‘A persistent and growing underclass’ in Orange County, report shows

Parents holding down two or three jobs each.

Families doubled and tripled up in cramped apartments.

Underachieving students.

Poor health and nutrition.

A dwindling working-age population.

It is not all bad news, but Orange County’s new Community Indicators Report, an annual study by government agencies, businesses and philanthropies, points to many woes woven into the fabric of the county’s sunny suburbs.

One thread links them all: a calamitous shortage of affordable housing.

“Clearly, homelessness, overcrowding, and family financial instability are directly linked to high housing costs,” warns the 74-page data-rich report released last week.

“But other factors are indirectly linked. When families spend 50% or more of their income on housing, they have less remaining to pay for health care and healthy foods, affecting overall health.

“With parents working two or more jobs to afford housing, they may lack the time to help children with homework or afford after-school enrichment, affecting educational achievement.”

If the housing crisis continues, the report predicts, the result will be “a persistent and growing underclass,” while higher-income residents bear the burden of supporting a swelling elderly population.

“There are two chief ways to tackle the problem of out-of-reach housing in Orange County,” it adds. “Bring earnings up or bring costs down.”

  • Course-taking in career technical programs related to science, technology, engineering and math jumped 40 percent from 2014 to 2016 in Orange County schools. Here, Aliso Niguel High School students Julia Hopkins, left, and Shanice Berry, worked on biotech experiments at a showcase in December 2016 for OC Pathways, a program that focuses on work-based learning. (Photo by Mark Rightmire, Orange County Register/SCNG)

    Course-taking in career technical programs related to science, technology, engineering and math jumped 40 percent from 2014 to 2016 in Orange County schools. Here, Aliso Niguel High School students Julia Hopkins, left, and Shanice Berry, worked on biotech experiments at a showcase in December 2016 for OC Pathways, a program that focuses on work-based learning. (Photo by Mark Rightmire, Orange County Register/SCNG)

  • As Miguel Hernandez steers, his fellow students Lizbeth Gomez and Rudy Martin Del Campo showed off Century High School’s solar powered vehicle at a December 2016 showcase for OC Pathways, a career-based program for students in 14 Orange County school districts. (Photo by Mark Rightmire, Orange County Register/SCNG)

    As Miguel Hernandez steers, his fellow students Lizbeth Gomez and Rudy Martin Del Campo showed off Century High School’s solar powered vehicle at a December 2016 showcase for OC Pathways, a career-based program for students in 14 Orange County school districts. (Photo by Mark Rightmire, Orange County Register/SCNG)

  • Brandon Bock, left, and Jason Ayala from McFadden Intermediate School in Santa Ana, guided their robotic vehicles at a December 2016 showcase for OC Pathways, a state funded program which encourages students to excel in science, technology, engineering and math-related subjects. (Photo by Mark Rightmire, Orange County Register/SCNG)

    Brandon Bock, left, and Jason Ayala from McFadden Intermediate School in Santa Ana, guided their robotic vehicles at a December 2016 showcase for OC Pathways, a state funded program which encourages students to excel in science, technology, engineering and math-related subjects. (Photo by Mark Rightmire, Orange County Register/SCNG)

  • The landscaping and barbecue area on the second floor at the Clark Commons affordable family apartments family apartments project in Buena Park on Wednesday, May 10, 2017. (Photo by Leonard Ortiz, Orange County Register/SCNG)

    The landscaping and barbecue area on the second floor at the Clark Commons affordable family apartments family apartments project in Buena Park on Wednesday, May 10, 2017. (Photo by Leonard Ortiz, Orange County Register/SCNG)

  • The 70-unit Clark Commons affordable family apartments was built at the at the corner of Orangethorpe and Stanton Avenues in Buena Park on Wednesday, May 10, 2017. (Photo by Leonard Ortiz, Orange County Register/SCNG)

    The 70-unit Clark Commons affordable family apartments was built at the at the corner of Orangethorpe and Stanton Avenues in Buena Park on Wednesday, May 10, 2017. (Photo by Leonard Ortiz, Orange County Register/SCNG)

