The numbers are troubling.
Since the end of the recession in 2008, San Diego’s population has grown by 3.9 percent. But the number of people in Generation X, ages 35 to 49, dropped by 5 percent. The number of youth, ages 10 to 19, also dropped by 5 percent.
While San Diego continues to be a Mecca for 20-year olds who have no problem living with three or four roommates, many of those same people leave ten years later when they are married with children and looking to buy a home.
The region offers few affordable housing options for families and the employment market is not strong enough to make up the price differences, experts say. As a result, families are moving to places like Temecula, Sacramento and even Texas.
“It is the Santa Barbara-ization of San Diego,” said Kelly Cunningham, an economist with National University’s Institute for Policy Research. “We could end up with high- end and low-end residents and no one in the middle.”
The primary culprit? Not enough housing.
“It’s all supply and demand,” said Mike McSweeney, senior public policy advisor for the Building Industry Association in San Diego. “We need 10,000 to 12,000 new units added a year to keep pace with [population] growth. We are building 8,500. If you have a 30 to 50 percent deficit every year, prices go up because there is not enough supply to meet the demand.”
San Diego had been on a housing boom. From 1997 until 2005, developers built an average of 9,181 single-family units and 6,000 multi-units per year. Most agree that builders even overdid it, especially in 2003 when they added 18,314 units, and in 2004 when they added 17,306 units.
But the numbers started to fall in 2005 and plummeted during the next four years, reaching a low of 2,946 in 2009.
Single-family units took the brunt of the collapse. The county has averaged only 2,673 single-family units per year since 2005. While multi-units have rebounded the past two years, single-family units remain stuck at 2,500.
No one expects single-family homes to rebound.
“We will most likely not see your typical suburban development that most of us grew up in again,” McSweeney said. “We don’t have the available land and the entitlement process takes too much time and is very expensive.”
McSweeney said state regulations lengthen the average timeline for a developer to get approvals for a new development from two years to 8 to 10 years. That additional time adds significantly to the cost of new homes.
“We’ve been living in a market constrained by government related factors that cause scarcity.” He said. “We would not get 20 percent jumps in home values if there were enough houses to go around.”
McSweeney said states like Texas streamline the entitlement process and have ample land to keep growing. Those factors mean homebuilders can sell the same new home in Texas for half the price of California.
The California legislature is also pushing developers to build within existing cities, instead of on the outskirts where land is more available. That means most new units will be higher-density infill projects — condos and apartments.
“I don’t see a lot of new single-family homes being built,” said John Altman, a Realtor with JT Altman & Associates who closely watches regional trends. “Certainly not starter homes. New homes will have to be in the higher price range.”
Altman said new families would be forced into condos in order to stay in San Diego. But many of the newer condos, especially those in downtown and East Village, are not in family-friendly neighborhoods.
Altman said that long term, the millennial generation may be more likely to want to live downtown with their families. But he does not see that for at least seven more years, when millenials start to reach 35.
Cunningham said Generation X is also leaving San Diego due to economic reasons, trends that could impact the millennial generation as well.
“While unemployment rates have recovered, most of the jobs are either on the high-end or in the service sector,” he said. “There is not much in the middle.”
Cunningham said construction jobs, manufacturing jobs and office jobs have not returned.
“There is a hollowing out of the people at that level,” he said. “You don’t have the ladder that you used to have because we are losing those mid-level experienced workers.”
Cunningham said we should be concerned with who will replace older workers when they retire.
“We are making it difficult for the younger generations to get into the labor force and grow,” he said. “And with housing so expensive, when they settle down it will be almost impossible for them to stay in San Diego.”
The solution? McSweeney said the government should help new homebuyers with down payments. As it is now, many renters would pay less per month than the cost of the mortgage. The problem is coming up with the down payment.
Also, homebuilders need to focus more on developing family-friendly units, even if they are multi-unit dwellings. That means condos with more square feet, near good schools.
Local governments could help by streamlining the entitlement process for such units. Instead, local governments have focused on inclusionary zoning, which requires developers to build a set percent of units that are affordable to low-income families. But most economists say such price controls negatively impact housing supply, something San Diego can’t afford.
