Monday, Sept. 18, 2006 | A few years ago, I went to a press conference hosted by the San Diego Regional Chamber of Commerce at the downtown police headquarters building on Broadway. The press briefing wasn’t about police, however. It was about housing – specifically, the lack of affordable housing.
See, the police headquarters was right across the street from the signature project of one of the chamber’s favorite downtown developers – the always-dapper Sherm Harmer.
The chamber had an answer that day for the recently labeled affordable housing “crisis:” The city, the chamber announced, needed to drop some regulations that required parking spaces and a minimum of landscaping for housing projects. These were issues that were costing developers money and making projects less desirable financially. Getting rid of these requirements would eventually result in more affordable living spaces, the chamber said.
Fair enough, I suppose. The chamber and its friends argued that if they built condos near trolley stops, for example, they shouldn’t have to make parking available for those condos. The requirement, supposedly, was holding back developers who might otherwise build more condos.
Here was the quote that from the chamber’s now-departed CEO Jessie Knight: “Housing is an essential component to job recruitment and job retention for all businesses and the focus must be to find better ways to increase our supply of workforce and affordable housing quickly.”
So I asked the Knight what I thought – and still think – was a simple question: Does this mean that you want home values to drop?
This was in December 2003 when the housing market was going absolutely berserk. It still had nearly two years to go before housing prices would finally level off. I wondered if this explosion in home values was what worried the chamber and the other businessmen who gathered at the press conference.
This is not complex logic: If you believe that a “lack of supply” of homes in the face of high demand is what caused homes to become unaffordable in San Diego, then an increase in supply would cause homes to lose value and become affordable.
But this wasn’t the logic Jessie Knight shared. He was not an impressive leader. He rarely had something of substance to say. While he may have presided over a re-stabilization of the chamber after some tough times, he also presided over a time of meekness where the chamber felt more obligated to defend the mayor and City Council than to help root out problems in the city and help provide solutions. This was the route, Knight and others thought, that would help businesses best succeed in the city.
In answer to my question, Knight said no, he didn’t want to see housing prices drop. No one wants to see home values drop, he said, and that’s not the purpose of what the chamber was proposing.
I was confused. Again it seemed clear to me: If you argue that housing is unaffordable because there’s not a enough of it, and you say that you need to increase the supply of housing to fix the problem, aren’t you saying that you want to bring housing prices down to earth?
No, no, no, not at all. The purpose, Knight said, was merely to create “affordable” and “workforce housing” as if these were two totally separate things from regular housing. Existing owners needn’t worry that Knight was hoping to decrease the value of their homes. He supported the notion that the housing market should still boom.
This touched on another fault of Knight and the business community at the time: the constant desire to have their cake and eat it too. There are many more examples of this attitude: Build a new airport, but don’t move or get rid of any of the local military bases; express concern about City Hall finances but don’t rock the boat; and don’t, whatever you do, oppose the construction of a costly downtown library.
The chamber’s wish to lessen the burden on developers hoping to build downtown never materialized exactly as they had imagined that day at the police headquarters, but somehow we still witnessed a dramatic upsurge in the supply of condos for sale downtown.
Realtor Lew Breeze maintains a great inventory tracker of condos downtown (full disclosure, in 2005, Breeze was my agent). According to Breeze’s graph, there were 88 condos for sale downtown at the time the chamber held its press conference. Now, 33 months later, there are 548 for sale. And that 548 does not include the number of new units just constructed by developers – the ones that still smell of drywall and have yet to see their shiny granite countertops blemished by a smudge of food.
And, sure enough, condo prices downtown are falling. In fact, there are now more homes on the market for sale in San Diego than ever before. And, yes, prices everywhere are starting to soften. The debate is no longer whether housing prices will go down, it’s whether they will collapse or just do the “soft-landing” thing.
The rug has been pulled out of the argument that there are not enough homes in San Diego but still the building industry complains. We’re seeing more press conferences like the one I saw in 2003, but now the mayor is participating.
The mayor and builders are trying to find better ways – or any way for that matter – to spend all the money the city has collected to solve this affordability crisis. Apparently, as good as it is at spending money, the city hasn’t had much success spending the money it has saved for affordable housing projects. And that’s to be expected – the lack of affordable housing is an awkward economic problem for a government to try to fix with simple spending.
Meanwhile, downtown condos are still being constructed; the inventory of homes will continue to rise as we head now into the slower winter months for home sales. With that rise in inventory, house values will continue to fall and they will reach a point where the ordinary family can purchase an ordinary living space. If housing is unaffordable now, then nobody will buy until it is.
Had we, in 2003, agreed to the chamber’s demands to allow builders to construct condos without the kind of parking and landscaping our laws dictated at the time, it’s hard to imagine that the housing supply would have increased more than it did anyway. The condos that did come up, however, would not have conformed to the bare minimum requirements of parking and landscaping that make them tolerable to live in.
Today, “affordable housing” is still a term that developers and labor unions throw around City Hall as a provocative call to action. But as they continue to make demands of the government, the city’s residents would be wise to counsel their representatives not to hastily accede to these demands.
The only way to solve the affordable housing crisis is to let the housing market continue its correction and reach a point where ordinary people can afford ordinary homes. The government won’t be able to influence this process, and it shouldn’t try any more than it has lest it cause more problems than it solves.
City Hall will be better off focusing on an effort to provide the bare minimum in terms of fire protection, sewers, and other vital infrastructure to support all the new housing that has been created. We’ve got all the housing supply we need for now.
Please contact Scott Lewis directly with your thoughts, ideas, personal stories or tips. Or send a letter to the editor.