A for sale sign in San Diego. Photo by Chris Stone

The UCLA Anderson Forecast released Wednesday predicts the Republican tax bill will make California housing less affordable and result in fewer new homes.

Jerry Nickelsburg, director of the respected forecast, said the end of deductions for state taxes will reduce Californians’ disposable income, making the state’s already expensive housing less affordable and lowering new construction by thousands of units.

“Let’s take the potential homeowner, a millennial software engineer looking for their first house,” he said. “Our millennial has lower after-tax income and now the bungalow is out of reach.”

He said that as a result, the state will see a “modest dampening of housing” construction, with the number of new units in 2019 falling from 125,000 to 121,000.

While the tax bill will hit housing hard, it will provide a short-term stimulus to California businesses because of new depreciation rules, leading to new jobs in the state.

“The investment incentive, in particular the bringing forward of investment due to expensing, increases our forecast growth rate for employment and income in 2018,” Nickelsburg said.

The forecast for employment growth is 1.5 percent in 2018 and 1.1 percent in 2019, with real personal income growing by 3.1 percent and 3.6 percent in those years.

Similar tax bills have been passed in both houses of Congress, but must be reconciled before being sent to President Trump for signature.

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Chris Jennewein

Chris Jennewein is Editor & Publisher of Times of San Diego.