1% 63.0% 64.4%
67.5%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
2000 2005 2010 2015
Pe
rce
nt
of
Tota
l Ho
use
ho
lds
Household Earnings > $50,000 Household Earnings < $50,000
Source: American Community Survey, Public Policy Institute of California, and Stanford Center on Poverty and Inequality
Source: Census Bureau, American Community Survey, 1-year Estimates
Section 8 – Housing Market and Construction Activity Page | 27
Section 7 - Educational Attainment Demographics
The educational attainment of Orange County’s residents has been a primary driver of
economic prosperity over the past several years; a well-educated workforce helps the county
attract, retain and create innovative businesses and has allowed it to become a hub for several
specialized industry clusters including biotechnology, medical devices, and semiconductors.
These industry clusters provide both high wages and significant multiplier effects that help
growth in other, related industries. Exhibit 7.1 shows the educational attainment of the
county’s population over age 25. In 2015, 46.4 percent of this group had an associate’s degree
or higher, an increase of 0.7 percent from 2014. This provides one indicator of county residents’
increasing educational attainment.
Exhibit 7.1 Orange County Educational Attainment, Population over 25 (2015)
Exhibit 7.2 offers another indicator of educational attainment, the increasing number of tech-
related degrees awarded at local universities and colleges, including the University of California,
Irvine, California State University, Fullerton, and Chapman University. The number of
undergraduate tech-related degrees has substantially increased since the turn of the
millennium, more than doubling from 1,402 in 2000 to 2,865 in 2015. Tech-related graduate
degrees have seen even more dramatic growth over the same time period, increasing from 434
in 2000 to 1,220 in 2015.
9.0%
6.9%
17.3%
20.5% 7.6%
25.1%
13.7%
Less than 9th Grade
9th to 12th Grade, No Diploma
High School Graduate
Some College, No Degree
Associate's Degree
Bachelor's Degree
Graduate or Professional Degree
Total Population Aged 25+: 2.15 Million
Source: Census Bureau, 2015 American Community Survey, 1-year Estimates
Section 8 – Housing Market and Construction Activity Page | 28
Exhibit 7.2 Orange County Tech-Related Degrees Granted (2000 – 2015)
Exhibit 7.3 Median Wages by Educational Attainment, Orange County Workers over 25
(2015)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Nu
mb
er
of
De
gre
es
Gra
nte
d
Undergraduate Graduate
$21,229
$28,614
$40,013
$60,712
$85,175
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
Less than HighSchool Graduate
High SchoolGraduate
Some College orAssociate's Degree
Bachelor's Degree Graduate orProfessional
Degree
An
nu
al W
age
s
Source: University of California, Irvine; Chapman University; California State University, Fullerton
Source: Census Bureau, 2015 American Community Survey, 1-year Estimates
Section 8 – Housing Market and Construction Activity Page | 29
Despite the rising cost of education, academic degrees continue to provide significant economic
benefits, as seen in Exhibits 7.3 and 7.4; higher educational attainment correlates with both
higher median wages and lower rates of poverty and unemployment.
Exhibit 7.4 Orange County Unemployment & Poverty Rates by Educational Attainment (2015)
Orange County’s deep talent pool and increasing educational attainment, as mentioned before,
provides an important competitive advantage that will most likely continue for the near future.
Recent economic and social issues, however, may threaten the county’s competitiveness. The
rising cost of education, for example, limits attendance at four-year universities, and the
county’s high cost of living and lack of gainful employment positions may force talented
workers, once educated within the county, to relocate elsewhere after graduation.
Policymakers and county stakeholders should take steps to address these issues so that Orange
County retains its young Millennial workforce talent, thereby maintaining one of the county’s
most valuable competitive advantages.
22.8%
12.3%
9.0%
5.3%
5.4% 6.4%
4.9% 3.4% 0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Less than High SchoolGraduate
High School Graduate Some College,Associate's Degree
Bachelor's Degree orHigher
Po
vert
y an
d U
ne
mp
loym
en
t R
ate
s
Poverty Rate Unemployment Rate
Source: Census Bureau, 2015 American Community Survey, 1-year Estimates
Section 8 – Housing Market and Construction Activity Page | 30
Section 8 - Housing Market and Construction Activity
Orange County’s strong housing market demonstrates the county’s economic resilience;
supported by job creation, increases in household incomes, and a favorable interest rate
environment, post-Recession housing prices have rebounded to surpass pre-Recession levels.
