Forty percent of housing costs in San Diego County can be linked to regulations, and just a slight reduction in those costs could make housing available to thousands more households, according to a new report from Point Loma Nazarene University.
The report, "Opening San Diego’s Door to Lower Housing Costs," comes from the Fermanian Business & Economic Institute at PLNU, and chief economist Lynn Reaser was the primary author.
About 21 percent (or 233,000) of households in San Diego County can’t afford to buy or rent based on their current incomes, the report said.
But without the various costs of housing regulations, about 79 percent of households could afford the average priced home.
Reaser said the results of the report were shocking, particularly because everyone has an interest in having housing that’s more affordable.
“It is, I believe, an alarm bell to trigger us to look at if there are other things we can do better, and I believe the compelling answer is yes,” Reaser told The Daily Transcript.
San Diego has built less than 10,000 units per year for the past nine years, and needs about 12,000 units now per year, on a sustained basis, to meet the need. Prices will be worse if housing deficiency increases.
In the report, Reaser wrote, “Reasonable solutions can and should be implemented to pare down the cost of housing, which has been the greatest single challenge to the fulfillment of San Diego’s potential.”
Regulatory costs occur throughout a project’s lifespan: from entitlement, mapping, development, permitting and homebuilding phases, as well as from the statutory fees of building permits, sewer connections, water, schools, drainage, traffic and other elements.
Slight reductions in regulatory costs could have a big impact on the number of families that could afford housing. A 3 percent reduction could open up housing alternatives to about 6,750 additional households in one year.
The Institute found that economic benefits would multiply in San Diego -- with the addition of 37,000 jobs, a $3.1 billion gain in gross regional product and a $2.5 billion gain in total personal income.
High land costs also contribute to the high price of development countywide. The report found regulatory costs vary by jurisdiction, and range from 22 percent of the total housing costs, at about $125,000 in Santee, to about $282,000 or 44 percent in Carlsbad.
Carlsbad has one of the highest regulatory cost burdens, with time costs representing the single largest driver of that total.
Extra time from complicated processes can add 15 percent or more to the price of a new house, the report said. For projects without a master plan, it may take 12 years or more before the first house is ready for sale.
“The real cost demon in the whole process is the redundancy,” Reaser said. For instance, a project could have passed through all or almost all of the approval process, but then a legal challenge sets it back, and the clock restarts.
The report calls for a collaborative approach toward implementing housing policies, and suggested best practices and improvements for the entitlement and mapping processes in order to approve housing costs.
“This is not a story of a builder’s woes or a developer’s woes, though they may be compelling stories,” Reaser said. “This is a story about school teachers and policemen who cannot afford housing in our community.”
* Related content: PLNU's Lynn Reaser on affordable housing (video)
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May 4, 2015 -- George Chamberlin and Dr. Lynn Reaser, chief economist for Point Loma Nazarene University's Fermanian Business & Economic Institute, discuss the university's report on affordable housing.
Dec. 5, 2014 -- George Chamberlin speaks with Dr. Lynn Reaser, chief economist for Point Loma Nazarene University's Fermanian Business & Economic Institute, about how the economy fared in 2014 and what we can all expect to happen in 2015.
Nov. 20 1014 -- George Chamberlin speaks with Dr. Lynn Reaser, chief economist for Point Loma Nazarene University at the Fermanian Business & Economic Institute, and Leslie Kilpatrick, 2014 president of the Greater San Diego Association of Realtors, about recovery in the local real estate market.
Dec. 6, 2013 -- George Chamberlin speaks with Dr. Lynn Reaser, chief economist for Point Loma Nazarene University's Fermanian Business & Economic Institute, about the details of the institute's 2014 economic outlook report.
Sept. 26, 2013 -- George Chamberlin and Dr. Lynn Reaser, chief economist for Point Loma Nazarene University at the Fermanian Business & Economic Institute, talk about the San Diego Military Advisory Council's recent report on the military's economic impact on the San Diego region.