The San Diego County Housing Crisis

Terra Lawson-Remer, the San Diego County Third District Supervisor, is an affordable housing advocate. Her staff has prepared an outstanding document describing in detail the crisis in our county. All of the content below comes directly from that document.

The San Diego region is facing a severe housing crisis. Housing prices have far outpaced inflation and wage growth over the past decades, driving rents and home prices out of reach for many residents, forcing households to make serious trade-offs to live in the region, and contributing to a historic homelessness surge.

The high cost of housing impacts all San Diegans: low-income residents, retirees living on a fixed income, younger generations locked out of homeownership, and struggling families trying to stay in the County. The housing crisis also drags down the regional economy, as attracting and retaining businesses and employees has become increasingly challenging due to the unsustainably high cost of living. Since 2011, the County of San Diego has seen a net loss in migration, with an average of 23,000 more people moving out of San Diego than moving in each year, and those leaving the region are largely being priced out, with incomes four times lower than residents moving into the region.

Alarmingly, housing affordability has only worsened during the COVID-19 pandemic as median asking rents increased 8.4% year over year to $2,075 a month, while median home prices surged 18.7% – among the highest increases in the nation – to a record high of $800,000. The pandemic has also made it clear that safe, decent, affordable housing is an essential form of infrastructure that is necessary for families and communities to thrive.

Recognizing housing’s role as critical infrastructure is not new. For example, when the United Stated was faced with the challenge of recovering from the Great Depression, housing was the leading edge of the solution. The Federal Housing Administration was created, which jump started a major generational shift towards homeownership. A recent report by UC Berkeley’s Terner Center for Housing Innovation makes the case that we cannot address the scale of our housing crisis by simply increasing funding levels for existing housing programs. We need to broadly rethink, adapt, and augment existing programs with transformative new approaches to put us on the path where housing is truly affordable and accessible for all San Diegans.

The County Crisis

The San Diego region’s housing crisis ranks among the worst in the nation. According to the federal Department of Housing and Urban Development (HUD), a household that spends more than 30% of its combined income on housing is considered “cost-burdened”, and households spending over 50% are considered “severely cost-burdened.” The San Diego region ranks third worst among all metropolitan areas, with 42.6% of the population suffering from cost-burden.

 The problem is especially acute for those at the bottom of the income spectrum, with a whopping 92% of extremely low-income families being cost burdened compared to only 6% of above-moderate income households. 

Housing cost burden has a disproportionate impact on renters, with 55.6% of tenants experiencing cost burden, compared to 31.3% of homeowners. Rents are so inflated that tenants in the San Diego region need to earn $36.62 per hour (2.8 times the City of San Diego minimum wage) to afford the average monthly asking rent.

Soaring home costs have also left homeownership out of reach for most of the population. The Housing Affordability Index (HAI) estimates the percentage of households that can afford to purchase a median priced home. San Diego’s HAI has dropped to 25% in the first quarter of 2021, the lowest since 2008, and more than half the national rate of 54%. Since 2012, median home prices have increased by 97% compared to a 25% increase in median household income.

The situation is even worse when you consider the broader historical trends. In the 1960s, the average California home cost 3 times the annual median income, compared to 5.9 times the median income in 2012, and 9.3 times the median income as of 2021. 

Why Housing Matters

Housing is a form of basic infrastructure and an essential component needed for households, communities, and regions to thrive. Housing is the largest share of most household budgets and high housing costs often crowds out essential spending for other necessities such as food, health care, and childcare, as well as long-term investments for retirement and asset building. The importance of affordable housing can be highlighted through several key lenses.  

Housing and equity

The high cost of housing is the primary driver of California’s extremely high poverty rate (at 19%, which ranks first among the 50 states) when using the Supplemental Poverty Measure, which accounts for localized cost of living. A McKinsey report stated that the housing crisis costs Californians more than $140 billion per year in lost economic output. High housing costs disproportionately impact communities of color, and the effects are magnified among families with young children. Half of Black children age 0-5 live in unaffordable housing compared to a one-third of young LatinX children and just 17% of young white children. 