Rental rates have seen similar increases as rising demand for rental properties confronts
constrained new supply.
Exhibit 8.1 shows Orange County home prices from January 2008 to May 2016, broken down
into prices paid for new and existing single-family housing units. As of August 2016, new homes
sales have risen in average price to $749,000, while existing home prices have also seen
increases, as their August 2016 average of $649,000 represents a 6.4 percent year-over-year
increase.
Exhibit 8.1 Orange County Median Home Prices (2008-2016): New vs. Existing Homes
Looking forward, in the presence of an increasing population, increasing wages, tight housing
supply and a low interest rate environment, Chapman University estimates that a combination
of factors – population growth, wage growth, a limited housing supply and low interest rates –
will increase county home prices by 4.6 percent in 2016, significantly more than the 2.7
increase in 2015.
The post-Recession increase in residential building permits offers another sign of Orange
County’s continuing economic vitality. As seem in Exhibit 8.2, the number of permits grew
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
Jan
-08
May
-08
Sep
-08
Jan
-09
May
-09
Sep
-09
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
Ho
me
Pri
ce
Existing New + Existing
Source: California Association of Realtors, CoreLogic/DataQuick
Section 8 – Housing Market and Construction Activity Page | 31
dramatically between 2009 and 2012, increasing by an average of 320 permits per month.
Approximately 1,098 residential permits have been granted thus far in 2016, a greater than 600
percent increase over 2009’s average of 182 permits per month. 8,805 building permits have
been granted thus far in 2016, with Irvine accounting for 3,399 or 39 percent of the total. While
other Orange County cities, including Anaheim, Huntington Beach, and Santa Ana, have also
seen significant permit activity, Irvine has been the largest contributor to Orange County’s
growing housing market for several years.
Exhibit 8.2 Orange County Housing Permits (2009-2016)
Orange County apartment rental rates have mirrored the rise in home prices, increasing from a
2015 average of $1,854 to $2,001 in June 2016, a growth of 8.0 percent.
0
500
1,000
1,500
2,000
2,500
Jan
-09
May
-09
Sep
-09
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
Bu
ildin
g P
erm
its
August 2016 - 708
Source: U.S. Census Bureau CenStats
Section 8 – Housing Market and Construction Activity Page | 32
Exhibit 8.3 Orange County Average Apartment Rental Rates, 2012 – 2016 YTD
The county’s high home prices have, in all likelihood, driven apartment rental rates up as well,
as the inability of residents to afford traditional single-family homes increases the demand for
multifamily units. The Traditional Housing Affordability Index (HAI) created by the California
Association of Realtors (CA) measures the percentage of households who can afford to
purchase a home in a specific region. Orange County has historically ranked lower on the HAI
than other California counties, an issue that continues to this day. As of the second quarter of
2016, only 22 percent of county households could afford to purchase a home. While this is a
slight improvement over 2015’s HAI of 21, it is still well below affordability levels of neighboring
counties as illustrated in Exhibit 8.4. Orange County also ranks below its neighbors on CAR’s
First-Time Home Buyer Affordability Index; only 43 percent of the county’s first-time
homebuyers can actually afford to purchase a new home, a rate that has not improved since
2015. Burdened by student loan debt, increasing healthcare prices, and marginal wage growth,
young professionals find themselves effectively priced out of Orange County and other high-
cost areas throughout the nation.
