San Diego Near Bottom of Housing Affordability

Builders call for reforms to reduce housing costs
01/06/2005
by Larry M Edwards

The San Diego region is the second-least affordable housing market not only in California but the nation, according to a report released today by the building industry.

What's more, California is home to the 11 least-affordable housing markets in the nation, as reported by the the National Association of Home Builders/Wells Fargo Housing Opportunity Index. The revised index reflects housing costs during the third quarter of 2004.

In San Diego, just 5.4 percent of median-priced homes are affordable to families with a median income of $63,400, the study found. The third-quarter median sales price used in computing the index for the metropolitan San Diego area was $470,000.

In response to the findings, the California Building Industry Association is urging Gov. Arnold Schwarzenegger and the state legislature to enact reforms that would increase the pace of housing production and meet the demand for new homes and apartments. But critics of the builder say industry practices exacerbate the affordability problem and that builders are unwilling to contribute their fair share of infrastructure costs needed to support additional development.

"It used to be that California dominated the 'bottom 10' list of least-affordable metropolitan areas. Now, we are the bottom 10 -- and then some," said Robert Rivinius, the CBIA's chief executive officer.

"What's worse is that even in California's most affordable market -- Tulare County -- less than half of the county's residents can afford a median-priced home," he added.

The least-affordable market out of 162 metropolitan areas nationwide is Santa Barbara County, where a family earning the median income could afford only 4.9 percent of area homes, according to the revised index. The next four least-affordable areas are San Diego County, Monterey County, Los Angeles County, and Orange County.

In his second state-of-the-state address yesterday, Gov. Schwarzenegger said he would "propose legislation that eliminates regulatory and legal hurdles that delay construction and increase the costs of new housing."

"We need roads and we need affordable housing," the governor said. "I want a California where people spend less time sitting on the freeway and more time in the homes that they own."

The reforms called for by the governor and CBIA include:

Ensuring an adequate supply of land for high-density condominiums as well as single-family homes, particularly in job centers.
Legislation that eliminates regulatory and legal hurdles.
Streamlining the permitting process for new housing.
"The governor clearly recognizes that California cannot sustain skyrocketing home prices and that housing production needs to keep up with demand," said Steve Doyle, CBIA president. "An average California subdivision takes a decade to be approved."
San Diego City Council member Donna Frye agrees that housing affordability is major concern, but says the builders are being less than candid.

"San Diego requires up to 20 percent of new homes to be affordable, but in most cases, builders pay the in-lieu fees rather than offer new units at the "affordable" price because they make more money," she said. "That contributes to the rising cost of housing."

Frye also points out that if housing construction outpaces infrastructure development, it creates a multitude of problems, not the least of which is traffic congestion. Mission Valley, for example has hundreds of new units coming on line, but there is no new fire station to meet public safety requirements.

Bordering on the ludicrous, in North County a feud erupted between the cities of Carlsbad and Oceanside after new homes were built in Carlsbad before additional roads to handle the increased traffic were completed. That pushed the additional traffic into nearby residential neighborhoods in Oceanside, so Oceanside erected barricades to block it. Which, in turn, cut off direct access to a neighborhood school. Congestion on major arterials in the east Carlsbad area increased until new roads opened late last year. Oceanside subsequently removed the barricades.

Housing cannot continue to be built in a vacuum, Frye said. It must be built in a coordinated manner that takes into account infrastructure needs that include roads, public transit, water, sewer, energy, open space, parks and public safety. And that requires comprehensive planning and development, which takes time.

As for developer impact fees, Frye said they are likely to go up within the city of San Diego. Carolyn Chase, a member of the San Diego Planning Commission and spokesperson for the Sierra Club, supports the fee increase.

"The building industry likes to believe it pays its fair share, but it doesn't," Chase said. Last year, she led an opposition effort against Proposition A -- the TransNet transportation initiative on the November ballot -- in part because commercial and industrial development is exempted from paying additional impact fees.

"It seems to me that if a new building has people working there, that will have an impact on roads and traffic," she said. "I don't see how they can argue it doesn't."

The initiative, which was narrowly approved by voters, imposes an impact fee of up to $2,000 on new housing units built in the county, however. The building industry opposed the fee but ultimately accepted it in exchange for the exemption on commercial and industrial development, according to an official with the San Diego Association of Governments, which placed the measure on the ballot.

With the median price of new housing in San Diego hovering near the half-million-dollar mark, $2,000 represents less than one-half of one percent of the selling price.