These disparities are not incidental but directly linked to past and current discriminatory policies that have exacerbated racial and ethnic gaps in housing stability, homeownership, and intergenerational wealth. Inequalities across the housing market have also resulted in impediments to fair housing choice to many populations, including persons with disabilities, persons with HIV/AIDS, older adults, as well as LGBTQ+ individuals. Overcoming this legacy of discriminatory local, state, and federal policies and practices will require a deep commitment to affirmatively furthering fair housing and increasing access to resource-rich communities for all residents.

Lack of affordable housing is also the main driver of the homelessness crisis that is facing our region. The problem is acute in the San Diego region where the number of people entering homelessness increased by 79% from 2019 to 2020.  

Housing and sustainability

Housing is an integral pillar in our regional approach to climate change. Residential development occupies the largest share of regional land use and has a profound effect on travel patterns across the County. When housing is located far from jobs, schools, services, and transit, people are forced to spend more time commuting in cars, which creates more greenhouse gas emissions. Research has shown that location efficient affordable housing can reduce vehicle usage with a 20-40% reduction in Vehicle Miles Traveled. 

As the single largest sub-sector in the construction industry, residential buildings offer the greatest potential for green technology to reduce carbon emissions. According to the U.S. Department of Energy, building operations are directly responsible for almost 40% of greenhouse gas emissions in the United States, while another 10% is linked to building construction. 

Housing and a just recovery

As we move towards a long-term COVID recovery, housing must be at the center of a just recovery. An investment in housing is an investment in healthcare as housing is key factor in the social determinants of health. Further, as we begin to move towards a recovery, the long-term outlook of the regional economy depends on our strong and diverse network of local businesses and skilled workforce. However, the economic competitiveness of our region is increasingly undermined by our high cost of housing.

Imbalance in Housing Supply and Demand

The San Diego region is missing 88,400 units

The San Diego region is facing a deep and chronic imbalance in housing supply and demand, which is a major contributor to the growing affordability crisis. We need to clearly understand the scale of the problem to move beyond short-term band-aids and find transformative solutions. This dire housing situation did not arrive suddenly but has been decades in the making as housing production has not kept pace with population and job growth. In the 1970s and 1980s, San Diego’s housing stock grew rapidly as car-centric sprawling suburban development boomed. New communities like Mira Mesa (23,000 units), Scripps Ranch (12,000 units), Rancho Penasquitos (14,000 units), and Rancho Bernardo (18,000 units), added to an annual regional production of 26,386 units per year throughout the 1970s, and 24,575 units per year throughout the 1980s. A recession in the 1990s, combined with decreasing availability of suitable land for greenfield development led to a steady and sustained decline in regional housing production. This was exacerbated by the 2008 recession that crippled the construction sector and stalled housing development for years. These decades of underbuilding coincided with profound demographic shifts, as millennials – the largest living generation in American history – are now entering the housing market, peaking in 2028.

The imbalance between housing supply and demand has been most acute in recent years, as seen in the 5th Cycle RHNA Plan which covers the decade from 2010 to 2020. By the end of the 5th Cycle RHNA Plan there was a 55% shortfall in regional housing production translating to an 88,402-unit shortfall, far below the 161,980 units projected in the Plan.

Most of the missing units are at low and moderate incomes 

This housing shortfall is found at every income category but is most acute at the low and middle portions of the income spectrum. The table below shows that housing production met 92% of the need for above moderate-income units (which is largely market-rate housing). In contrast, housing production met just 10% of the need for very low-income units, 19% of the need for low-income units, and just 9% of the need for moderate-income units. Across the region, we are failing to meet the housing needs of our communities, especially for the most vulnerable and housing insecure individuals and for middle income households, like younger families looking to enter the homeownership market for the first time. 

Why Doesn’t More Housing Get Built?