$1,607 $1,682
$1,765 $1,854
$2,001
$-
$500
$1,000
$1,500
$2,000
$2,500
2012 2013 2014 2015 2016 YTD
Ave
rage
Ap
artm
en
t R
en
tal R
ate
Source: RentBits
Section 8 – Housing Market and Construction Activity Page | 33
Exhibit 8.4 California Association of Realtors Affordability Index
California Association of Realtors Affordability Index
Traditional Affordability Index First-Time Home Buyer Affordability Index
County Q2 2016 Q1 2016 Q2 2015 Q2 2016 Q1 2016 Q2 2015
Orange County 22 23 21 43 44 43
Los Angeles 30 31 30 49 50 50
Riverside County 41 42 40 61 62 61
San Bernardino 56 57 56 73 73 73
San Diego 26 28 25 45 47 47
Ventura 29 30 25 51 52 49
Exhibit 8.5 shows the percentage of income spent by Orange County residents on housing,
illustrating the heavy burden faced by many county renters and homeowners. Traditionally,
economists and housing professionals have used the 30 percent rule – a person or family
should spend around thirty percent of their income or less on housing – as a rule of thumb. 57.7
percent of county renters and 39.5 percent of county homeowners exceed that 30 percent,
with almost half of renters spending more than 35 percent of their income on housing. This, in
turn, leads to a corresponding decrease in discretionary spending - and the ability to save for
the future - and thus serves to inhibit widespread economic prosperity in Orange County over
time.
Exhibit 8.5 Orange County Renter and Owner Housing Costs as a Percent of Income (2015)
17
.8%
12
.6%
11
.8%
10
.5%
47
.2%
31
.5%
15
.8%
13
.2%
8.9
%
30
.6%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
Less than 20% 20% to 24.9% 25% to 29.9% 30% to 34.9% 35% or More
Pe
rce
nt
of
Re
nte
r an
d O
wn
er
Po
pu
lati
on
Percent of Income Spent on Housing
Renters
Owners
Source: California Association of Realtors
Source: California Department of Finance, Demographic Research Unit
Section 9 – Final Thoughts Page | 34
Section 9 - Final Thoughts
The strength and resilience of Orange County’s economy has become even more apparent in
the post-Recession era, as the county has lead Southern California’s economy recovery and
enjoys pre-Recession levels of economic activity as well as one of the nation’s highest qualities
of life. Orange County must leverage its strengths and address its weaknesses in order to
continue on this positive trajectory. Although county employment has seen a significant
increase, the skills gap continues to limit economic growth and frustrate both employers and
workers. Automation threatens to stop or even reverse the county’s employment growth as
self-driving vehicles, computerized kiosks, and other new technologies replace many jobs. High
housing costs drive young Millennial workforce talent to move to lower-cost regions and
commute to Orange County, or in some cases, out of California all together. Finally, the
county’s increasingly older population demography places a heavier burden on government
services in terms of healthcare, transportation, and other services.
Orange County elected officials, policymakers, and stakeholders must face these problems head
on and preserve – and hopefully even enhance - the county’s competitive advantages. Further
increasing the county’s educational attainment rates, for example, could help close the skills
gap, while also supporting innovative industry clusters which will pay significant dividends in
the form of economic growth, job creation, high wages, and significant multiplier effects on the
local economy. Above all, a better understanding of the county’s demographic, education,
economic, innovation, and housing trends will help stakeholders and policymakers preserve the
county’s high quality of life and competitive business environment far into the future.
In addition to this report, Orange County Business Council also provides a variety of other
related economic, workforce, housing, and demographic reports including:
Orange County Workforce Indicators Report: A product of the research partnership
between the Orange County Business Council, County of Orange, and Orange County
Development Board, the Workforce Indicators Report examines the growth of industry
and employment, salary and wage trends, demographic changes and the educational
attainment of Orange County students. Click here for a link to the report.
Orange County Community Indicators Report: A partnership between Children &
Families Commission of OC, United Way OC, Orange County Community Foundation,
and CalOptima, the 2015 Orange County Community Indicators Report focuses on three
pivotal issues currently facing Orange County related to housing, children’s health, and
the opportunity gap between high- and low-income families and their children. At the
same time, the report retains the core components of past reports including population,
demographic and workforce trends. Click here for a link to the report.
Section 9 – Final Thoughts Page | 35
Orange County Workforce Housing Scorecard: The 2015 Workforce Housing Scorecard
examines and analyzes the current and projected housing trends and provides a preview
of where Orange County is headed in terms of workforce housing, and how it will impact
demographic, economic, and business competitiveness factors. Click here for a link to
the report.