  • The 70-unit Clark Commons affordable family apartments was built at the at the corner of Orangethorpe and Stanton Avenues in Buena Park on Wednesday, May 10, 2017. (Photo by Leonard Ortiz, Orange County Register/SCNG)

    The 70-unit Clark Commons affordable family apartments was built at the at the corner of Orangethorpe and Stanton Avenues in Buena Park on Wednesday, May 10, 2017. (Photo by Leonard Ortiz, Orange County Register/SCNG)

  • The the laundry room is one of the amenities offered at the Clark Commons affordable family apartments family apartments project in Buena Park on Wednesday, May 10, 2017. (Photo by Leonard Ortiz, Orange County Register/SCNG)

    The the laundry room is one of the amenities offered at the Clark Commons affordable family apartments family apartments project in Buena Park on Wednesday, May 10, 2017. (Photo by Leonard Ortiz, Orange County Register/SCNG)

  • The bike storage area left, and fitness center, right, are two of the many amenities offered at the Clark Commons affordable family apartments family apartments project in Buena Park on Wednesday, May 10, 2017. (Photo by Leonard Ortiz, Orange County Register/SCNG)

    The bike storage area left, and fitness center, right, are two of the many amenities offered at the Clark Commons affordable family apartments family apartments project in Buena Park on Wednesday, May 10, 2017. (Photo by Leonard Ortiz, Orange County Register/SCNG)

  • The game is one of the amenities offered to residents at the Clark Commons affordable family apartments family apartments project in Buena Park on Wednesday, May 10, 2017. (Photo by Leonard Ortiz, Orange County Register/SCNG)

    The game is one of the amenities offered to residents at the Clark Commons affordable family apartments family apartments project in Buena Park on Wednesday, May 10, 2017. (Photo by Leonard Ortiz, Orange County Register/SCNG)

  • The second floor outdoor playground at the Clark Commons affordable family apartments family apartments project in Buena Park on Wednesday, May 10, 2017. (Photo by Leonard Ortiz, Orange County Register/SCNG)

    The second floor outdoor playground at the Clark Commons affordable family apartments family apartments project in Buena Park on Wednesday, May 10, 2017. (Photo by Leonard Ortiz, Orange County Register/SCNG)

  • The fitness center is one of the amenities offered to residents Clark Commons affordable family apartments family apartments project in Buena Park on Wednesday, May 10, 2017. (Photo by Leonard Ortiz, Orange County Register/SCNG)

    The fitness center is one of the amenities offered to residents Clark Commons affordable family apartments family apartments project in Buena Park on Wednesday, May 10, 2017. (Photo by Leonard Ortiz, Orange County Register/SCNG)

  • The computer lab is one of the amenities offered to residents Clark Commons affordable family apartments family apartments project in Buena Park on Wednesday, May 10, 2017. The room is used for children to do their homework or learn English. (Photo by Leonard Ortiz, Orange County Register/SCNG)

    The computer lab is one of the amenities offered to residents Clark Commons affordable family apartments family apartments project in Buena Park on Wednesday, May 10, 2017. The room is used for children to do their homework or learn English. (Photo by Leonard Ortiz, Orange County Register/SCNG)

  • The 70-unit Clark Commons affordable family apartments was built at the at the corner of Orangethorpe and Stanton Avenues in Buena Park on Wednesday, May 10, 2017. (Photo by Leonard Ortiz, Orange County Register/SCNG)

    The 70-unit Clark Commons affordable family apartments was built at the at the corner of Orangethorpe and Stanton Avenues in Buena Park on Wednesday, May 10, 2017. (Photo by Leonard Ortiz, Orange County Register/SCNG)

  • Clark Commons, a 70-unit low-income housing project in Buena Park, has a playground and a cmputer center. It was built on the site of a blighted retail center. The city provided $7.7 million in loans to Jamboree Housing Corp., a non-profit developer. (Courtesy Juan Tallo)

    Clark Commons, a 70-unit low-income housing project in Buena Park, has a playground and a cmputer center. It was built on the site of a blighted retail center. The city provided $7.7 million in loans to Jamboree Housing Corp., a non-profit developer. (Courtesy Juan Tallo)