We need a clear diagnosis of the problems that constrain our ability to build housing that adequately meets the needs of all San Diegans. The following four factors constrain the supply and affordability of our regional housing stock. 


The Cost of Land is Too High

The supply and price of developable land is the major constraint on the ability of homebuilders to produce new homes. An LAO report found that 99% of land in coastal urban areas were already developed, leaving less than 1% vacant. In response, the price of land has skyrocketed far faster than the pace of inflation on goods, services, and wages. According to the Harvard’s Joint Center for Housing Studies, the median price of land per acre in the San Diego region increased by 88% from 2012 to 2017, 13 times faster than the rate of inflation and 5 times faster than the rate of household income growth. 

Land price inflation in the San Diego region, and across California, has created a condition where the bulk of a home’s value lies in the land that it is built upon. A 2017 Redfin analysis found that the price of land accounts for 54.2% of a home’s value in the San Diego region, or $315,900 dollars, which ranked fourth highest in the nation, compared to just 15.9% in Buffalo, or $24,645.

The value of land, with or without a home, is largely a reflection of what it is near: jobs, schools, transit, and other amenities. In this way, the value of land is created through the collective effort and investment of the entire regional population, and not solely the individual actions of a

particular property owner. Yet the upside of land value increases accrues almost entirely to incumbent property owners. While property taxes are the primary mechanism to capture and reinvest a portion of these land value increases, California ranks in the bottom third of all State’s with an effective property tax rate of 0.74%, compared to a national average of 1.07%

The property tax system also effectively rewards incumbent property owners while penalizes new homebuyers. Since the 1978, property taxes have been capped at 1% of assessed property value, down from a previous statewide average of 2.67%. Further, California property tax assessment are also based on the purchase price of the property rather than the actual market value of the property that increases over time. Assessment increases are capped at a maximum of 2% per year, regardless of the actual increase in property values, which have risen by 67% over the past decade.  

A 2015 LAO analysis found the typical gap in property taxes for similar property owners ranged from $1,350 to $7,500 per year, a 450% difference that penalized newer homebuyers. It also found that this land tax system incentivized vacant land to remain vacant for longer and contributed to the 33% decline in homeownership rates among younger households over the past four decades.

The Cost of Construction is Too High

Labor: An ongoing shortage of skilled trade workers remains a widespread concern by home builders and subcontractors as many skilled construction workers left the industry after a wave of layoffs following the 2008 housing crisis. According to the National Association of Home Builders, 60% of home builders reported a worker shortage, which contributes to longer build times, more delays, and higher costs for workers and subcontractors. Further, construction productivity has lagged far behind other labor industries growing by just 21% since 1995 compared to manufacturing productivity which nearly doubled during this period. 

Laws and Regulatory Requirements: Regulatory processes and barriers, such as environmental review, restrictive and exclusionary land use zoning, permitting, and entitlement processes are particularly complex in California and can significantly extend development timelines and increase unpredictability. State and local policies such as design requirements, increasingly stringent building codes, impact fees, minimum parking requirements, and permitting processing all add to development costs. For instance, in 2015, the average impact fees in the State of California were $23,455 for a single-family home, and $19,558 for a multifamily unit, nearly three times the national average. Each parking space can cost between $34,000 to $50,000 to construct, with the costs ultimately passed onto the consumer whether they have a car or not. A 2013 study of downtown Los Angeles found that mandatory parking requirements raised the rent for each apartment by $200 per month and the sale price of a condo by $43,000. Some studies have also found that local design requirements added an average of 7% to total development costs and prolonged community opposition can increase housing production costs by 5%. 

Many of these impact fees, development fees, and Mello-Roos assessments have grown significantly over the years to pay for infrastructure improvements that would have been paid through property taxes prior to 1978. However, these fees and assessments have the perverse effect of increasing the cost of new housing development and exacerbating our regional housing shortfall. 

