The American Dream of homeownership is unattainable for many San Diegans.
A San Diego County home is now worth more than it was a year ago and the median price is a whopping $835,000. To put this into perspective, in order to afford a home that costs $835,000 a buyer would need a down payment of $167,000 and earn $180,952 per year before taxes. Compare that to the median household income in San Diego County which was $88,240 in 2021.
Considering that almost half of Americans have seen a decline in their savings over the past year, and merely 43% feel confident in their ability to handle a $1,000 or more emergency expense through their savings, expecting to accumulate $167,000 for a down payment appears impractical for most.
San Diego is in a housing crisis because the county has not built enough homes to meet the demand. For many years homebuilding has not kept up with the growing demand for housing.
Higher density in the city of San Diego and other urban areas is unlikely to yield all of the additional homes that are needed, so builders need to look elsewhere in the county to build. One way to increase the housing supply is to open up relatively small portions of San Diego County’s vast unincorporated lands for master-planned communities.
The primary obstacle is much of the land that would be perfect to build on is environmentally sensitive or remote and I would not advocate encroaching on environmentally protected land. However, land near freeway corridors or near employment centers are prime candidates for building. By offering tax incentives for developers along with some government grants, building homes in these areas could be accelerated.
Developers engaged in backcountry construction are subjected to mitigation fees for certain developments. These fees are intended to offset the expenses associated with creating new or supplementary public amenities required to support these developments. Among the fees commonly imposed are those related to tree and fire mitigation, facilities fees, and impact fees.
The fees contribute to escalating construction expenses, which directly add to the elevated home prices. Government-imposed regulation in San Diego County can add an additional 40% to housing prices. Add on costly school bonds, point of sale mandates and pricey climate-action requirements, and the cost to build homes in San Diego does not pencil out for many developers. They simply take their business to more business-friendly states where building cost are more reasonable.
In addition to high government regulatory costs, San Diego pays the highest electricity rates in the country. In California we also pay some of the highest income tax rates in the nation along with high gasoline prices, food prices, healthcare costs, auto insurance premiums, housing insurance and childcare costs.
Given the magnitude of these costs, it’s unsurprising that our homeless population is growing at an unsustainable pace. It’s no wonder why our state’s population has shrunk by about 500,000 people as experts have credited California’s high cost of living as the main driver for people moving out of state.
One of the most damaging factors leading to the affordable housing crisis has been San Diego’s costly and sluggish permitting process. In order to begin to build affordable homes, local government needs to take bold steps and waive or substantially reduce building permit fees on housing projects.
Elected officials should exercise caution when introducing new mandates and consider rescinding some that are already in place. Local government possesses the ability to influence affordability by mitigating regulatory expenses and simplifying the construction process, but do they have the will to do so?
Instead of hasty responses or ineffective legislation aimed at tackling the housing crisis, what’s truly required are practical solutions. These could involve the reduction or elimination of steep permit fees, a cautious approach to introducing new climate-related mandates, simplification or privatization of the permitting process, and the introduction of tax incentives to encourage construction.
Rather than increasing costs to build through more regulation and fees, the government must look for ways to reduce them.
Mark Powell is a real estate broker and a former San Diego County Board of Education member.