  • Bobbi Smith,15, uses the free wifi to do her homework at Clark Commons, a low-income housing project in Buena Park. More than 2,500 families are on the waiting list for the 70-unit complex, which opened in February 2017, with the help of city loans. (Courtesy Juan Tallo)

    Bobbi Smith,15, uses the free wifi to do her homework at Clark Commons, a low-income housing project in Buena Park. More than 2,500 families are on the waiting list for the 70-unit complex, which opened in February 2017, with the help of city loans. (Courtesy Juan Tallo)

  • At Buena Park’s Clark Commons, a 70-unit low income housing project, a resident coordinator helps children with homework. The waiting list for apartments includes 2,500 families. (Courtesy Juan Tallo)

    At Buena Park’s Clark Commons, a 70-unit low income housing project, a resident coordinator helps children with homework. The waiting list for apartments includes 2,500 families. (Courtesy Juan Tallo)

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Some good news

The report notes several positive trends:

— At 3.7 percent, the jobless rate is lower than that of California or the U.S. In 14 of 19 high-tech industries, its employment concentration is higher than the national average.

— At 5.4 percent, the overall high school dropout rate is lower than the state’s 9.8 percent. Course-taking in career technical education related to science, technology, engineering and math (STEM) jumped 40 percent over two years.

— The proportion of residents without health insurance sank to 9 percent in 2015 from 17 percent in 2013, in the wake of the federal Affordable Care Act. The number of poor children with health insurance grew by 40 percent.

— While many communities resist affordable housing projects, a few are being built with city governments’ support, including in Yorba Linda and Buena Park.

We are losing our millennials and Zers,” Lucy Dunn, president and CEO of the Orange County Business Council, a trade group for the county’s largest companies, told a group of 150 executives and government officials at an Orange County Forum gathering last week.

“Cities: you have to say yes to housing…We need city council people not be afraid of the next election.”

Disturbing data

Among the report’s troubling trends:

— To afford a median-priced, one-bedroom rental unit, an hourly wage of $27.62 is needed. Yet 68 percent of Orange County jobs pay below that.

— Orange County’s cost of living is almost double the U.S. average (87% higher). Housing costs are 356% higher than the national average.

— Residents 65 and older are the only group projected to grow proportionate to other age groups in the next 25 years.

— 48 percent of children are not developmentally ready for kindergarten

–Nearly 60,000 households are on waiting lists for government rental assistance.

Michael Ruane, an affordable housing executive who was the county’s project director on its first indicators report 17 years ago, said the data show “there are two Orange Counties.

“What’s striking is the enormous variation. You have poverty in a prosperous region. You have a knowledge economy with high wages, and a tourism economy with lower wages.”

Low pay, high costs

Tourism jobs—some 200,000—make up one of the biggest sectors in the county, along with business and professional positions, and healthcare and social services employment.

But jobs in theme parks, hotels and restaurants pay far less than other large sectors: $24,300 a year on average, with thousands of workers making the minimum wage of $10.50 an hour or slightly above.

Anaheim, home to Disneyland, Orange County’s largest employer with 28,000 workers, is one of the poorest cities in the county, the report notes, with its highest high school drop-out rate (11.5 percent).

Racial and ethnic disparities are stark.

Latinos, on track to grow from 35 percent to 40 percent of the county’s population over the next two decades, experience far more poverty, less access to health care and worse educational results than non-Latino whites (42 percent of the population) or Asians (19 percent).

“Parents work two and three jobs, even on weekends, to make ends meet,” said Al Mijares, county superintendent of schools.

“I know parents who board early buses in Santa Ana to work at south county eateries. They get home late in the evening. So kids are unsupervised. No one can help with homework.”

Adding to the stress, he said, is “overcrowding. There may not be a bed for every member of the household. There may be no place to study.”

Youngest fall behind

The report makes no policy recommendations, but Mijares, whose department is one of the report’s sponsors, said publicly-funded universal pre-kindergarten would be the single biggest boost to educational success.

Georgia, Florida and Oklahoma have enacted statewide pre-K programs, but California has yet to fund a comprehensive program.

Kimberly Goll, executive director of the local Children and Families Commission, said Orange County is the first in California to measure and track factors affecting kindergarten readiness in all its school districts.

