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San Diego County built 9,579 homes in '18. Some say it's not enough

San Diego County built 9,579 homes in '18. Some say it's not enough
Construction in the Lovina community of Otay Ranch on April 12, 2018. (K.C. Alfred / San Diego Union-Tribune)

San Diego County built housing at historically low levels in 2018 as the political push for more homes hit a fevered pitch.

There were 9,579 homes built last year, down by one from 9,580 in 2017, said the Real Estate Research Council of Southern California. Apartments made up the majority of building permits, as it had the past few years.

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It’s a far cry from the heyday of 2004 when 17,306 were built in a year.

Lack of homebuilding concerns economists for a variety of reasons, including the ability to recruit workers. More people are already leaving San Diego County than moving here, with the majority of growth coming from births. The county has grown yearly by an average of 34,560 people since 2010.

New homes built in San Diego County Despite political pressure, San Diego County again built under 10,000 homes. Source: Real Estate Research Council of Southern California DANIEL WHEATON U-T ’10 ’09 ’08 ’07 ’06 ’05 ’04 ’17 ’18 ’16 ’15 ’14 ’13 ’12 ’11 17,306 2,990 9,579 0 5.000 10,000 15,000 20,000

Kelly Cunningham, of the San Diego Institute for Economic Research, said fewer homes mean people will continue to move farther from where they work, adding to congestion and taking dollars away. The majority of people who left San Diego County from 2011 to 2016 moved to Riverside County, said the latest IRS migration data, where housing is cheaper.

“It has an economic consequence,” Cunningham said. “You spend most of your money where you live, even though you might earn it elsewhere.”

Political pressure out of Sacramento to build more housing has been strong — making it a major talking point in the governor’s race — but there were other factors working against new construction, said Borre Winckel, CEO of the local Building Industry Association.

He said a statewide measure to allow expanded rent control, increasing steel prices brought on by tariffs and steady community opposition to new projects sent a chill through many builders.

Southern California homebuilding was mostly down across the board, with the exception of two counties that saw increases. Los Angeles County built 3 percent more housing than the previous year and Riverside County was up by 28 percent. Growth in both counties was led by a rise in single-family home construction.

San Diego County had 3,389 building permits pulled for single-family homes, down 15 percent from the previous year. However, the county had the second-biggest increase, 11 percent, in multifamily building in Southern California. There were 6,190 multifamily permits pulled in 2018, up from 5,601 the year before.

Most housing analysts say the county and state need to build more housing, as does Gov. Gavin Newsom, but how much is up for debate. San Diego-based real estate analyst Gary London said the ideal scenario is 15,000 to 20,000 housing units built a year to make up for years of lethargic construction. Also, new homes should be more evenly spread out geographically (not just downtown), and by product type.

Despite all the talk of high demand, San Diego County has seen months of slowing home sales. In January, sales fell 20 percent year-over-year, said CoreLogic.

Murtaza Baxamusa, director of planning and development for the local Building Trades Council, said the problem is not that people don’t want to buy homes, it’s that what is being built is outside of their price range. The median cost for a newly built home (combined single-family and condo) in January was $669,000.

“We’re overbuilding at the higher income and luxury market,” he said. “My concern is that it’s not working people that can afford high-priced condos and apartments.”

Ironically, the county appeared to be on track to build significantly more homes this year as of the third quarter. Yet in the last three months of the year the industry collapsed, with 70 percent fewer permits than the same time in 2017. It was the biggest drop of the seven counties in Southern California.

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Gary London said a mix of factors likely slowed construction, including builders tempering their plans based on a possible slowdown in the real estate market and increasing labor costs.

Forecasts for statewide homebuilding this year are mixed. The California Association of Realtors predicts fewer homes will be built, but California Department of Finance and the UCLA Business Forecasting Project are predicting more.

Other interesting tidbits from the building permit report for San Diego County:

  • Office building was up with 93 building permits, up from 42 in 2017. It was the highest number since 2014.

  • Hotel construction was down with 53 permits pulled compared to 164 in 2017.

  • Notices of mortgage default were 3,239 in 2018, down 7 percent from 2017. (There were 38,308 defaults in 2009.)

  • Construction lending was $5.2 billion in 2018, its highest-ever number and up 12 percent from 2017.

  • There were 39,621 homes sold in 2018, the lowest number since 2011.

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