San Diego may often get overlooked and overshadowed by its flashier counterparts, Los Angeles and San Francisco, but given the city's projected population and job growth, it's a prime example of a modern American city grappling with a dilemma observed across the nation: housing. The stratospheric and ever-increasing cost of housing in California hotspots like Silicon Valley is becoming the new reality for much of the Golden State and numerous other metropolitan areas in the United States.
This predicament has long-time San Diego resident, David Malcolm, wondering: what's changed? With over 40 years of experience in real estate in and around San Diego, Malcolm has an encyclopedic insight into what it takes to make a city flourish and provides a valuable perspective on the risks associated with current housing and infrastructure trends.
"For San Diego's largest employers, such as the Navy and the public school system, the city has historically provided the American dream of homeownership. Yet today, the city is struggling to provide enough housing to meet the projected population and job growth while maintaining the quality of life that attracts people and businesses to the area," shared Malcolm.
Since 2021, existing homes in San Diego County listed for sale have sold at an astonishing rate, and in most cases, well above the listing price. The same frenzy exists for single-home residential construction, with an estimated 9,500 to 10,000 new homes built in 2021. Despite this flurry of real estate activity, the housing shortage is a palpable problem with no apparent relief in sight, also causing the average rental prices to surge in 2022.
According to numerous reports, rent prices in San Diego continued to climb in May. A study by rent.com reported the average studio apartment in San Diego costs $2,417, a 23% increase from last year. The average rent for a one-bedroom apartment costs $2,775, up 21%. For context, according to a Zumper report, the median price of a one-bedroom in the U.S. reached an all-time high in May at $1,414.
Malcolm notes there isn't a single solution to his city's housing needs, but he does believe that costs can be reduced and single-family homes preserved.
"We have gone from NIMBY (Not in my back yard) to YIMBY (Yes in my back yard) in a very short timeframe. This trend of moving from No to Yes presents several 'risks.' Preserving the integrity of the R-1 zoning (single-family zoning) is something I have always believed in. We can reduce the cost of housing and, at the same time, preserve residential neighborhoods. One doesn't need to be sacrificed for the other," explained David Malcolm.
Last year, California Governor Gavin Newsom overhauled single-family-only zoning through a suite of housing production bills legalizing the construction of duplexes and quadplexes on land that otherwise would have been reserved only for single-family homes. While this high-density housing approach presumably eliminates government red tape in some respects to address housing needs, Malcolm has repeatedly observed government bureaucracy stand in the way of solving real and significant problems.
"Developers will build more housing when it is profitable to do so. However, dealing with local government has become a significant line-item cost," stressed Malcolm. "Not only does the government delay the approval process by several years, but it also imposes fees equal to twice the cost of my first home. Until the local government assumes responsibility for their actions (or lack thereof), we will never solve the housing affordability problem."
With steadfast employers such as the United States Navy, the University of California (San Diego), and Qualcomm, and an April unemployment rate of 3% (down from 3.4% in March, according to the Employment Development Department), affordable housing is just one element that San Diego needs to consider as its economy grows. Business and civic leaders must adopt a logical approach to avoid letting the population outpace its supporting infrastructure. There are plenty of examples in California of what happens when authorities ignore projected growth trends.
Malcolm affirms that local governments must first determine how much growth can San Diego's roads, schools, wetlands, air quality, and water availability support.
"I live in San Diego, and I don't want San Diego to become another Los Angeles," said Malcolm. "We need to realize that water is a precious resource and a major reason we cannot simply build our way out of the housing shortage. Everyone is looking for some 'Fairy Dust' to solve San Diego's housing crisis, and there is none! There is no one solution."
Based on his extensive knowledge and wealth of experience, Malcolm believes the private sector and government need to work together to start doing many "little things" right to begin making a difference.
As a step in the right direction, he suggests a logical set of topics that authorities and developers should address in order as they grapple with what can sometimes be difficult choices:
According to Malcolm, "EVERYTHING needs to be put on the table. The government needs to understand builders' issues and builders need to understand the government's needs." He continued, "We will never get anywhere until civic leaders and elected officials can have an open, honest dialogue, find the 10 items they can agree upon, and leave the 20 items they disagree on 'on the table' until those 10 items are addressed."
Local governments and developers have always had a "tug of war" relationship, but if San Diego is to preserve the quality of life for its current and future residents, a cohort of both sides needs to cooperate. Unfortunately, only time will tell if meaningful transformation will come to fruition in San Diego, which sadly places too many families at an unfortunate disadvantage in the search for a quality home.
About David Malcolm
David Malcolm resides in San Diego and is a prominent real estate professional, serial entrepreneur, and esteemed community leader with over four decades of work experience. Malcolm is a licensed real estate agent and broker, a Certified Commercial Investment Member (CCIM), and a celebrated graduate of Harvard Business School's Presidents Program. He has run and advised multiple public and private companies, including his current role as President of Cal West Apartments, and held several municipal and statewide public offices.
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