Among the 48 percent who enter kindergarten unprepared, some lack motor skills—too much screen time, not enough crayons and physical play, according to some experts. Others lack emotional and cognitive development.

“It is scary that half of our kids are not ready to start kindergarten,” Goll said. “It is well documented that they are then more likely to drop out of high school. They are more likely to become teen parents. They are more likely never to attend college. They are more likely to be arrested for a violent crime.”

Last year, a third of Orange County eleventh graders failed to meet state literacy standards, while 57 percent failed in math.

Still, efforts are ramping up to prepare students for higher-paid jobs requiring STEM skills. Thanks to a state grant, 14,000 high schoolers participate in OC Pathways, a program offering courses and industry contacts in three areas:  Health Care/Biotechnology, Engineering/Advanced Manufacturing and Information Technology/Digital Media.

Vocational education has changed, Mijares said. “For instance, automobiles have become complex, with sophisticated computers under the dash. You need to be an engineer to understand what’s going on.”

More elderly, fewer workers

If demographics are destiny, then the county’s population trends are daunting.

“Families are migrating to other parts of the state and country that boast cheaper housing and lower costs of living,” according to the report. “For the workforce that remains…the social burden of supporting the growing older adult population will fall on them and them alone.”

The age 65-and-older group will grow from 14 percent today to 26 percent of the population by 2040, the report predicts. The number of working-age residents for each dependent (children and the elderly) will shrink from two to one.

“The fewer people of working age, the fewer there are to sustain schools, pensions and other supports to the youngest and oldest members of a population,” the report notes.

Turning malls into housing

Cities often prefer retail development, which brings in sales tax revenue, to multifamily housing, which sparks political opposition.

Even luxury housing is controversial: in March the Newport Beach City Council rescinded its approval of a 25-story project for million-dollar condominiums after opponents threatened a referendum.

Steve PonTell, CEO and President of National Community Renaissance (National CORE), a non-profit affordable housing developer, called on employers at the forum event to “see themselves as being in the housing business.”

Hospitals, for instance, should “have hundreds of units of apartments in conjunction with their facilities,” he added.

Open land is scarce, but as shopping centers begin to retrench under the e-commerce onslaught, struggling retail areas can be converted to housing, the report suggests. “Underutilized retail corridors may be the only viable option for increasing the supply,” said Ruane, who heads an Urban Land Institute initiative to assess the potential.

In Yorba Linda, National CORE, where Ruane serves as executive vice president, built Oakcrest Terrace, a 69-apartment complex for low-income families on the site of a former car dealership. The city contributed about 20% of the funding.

In February, Jamboree Housing Corp., an Irvine nonprofit, opened Clark Commons, a 70-apartment complex for low-income families on the former site of a city maintenance yard and blighted retail center in Buena Park. The city contributed $7.7 million in loans.

One testament to the housing shortage: Clark Commons has a waiting list of 2,500 families.

Homes for the well-off

Orange County’s home building 2014-2015 was mostly for higher incomes.

To buy a home

Only 43 percent of first-time buyers have the necessary income ($92,000/year) to qualify for buying an entry-level home, down from 52 percent in 2009.

To rent a home

In Orange County, a $28/hour wage is needed to afford a one-bedroom apartment.

Cost of living

Orange County is 87 percent more expensive than the national average.

Homeless students

More than 28,000 students are homeless, doubled-up or tripled up with other families.

Education

Under 30 percent of poor students meet state math standards. Under 40 percent meet literacy standards.

*Live in hotels, motels, shelters or unsheltered
Source: U.S. Census Bureau

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Five Below: Why is this bargain retailer rushing to California?

  • Sweet tooth? You can satisfy it here at Aliso Viejo’s Five Below where everything is $5 or less. (Photo by Cindy Yamanaka, Orange County Register/SCNG)

    Sweet tooth? You can satisfy it here at Aliso Viejo’s Five Below where everything is $5 or less. (Photo by Cindy Yamanaka, Orange County Register/SCNG)

  • Joel Anderson, the CEO of Five Below, a fast-growing chain from Philadelphia that’s making the splashy debut. He is an Orange County native and graduated from Fountain Valley High School. His professional career included work at Toys r Us and heading up Wal-Mart’s online shopping operations. Did I mention his Harvard MBA?

