The Morning Report
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When Mayor Kevin Faulconer first took office, he said he’d make sure San Diego built more homes to combat a housing shortage driving the city’s high cost of living.
Seven years later, he mostly made good on his pledge to seek supply-side reforms intended to make it cheaper and easier for developers to build homes in the city’s urban core. As housing continued to get more expensive – and grew more salient as a political topic throughout cities on the West Coast – it took on a more central role in his administration, too.
In his 2019 State of the City address, he leaned into the rhetorical zeitgeist and declared himself a “YIMBY mayor,” positioning himself against California NIMBYism that has contributed to the state’s housing shortage. It won attention from the Los Angeles Times and the Wall Street Journal.
Yet the outcome of Faulconer’s YIMBY moves is not yet clear.
San Diego is among the most expensive cities in the country, with more than half of its residents unable to cover their cost of living, according to a study last year by the San Diego Regional Economic Development Corp. Housing costs have grown consistently in the last five years, and the share of renters devoting more than a third of their income to housing has increased 44 percent. The city’s stock of reasonably affordable housing is in steep decline.
Faulconer’s aimed to combat those trends by building more homes. But after years of housing deregulation, San Diego is not building significantly more homes now than when he took office, nor are developers outbuilding counterparts in San Francisco or Los Angeles, according to a Voice of San Diego analysis of U.S. Census Bureau building permit data. San Diego isn’t even approaching the housing production of cities like Denver or Seattle.
Housing experts say it’s premature to declare Faulconer’s reform efforts ineffective.
Jenny Schuetz, a fellow at the Brookings Institution and expert on urban economics and housing policy, said it could take five or six years to see his policy changes show up as new housing.
“There isn’t enough evidence to say this hasn’t worked. Housing development in California is a very slow process, so even reforms that will be effective will take a while to show up,” she said. “If the next mayor rolls things back or isn’t as growth-friendly, we might actually never see the results.”
Mayor Todd Gloria shares Faulconer’s view that San Diego’s housing costs stem from a housing shortage. The City Council in recent years has as well. Differences on housing remain – especially on raising taxes to build homes for low-income residents – but pro-development views have become bipartisan.
November’s election suggested the pro-housing rhetoric has persuaded city voters, too. By a healthy margin, they approved a measure eliminating the 30-foot coastal height limit in the Midway district – a specific change Faulconer himself disavowed in a 2013 interview with Voice of San Diego.
He supported the measure this year.
“The mayor is cautious by nature,” said former Councilman Scott Sherman. “He wants everyone on board before he comes along. But once it was bipartisan, he came on board and started using some of the ideas we had been pushing on the Council. It was fine by me as long as it gets done.”
Other large California cities during Faulconer’s tenure passed tax increases to build homes for low-income residents. San Diego did not, and when a measure to do so went to the ballot in 2020, Faulconer did not support it. Until the pandemic hit, he paid little attention to tenant protections.
But the city’s entire approach to housing, Faulconer said, is now different.
“You’ve seen a sea change, from when I was first elected, when there was strong animosity to any development, to a realization that we have to be able to construct housing that San Diegans can afford,” he said.
A Reform Agenda
A top target for people who wanted to make it easier to build housing in San Diego had long been community plans – the zoning regulations for the city’s 52 official neighborhoods. They were outdated and did not allow much growth even in areas that could support it. A year into Faulconer’s tenure, his staff was trying to finish a handful of updates to them. By that point, the effort had cost $15 million, dragging on for over a decade.
The City Council eventually approved that batch of new plans, but with little to show for the cost and effort. New plans in North Park, Uptown, Golden Hill and San Ysidro – dense, urban communities served by transit and near jobs – let developers build just 3,500 new homes combined.
In the next four years, Faulconer passed more community plan updates with far more significant density increases. New plans cleared the way for 6,000 more homes in the Midway district, 9,000 new homes along Morena Boulevard and 28,000 homes in Mission Valley. Altogether, the plans passed under the mayor made way for nearly 100,000 new homes.
And he passed them faster, in three or four years instead of 10. The city’s new approach called for planners to work with neighbors, yes, but to quickly decide if they’d compromise, or move forward despite disagreement.
“We had an absolute focus: Let’s have this input, but let’s get them in front of Council,” Faulconer said.
