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I made a big deal last week about our housing analyst, Rich Toscano, buying a home himself.
Did it mean that the housing market had finally hit the bottom? Not exactly, as he explains in this post.
However, home prices per square foot are down about 40 percent from the September 2005 peak, according to Toscano’s widely followed graphs.
Property values remain one of the major, if not the most important, impediments to affordable housing. And with property values and construction costs down, housing affordability should be on the rise.
Unfortunately, the housing crash also caused a broader economic meltdown. More people are out of work than in many previous years and wages are stagnant.
Thus, “affordable housing” remains a problem local government is still trying to solve.
In San Diego, and across California, local governments have been subsidizing the construction of housing complexes for years. The agreements mandate that monthly rents stay within certain ranges for many decades. And the money to subsidize these efforts came in no small part from redevelopment — the complex system that allowed a blighted neighborhood to keep some of its property tax growth and invest it into construction projects.
The state, of course, just killed redevelopment. That sent affordable housing developers scrambling and demanding a new source of revenue from the government.
Before they get one, however, they’re going to need to answer some questions.
At the top of the list: Why were they only able to build so few units?
As researcher Vlad Kogan found, between 1990 and 2008, the city of San Diego’s redevelopment agency helped build only 3,406 affordable units.
Yet during that same period, the market as a whole built 85,000.
Fewer than half of those units the government built had rents cheap enough for people making less than 50 percent of the median wage. Fully 22 percent of the units, in fact, were set aside for people making more than 120 percent of median income.
Is this changing? Not by much. In the fiscal year that covered the last half of 2009 and the first of 2010, the city of San Diego helped build 434 units. Of those, 233 served the lowest income folks. The other 201 went to people with incomes below 80 percent of the median.
Why so few units then? Well, cost is one thing. As we laid out in an ambitious investigation last summer, affordable housing projects absorbed all kinds of social desires. After developers made them palatable to neighbors, infused them with the latest in eco-friendly technology and made them attractive as architecture, the costs rose to close to $500,000 a unit in some cases.
If this is the way to solve our crisis in housing costs, it’s going to be a while.
More than 456,000 households in San Diego County are making less than $50,000 a year. Last year, in the whole county, government subsidized the construction of 665 units directed at helping those who make just less than $47,000 a year.
In other words, at this rate, if we waited for this system to solve the affordable housing crisis, we could get each of those people a home within 700 years.
So is government changing the market and making housing more affordable? Or is it creating a few nice units for a few lucky people?
“It’s not having a large impact on the vast majority of poor people who can’t afford to live here,” Kogan concluded.
The market can clearly both build homes and lower their price a lot faster than the government can. But is there something the government can do?
Yes. The city of San Diego has actually studied the impediments to housing affordability quite thoroughly.
In its general plan, it lists land costs at the top. (The market’s taking care of that, for now.)
The other issues aren’t so simple. At the heart of them is planning and infrastructure.
You see, many older neighborhoods do not have updated community plans, which lay out what kind of development can happen where. That means putting in new, dense housing projects require special permits. If you have an updated community plan, you can ostensibly breeze through the process. Downtown’s 2006 update is partly why building there exploded like it did (as long as you didn’t want to build next to a legacy manufacturer).
Neighbors often make getting permits difficult for developers of dense projects in areas without a community plan. They complain (rightly) that their neighborhoods lack infrastructure to handle what they already have.
Unfortunately, the city of San Diego has stopped updating community plans. It’s a money thing. Some neighborhoods have gone three decades without updating their vision for how they should go.
The mayoral candidates say they’re on it. We’ll see.
If they stay on it, it may lead them all to a comprehensive approach: As San Diego continues to grow, it will have to do it upward. We could invest in the parks, fire stations and traffic alleviation neighborhoods want while asking them to update their community plans and allow for projects to get through the process quicker and cheaper.
This is at least as good of an investment as just getting a few units for a few lucky people built.
There is no simple solution. We’ve tried investing hundreds of millions of dollars. We’ve tried letting people get mortgages for whatever amount they wanted without regard to their ability to pay it back.
We may have to come to terms with the fact that it will be a long, hard process of planning for a more densely packed community and investing in the infrastructure that will make that habitable. Only then will we be able to build the supply needed to make prices more affordable.
Here are a few things to look for this year:
• Mayor’s Race: What more will the mayoral candidates say about community plans?
• Focus of Economic Investments: U-T San Diego recently asked economist Marney Cox what he thought of the paper’s grand vision of a sports resort along the waterfront with a new stadium, sports arena and convention center. Cox responded in part with a great question: “does the region need more infrastructure (convention center and entertainment facilities) for which approximately 75 percent of the workers earn less than the median wage …?”
In other words, building a convention center may create jobs, but also more need for things like affordable housing. If we continue to create these kinds of jobs, advocates of government-subsidized housing development will continue to make a compelling case. At a forum we held debating the merits of redevelopment, Susan Tinsky, the head of the consortium of developers known as the San Diego Housing Federation, made that very case.
“Right or wrong, these are the jobs we’re creating and we have to house our workforce,” she said.
Watch all of our city’s economic development projects and make sure you understand whether each will create good-paying jobs or simply more demand for cheap housing.
Because we’re just not good at building that.
I’m Scott Lewis, the CEO of voiceofsandiego.org. Please contact me if you’d like at email@example.com or 619.325.0527 and follow me on Twitter (it’s a blast!):
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