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Multifamily permits surge in 2011

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With much of the county’s developable land already home to housing, developers and the San Diego Association of Governments have frequently said the future of housing in the county lies in redevelopment and urban infill projects.

Home-building permit activity so far this year suggests that process could be underway.

Permit activity has picked up this year from the record-low levels of 2009 and 2010. Through four months, there’s been an almost 100-percent increase in the number of permits county developers have pulled compared to the same period during the last two years.

Permits have been granted for the construction of 2,225 homes this year, up from 1152 at this point in 2010 and 1,114 in 2009.

But almost all of that increase has come in the multifamily sector, where projects are far more likely to be the sort of dense developments the county is said to need.

More than half — 1,499 — of the permits pulled this year are for the construction of multifamily housing units. At this point last year, developers had pulled 314 multifamily permits. Through four months of 2009, they had pulled 590. That’s good for a 377 percent increase year-over-year, and a 154 percent increase over two years ago.

Susan Tinsky, executive director of the San Diego Housing Federation, said the increased building of multifamily housing is consistent with SANDAG’s regional comprehensive plan and growth forecasts, which say new activity should be concentrated in dense, transit-oriented communities.

“This bodes well for where the county needs to be going, to preserve its agricultural and rural land,” she said. “For affordability, there’s also a better likelihood that you can achieve homeownership in this context.”

Housing demand remains low, and what exists is largely satisfied by the inventory of distressed properties from the foreclosure crisis. New housing needs to compete with those discounted properties. Borre Winckel, president and CEO of the Building Industry Association of San Diego (SD-BIA), said developers are making a calculated bet that there’s room in the market for new homes, which carry a less burdensome transaction schedule and are in far better condition than distressed properties, despite the increased cost.

“The market is thinking inventories are very low, the predominant product is distressed properties, and do (buyers) really want to deal with short sales and foreclosures at a low price, contrasted with buying a new home with warranty?” he said. “It’s a cautious play by the major homebuilders with the cash to wage this waiting game.”

Matt Battiata, of Battiata Real Estate, said developers could simply be looking at the lack of home buying activity, and building multifamily units that can be marketed as rental units.

“It’s indicative of the market that builders are building apartments that people are going to rent, rather than buy,” he said. “I know builders that do nothing but apartments, including some that do primarily affordable (housing), and they’re busy, has to turn business away.”

But Tisnky says it’s the jurisdictions, not builders, that are steering development toward multifamily.

“More so than the developers, its the jurisdictions themselves that are working to direct development to areas that can support it through alternative transportation modes, and in an urban context where there are amenities to support that kind of growth,” she said. “From the perspective of smart public policy and fiscal planning, it makes more sense to utilize existing infrastructure, and not create new opportunities for growth in areas that aren’t supported by existing infrastructure. It makes for a better fiscal model.”

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