Part of that focus owes to the city’s Climate Action Plan, passed in Faulconer’s first term. It committed the city to cut emissions in half by 2035, in part by requiring half of city residents living near transit to bike, walk or take transit to work. That meant building dense housing that made those commutes possible. (The city is way behind that pace; as of 2018, transit use among those residents had increased, but biking and walking had declined. Just 13 percent of people living near transit met the city’s goal of non-car commuting).
Still, Faulconer said the climate plan made it harder for climate-minded residents to oppose new housing.
The mayor’s team also eliminated parking requirements for new apartments near transit stations.
And in 2016, the city passed a souped-up version of its so-called density bonus program, which lets developers build beyond existing zoning if they include low-income homes in the project. It worked: A report from Circulate San Diego, an urbanist advocacy group that supported the program, found it dramatically increased both low-income and market-rate homes over the previous year, leading the Legislature to pass a law this year intended to mimic San Diego’s program statewide.
Colin Parent, executive director of Circulate San Diego and a La Mesa city councilman, said the programs were examples of a successful approach Faulconer adopted.
The mayor is proud of his record on community plans, but Parent said he should be most proud of moving beyond them.
“They eventually recognized that the path to substantial reform is structuring reforms in a manner that applies largely citywide,” he said. “They demonstrated you could do things citywide, and get out of the morass of arguing with the community planning groups.”
The mayor’s last major regulatory reform falls into that bucket. “Complete Communities” started as a call to revoke height limits near transit, but ended as a modest, optional program in which developers can build larger projects near transit if they agree to a slew of tenant protections and community benefits and to build income-restricted homes.
But the program isn’t available in areas reserved for single-family homes, even those near transit. On over half the land within a half-mile of transit in the city in which it is legal to build housing, it is legal to build only single-family homes. Complete Communities never attempted to disrupt that privilege.
Ricardo Flores, executive director of nonprofit affordable housing group LISC San Diego, this summer called the mayor’s decision not to be more ambitious about dismantling exclusionary zoning a “missed opportunity.”
“For someone termed out, looking for a legacy beyond California, to have thought about this and done something about it, it would have been profound,” he said.
Early Results: Incomplete
So far, Faulconer’s reforms are not resulting in a dramatic change to housing production in San Diego.
San Diego last year issued permits to developers for nearly three homes for every 1,000 people who live here. That’s not just fewer than in 2018, 2017 and 2016 – it’s fewer than the city issued in 2013, the year before Faulconer took office.
Seattle in 2019 issued over five times as many permits per capita as San Diego, giving out over 14 for every 1,000 residents. Denver did nearly four times as well as San Diego, and Houston, Phoenix, San Francisco and Los Angeles outperformed the city as well.
Over Faulconer’s seven years in office, San Diego has, on average, performed below its peer cities in housing construction. It’s done better than only San Jose.
Even in San Diego County, the city of San Diego is not all that special. Both Carlsbad and Chula Vista have permitted more new homes on average relative to their populations than San Diego has.
Erik Bruvold, head of the San Diego North Economic Development Council and a longtime policy analyst and economic development professional in the city, also said it was too early to see continued sluggish housing production as a reflection of the mayor’s record.
“The numbers illustrate that especially on the West Coast, and especially in California, housing development is a multi-year process,” he said. “What it takes in California is, it takes more than one mayor.”
At least one of Faulconer’s deregulatory moves created immediate results.
In 2017, the city exceeded new state laws to make it easier and cheaper for homeowners to build granny flats – standalone second homes – on their properties. Two years later, the city made it even easier to build them, and this year, the city made it possible to add unlimited granny flats to properties in single-family zones, which, Faulconer’s staff argues, fundamentally undermines the exclusionary nature of single-family zoning.
Granny flats have exploded in the city since then. In 2016 and 2017 combined, homeowners completed construction on 22 granny flats, according to city data. In 2019 and 2020 – as of the end of September – they’ve completed construction on 492 granny flats. Granny flats represented nearly 13 percent of all home permits issued in the city in 2019, and the city is on pace to increase that number this year.
“Any time a policy is implemented, it takes a long time for the market to respond, particularly here in California where it’s not easy to construct new housing,” Faulconer said. “But the market does respond.”
Bruvold said the biggest thing Faulconer did wasn’t a policy reform at all.
Rather, he said, it was identifying significant development opportunities, and engaging with the development community to figure out what needed to be done to make them happen.