Materials: Hard costs represent a major expense for multifamily housing projects in California. According to the National Association of Home Builders, increases in the cost of lumber has added $35,872 to the price of an average new single-family home and $12,966 to the price of an average new multi-family home and translates to a rent increase of $119 per month for a new apartment. Beyond lumber, the per-square-foot hard costs for constructing multifamily housing in California climbed by 25% over the past decade, with the most pronounced increases in plastics, concrete, and finishes. 

Household Income and Wealth are Too Low

Housing supply is only half of the equation, we also need to look at income and wealth. Housing cost burden can be seen as a manifestation of inequalities and distortions in our labor market that has produced growing income inequality in the past decades. For millions of low-wage workers, there is simply too large a gap between their monthly income and the price that housing can be reasonably built and operated. Approximately 25% of households in the region earn less than $35,000 annually and can only afford to pay $875 per month in rent to avoid being considered cost-burdened, which is far below the median asking rent $2,250 per month, the Fair Market Rent of $2,037 per month, a metric developed by HUD that sets the rent payments levels for federal housing assistance programs, as well as the median rent in all 50 states. 

For thousands of such families the math simply does not add up. Housing cannot be developed with rents low enough to be affordable without significant subsidies to reduce the cost of development or increase household incomes. 

Wealth is another significant factor that severely limits access to rungs on the housing opportunity ladder, especially for homeownership. Between 1989 and 2019, median wealth grew by 30% while median home prices increased more than twice as fast, at 77%. Further, student loan debt has increased by 76% since 2000 and continues to grow at 7.8% each year.  

There are also significant disparities in wealth within subpopulations. For instance, white families had seven times greater wealth compared to black families, and five times greater wealth compared to Hispanic families in 2016. These racial wealth gaps have increased over the past five decades. Age-based wealth inequality has also grown. Between 1989 and 2016, the median net worth of people 65 and older increased by 68 percent while the median net worth of those 35 and younger has declined by 25 percent. 

Regional housing challenges require regional solutions

Housing markets extend across metropolitan areas and are not constrained by local political boundaries. While it’s helpful to consider the disaggregated RHNA production targets for each of the 18 cities and the Unincorporated County, our regional housing challenges require greater regional coordination and partnership to address the scale of our housing shortfall and to affirmatively further fair housing.

Principles to Orient Housing Solutions

The following principles are intended to begin to orient and ground a new housing paradigm for San Diego where housing can be affordable and accessible to all residents. 

  • We need to understand housing as a regional challenge that requires regional solutions. While the County has land use authority in the unincorporated communities of the County, it also provides funding, resources, and thought leadership to projects and initiatives across the region. The County should emphasize this regional approach to housing and explore opportunities to coordinate, support, and partner with other regional entities, such as SANDAG and incorporated cities, to plan, finance, and facilitate housing production across the region. 
  • We need to build the right kind of housing. To tackle our housing crisis and climate emergency, we need to build high-quality “15-minute” communities that give San Diegans real options to walk, bike, access local services and commute with transit. This means developing mixed-used, mixed-income communities that are walkable, age-friendly, and have excellent access to local amenities like parks, daycare, schools, jobs, and transit. 
  • We need to create a better ladder of housing opportunity. Effective housing policy should create options for people to move up and thrive in different housing opportunities. The current housing ladder is missing many rungs and some are only accessible to certain people. For instance, many resources are narrowly focused at producing rental housing at 60% AMI but very few resources exist to help moderate-income renters and to help people access first-time homeownership, especially in communities of color. We need to create housing across the income spectrum, especially focusing on income categories where the gap between housing supply and demand is greatest and where housing cost burden is most acute (extremely low-income households), and where existing programs are not facilitating adequate production (moderate-income households).   
  • We need to intentionally create inclusive communities. We have a responsibility to counteract the ongoing legacy of racially discriminatory housing policies and practices and create pathways to high-opportunity communities for all residents.
  • We need to give consideration for subpopulations that may experience greater housing insecurity such as extremely low-income households, veterans, older adults, people with disabilities, justice involved individuals, people with HIV/AIDS, LGBTQ+ individuals, and undocumented immigrants.