    Joel Anderson, the CEO of Five Below, a fast-growing chain from Philadelphia that’s making the splashy debut. He is an Orange County native and graduated from Fountain Valley High School. His professional career included work at Toys r Us and heading up Wal-Mart’s online shopping operations. Did I mention his Harvard MBA?

  • Aliso Viejo residents Paula Campos, 11, plays hardball during a soft opening with sister Regina, 9, and their friend Piper Hubbard, 10. The girls loved the crafts at Five Below in Aliso Viejo. (Photo by Cindy Yamanaka, Orange County Register/SCNG)

    Aliso Viejo residents Paula Campos, 11, plays hardball during a soft opening with sister Regina, 9, and their friend Piper Hubbard, 10. The girls loved the crafts at Five Below in Aliso Viejo. (Photo by Cindy Yamanaka, Orange County Register/SCNG)

  • A set of decorate wooden hooks at $5 at Five Below in Aliso Viejo. The new store mark the companyÕs first West Coast locations, bringing its reach to approximately 550 stores in 32 states. (Photo by Cindy Yamanaka, Orange County Register/SCNG)

    A set of decorate wooden hooks at $5 at Five Below in Aliso Viejo. The new store mark the companyÕs first West Coast locations, bringing its reach to approximately 550 stores in 32 states. (Photo by Cindy Yamanaka, Orange County Register/SCNG)

  • Ciro Brudagljo of Laguna Niguel tours Five Below with 8-month-old daughter Tania whose less interested in commerce than playing with dad at the Aliso Viejo location. (Photo by Cindy Yamanaka, Orange County Register/SCNG)

    Ciro Brudagljo of Laguna Niguel tours Five Below with 8-month-old daughter Tania whose less interested in commerce than playing with dad at the Aliso Viejo location. (Photo by Cindy Yamanaka, Orange County Register/SCNG)

  • Ciro Brudagljo of Laguna Niguel says Five Below is an upscale dollar store. He tries to get 8-month-old daughter Tania interested in toys with no luck at the Aliso Viejo location. (Photo by Cindy Yamanaka, Orange County Register/SCNG)

    Ciro Brudagljo of Laguna Niguel says Five Below is an upscale dollar store. He tries to get 8-month-old daughter Tania interested in toys with no luck at the Aliso Viejo location. (Photo by Cindy Yamanaka, Orange County Register/SCNG)

  • Graciela Brudagljo of Laguna Niguel, from left, tries to entice 8-month-old daughter Tania with a hint pinwheel as husband Ciro watches at value retailer Five Below which is set to launch nine new stores in the region. Everything is $5 or less. The retailer will simultaneously open at 10:00 a.m. Friday, April 21st in Aliso Viejo, pictured, Anaheim, Compton, Hawthorne, Montebello, Fontana, Rancho Cucamonga, South Gate and Redlands. (Photo by Cindy Yamanaka, Orange County Register/SCNG)

    Graciela Brudagljo of Laguna Niguel, from left, tries to entice 8-month-old daughter Tania with a hint pinwheel as husband Ciro watches at value retailer Five Below which is set to launch nine new stores in the region. Everything is $5 or less. The retailer will simultaneously open at 10:00 a.m. Friday, April 21st in Aliso Viejo, pictured, Anaheim, Compton, Hawthorne, Montebello, Fontana, Rancho Cucamonga, South Gate and Redlands. (Photo by Cindy Yamanaka, Orange County Register/SCNG)

  • Aalue retailer Five Below which is set to launch nine new stores in the region. Everything is $5 or less. The retailer will simultaneously open at 10:00 a.m. Friday, April 21st in Aliso Viejo, pictured, Anaheim, Compton, Hawthorne, Montebello, Fontana, Rancho Cucamonga, South Gate and Redlands. (Photo by Cindy Yamanaka, Orange County Register/SCNG)

    Aalue retailer Five Below which is set to launch nine new stores in the region. Everything is $5 or less. The retailer will simultaneously open at 10:00 a.m. Friday, April 21st in Aliso Viejo, pictured, Anaheim, Compton, Hawthorne, Montebello, Fontana, Rancho Cucamonga, South Gate and Redlands. (Photo by Cindy Yamanaka, Orange County Register/SCNG)

