Last year I entitled my annual San Diego forecast: “The Year of the Yawn.” While this year is more of the same, the stakes are only growing.
Yes, we will have a new president in the White House (his family will be downsizing) and a new senator from California, but history has shown that those folks who live in the nation’s capitol have a fairly inconsequential effect on the Golden State. I have said, in the past, partially in jest, that if the president of the United States were to disappear for four years, the state of California wouldn’t notice. Only if the folks in D.C. would meddle with our military budget would we find it necessary to bring that to the attention of our elected officials.
Yes, we Californians have a life of our own, largely disconnected from the other states. And San Diego is pretty much the same. Every decade we add 300,000 people to our population and we now have more than 3.2 million living here. In 2017, we’ll add another 30,000 people. Like clockwork.
Better yet, we continue to add 25,000 to 30,000 new jobs each year, many of them in the high-paying high-tech fields. We are a powerhouse of small to mid-size businesses. We will never be a Silicon Valley with mega-employers like Google or Facebook, but we create an enormous number of small firms in telecommunications, bio-tech, bio-med, social media and software. Frankly, it’s a lot safer to have a myriad of small firms than relying on the growth of a few mega-firms. Remember Detroit.
Better yet, these mini-firms attract large numbers of educated millennials who will be the driving force of our community in the years to come. They are the folks who will demand better schools, wildly varied food and drink, great music, and who appreciate well-designed and highly livable housing. Most of them can be categorized as HENRYS: High Earnings, Not Rich Yet.
Ah, yes, and there is housing. Now there’s something that’s worth discussing.
None other than the Governor Jerry Brown recognized that the state has a housing shortage. He tried to help with an effort to make land zoned residential free from community planning group and elected official approval. But he got shot down by an anti-growth legislature. An alternative plan has not been made public, if there is one.
The feds have stepped in, too. They are on a climate-improvement / reduced emissions binge (so far) and want municipalities to come up with plans to reduce the need for cars. The obvious way to do that is to increase densities in transit-oriented development corridors. Unfortunately, most community planning groups are wildly against increases in density.
Thus, the odds of seeing density increases are not too good, to say the least.
Based on our population and job gains, we should be producing a minimum of 15,000 housing units annually. In the ten years between 1997 and 2006, we did exactly that, averaging 15,896 units.
Since then, our production has averaged just about half of that total. Homebuilders are producing one-third the number of single-family homes as in the past. And the only production of any magnitude is of high-end rental apartments. Due to government fees and regulations, it has proven almost impossible to build new apartments that rent for less than $2.50 per square foot. And if you are going vertical, as in downtown, projects don’t pencil out at less than $3.00 per square foot.
The very sad thing is that there are substantial acres available that are underutilized, many of them covered with old industrial space or warehousing that could be razed. Much of it is near trolley stops or bus routes.
Perhaps a group of folks who are priced out of the housing market will launch a class-action suit against a few municipalities who have failed to approve higher density housing projects.
That sounds good doesn’t it? What doesn’t sound good is that in 2017, we will continue to form 12,000-plus households and produce pitifully few housing units, maintaining a deficit that most newly formed households find devastating.
Alan Nevin is the director of economic and market research at Xpera Group.