That resulted in projects moving forward including some 3,000 homes near a transit station on Morena Boulevard in Linda Vista, over 4,000 apartments in place of the Riverwalk golf course in Mission Valley, and more than 2,000 units at the Sports Arena site in Midway.
“At the senior level, they coordinated on what was needed to move projects forward, and they were smart to listen to people in the private sector who told them what the economics needed,” Bruvold said.
It’s no coincidence, he said, that during the time that Faulconer was in office and pushed for pro-housing policies, the public seemed to become more receptive to the city’s need for more housing. That culminated not just in 57 percent of voters approving a change to the previously sacrosanct coastal height limit, but a similar share choosing Gloria over his opponent, Councilwoman Barbara Bry, who ran on a familiar, but perhaps now-outdated theory of San Diego as growth-averse.
“Up until Kevin, I think it was fair to say that no San Diego politician ever lost an election by opposing a housing project,” Bruvold said. “If he’s done one thing, he’s changed the dialogue, and the political calculus.”
Nationwide, Schuetz said too few mayors have engaged on exclusionary zoning, and its effect on prices.
“People with a platform need to name the problem, and explain why single-family exclusionary zoning is holding us back,” she said.
What He Didn’t Do
San Diego passed no tax increases for low-income housing under Faulconer. It put one in front of voters this year, and Faulconer did not support it.
It’s no surprise then that San Diego has not built many low-income units. From 2010 through 2019, developers broke ground on 5,807 homes for low- or very low-income residents, or about 15 percent of the state’s target for the city.
The mayor – a generally tax-averse Republican by nature, though he championed a hotel tax increase to expand the Convention Center and pay for homeless services – did not match his enthusiasm for housing deregulation with support for revenue to build homes that the market is unlikely to ever provide.
When Faulconer took office, his transition team listed its policy priorities. On housing, it’s basically a checklist of policies he went on to implement – densifying neighborhoods, cutting red tape, streamlining approval processes.
On subsidized housing, though, he ignored increasing revenue, and instead said he hoped to attract private investment, and to lower the cost of building rent-restricted homes – again, through red tape-cutting, streamlining and regulatory changes.
That hasn’t happened.
“The cost has gone up,” said Stephen Russell, executive director of the San Diego Housing Federation, a nonprofit that advocates for the affordable housing industry. “Our inputs – land, labor, materials, financing – nothing is cheaper on any of those fronts, and few are under the control of the mayor. The liberalization of zoning has made it easier to develop, but to the extent that we gave those same time savings to market-rate housing, it basically levels the playing field.”
Faulconer said he did not consider supporting Measure A this year, or any other hypothetical revenue measure to increase low-income housing.
“My focus has been on changing the policy that allows housing to be constructed,” he said. “Long term, that’s the best bang for your buck. If you save time and money for developers, you’ll get more housing constructed, and that’s where the bottleneck has been.”
If it’s unsurprising that the Republican mayor testing the waters of a gubernatorial bid as we speak didn’t support tax increases on housing, it probably also figures that he mostly avoided tenant protections supported by progressive activists.
Rafael Bautista, an organizer with San Diego Tenants United, said the city under Faulconer never responded to activist demands for policies like rent control, eviction protections or increased code enforcement against slumlords. That’s true, he said, not just of the Republican mayor, but Democrats on the City Council, too.
“It’s nothing serious – it’s very developer-friendly,” Bautista said. “It’s oriented specifically to development, with none of the savings that were promised coming to the consumer.”
He said the city’s especially seen an increase in investors buying up somewhat affordable housing, renovating it and pushing out existing residents.
But it’s replacing those somewhat affordable homes in the coming years where the promise of Faulconer’s attempts to increase development will need to deliver.
There’s quite a hole they’ll have to fill in the city’s housing stock, and it’s only getting deeper.
San Diego’s “naturally affordable housing,” homes not built with the help of subsidies that are nonetheless cheap enough for low-income residents to afford, has been in precipitous decline since before Faulconer took office.
In the last 20 years, 66,000 of those homes have become unaffordable, according to a study this year from the San Diego Housing Commission.
And over the next 20 years – given current trends – the remaining 29,200 homes that people earning below 50 percent of the median income can afford are expected to fall to just 9,300 homes.
After he leaves office, Faulconer is betting the policies he’s left behind can begin to change that trend.