  • Ciro Brudagljo of Laguna Niguel tours Five Below with 8-month-old daughter Tania, who’s less interested in commerce than playing with dad at the Aliso Viejo location. (Photo by Cindy Yamanaka, Orange County Register/SCNG)

    Ciro Brudagljo of Laguna Niguel tours Five Below with 8-month-old daughter Tania, who’s less interested in commerce than playing with dad at the Aliso Viejo location. (Photo by Cindy Yamanaka, Orange County Register/SCNG)

  • Value retailer Five Below, which is set to launch nine stores in the region. Everything is $5 or less. The retailer will open at 10 a.m. Friday, April 21, in Aliso Viejo, pictured; Anaheim, Compton, Hawthorne, Montebello, Fontana, Rancho Cucamonga, South Gate and Redlands. (Photo by Cindy Yamanaka, Orange County Register/SCNG)

    Value retailer Five Below, which is set to launch nine stores in the region. Everything is $5 or less. The retailer will open at 10 a.m. Friday, April 21, in Aliso Viejo, pictured; Anaheim, Compton, Hawthorne, Montebello, Fontana, Rancho Cucamonga, South Gate and Redlands. (Photo by Cindy Yamanaka, Orange County Register/SCNG)

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Brick-and-mortar merchants seem to be dying.

And teen-targeted retailing is even more troubled.

And California, as certain logic goes, isn’t the greatest place in the world to do business.

So, what is a discount retailer with a youthful audience doing opening 12 stores in a month in Southern California with plans to make the state its top market?

“We couldn’t be more excited to come to California,” says Joel Anderson, the CEO of Five Below, a fast-growing chain from Philadelphia that’s making the splashy debut. “It’s a perfect opportunity. There are no worries on our end about California.”

It’s a curious shopping concept. Dare I say, a fancier dollar store where nothing costs more than $5. Hence, its name.

Selling goes on in a setting that’s bright and a bit loud, much like the vibe of other teen-targeted stores. The products include arty household goods, assorted knickknacks, electronic gadgetry, sportswear, beach toys and snacks — with much of it seemingly perfect for gift-giving. Well, at least to these middle-aged shopper’s eyes. Plus, there’s a healthy supply of plugs and chargers for mobile devices that always seem to get misplaced!

So, why the big jump to California when the previous most-Western store was in Oklahoma? Stores opened in April in Aliso Viejo, Anaheim, Compton, Fontana, Hawthorne, Montebello, Rancho Cucamonga, Redlands and South Gate. Openings in San Dimas, Lancaster and South Fontana are slated for May.

Well, it probably helps that the CEO knows California. Anderson is an Orange County native and graduated from Fountain Valley High School. His professional career included work at Toys r Us and heading up Wal-Mart’s online shopping operations. Did I mention his Harvard MBA?

Five Below plans to roughly quadruple from its current 549 stores to roughly 2,000 at its peak. Anderson believes California will become this chain’s No. 1 market, usurping Texas.

He sees only one noteworthy headache growing in California: “Our biggest challenge is finding centers that have space for us.”

Five Below’s chainwide sales grew 20 percent last year to $1 billion, though one sign of the tough retailing environment: sales at existing stores grew by only 2 percent. Profits rose 24 percent to $72 million.

To me, a veteran bargain hunter, Five Below has a reasonable chance at success.

For one, $5 is a much more logical price point for discount stores. Let’s face it, many dollar stores now sell stuff for more than a buck.

Plus, Five Below has an entertainment quotient – making the time in the store relatively pleasant. Of course, Five Below executives may need a map. It bugged this consumer to see the Anaheim store last week stocked with items emblazoned with icons of Los Angeles and Dallas and the logo of – boo! – hockey’s LA Kings.

The fate of in-store shopping has yet to be determined. But I have to agree with CEO Anderson when he said, “To be successful you have got to offer value and you have got to offer a great store experience.”

If the time a shopper spends in a store isn’t functional or fun, online purchasing will win out. Perhaps, Five Below has a solution.

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