Taking Stock Of San Diego's Housing Shortage
December 20, 2017 1:12 p.m.
Taking Stock Of San Diego's Housing Shortage
Borre Winckel, president and chief executive officer, Building Industry Association of San Diego County
Stephen Russell, executive director, San Diego Housing Federation
Related Story: Taking Stock Of San Diego's Housing Crisis
I am Allison and St. John. You are listening to midday edition on KPBS.To keep up with population growth, San Diego would have to be building 10,000 new houses per year for the last few years, we have been falling far short of that goal. On top of that, most of the houses being built are for people on the upper end of the income scale. So taking a look at what has been built and what we might expect, we have Borre Winckle . Thank you for joining us.A pleasure to be with you.We also have Stephen Russell, and advocate for affordable housing. Thank you also.Thank you.Let me start with you both. The economy has recovered, unemployment is down, and we are still in this housing crisis. Being driven primarily by a shortage. Why are so few new homes being built in San Diego County?The cost to construct the new unit held for lease, or for sale, costs more than what the pocketbook of the and user or homeowner can afford. Therefore, we are under producing to market demand. This is a new phenomenon, we have never experienced this before.Stephen, you are working on lower income housing, why are we still falling short?It is challenging, land prices are really driving up the cost of production for all sectors. The resources available for affordable housing in particular, seniors, veterans, low-wage families, the funds are very finite. We know there are over 100,000 families in San Diego County that would be eligible for low income housing, but we are nowhere near that number of units.How many number of houses have been built this last year?Numbers tell the story, we have pulled building permits, including permits for affordable housing to the tune of 7000. We are on pace to and the year, -- finished the year probably in the 7800 units for the entire region. That will be, significant because it will be a 20% drop below last year and the year will that before. -- The year before. This is significant that we, acknowledge this drop in building permits, the strides everything. We believe that 2018 will be, at best, as good as 2017, but probably will have even lower production rates. The time for serious action is upon us. It is not someone else's problem anymore. It is a universal problem.If you could briefly say why so few houses are being built.It was at a couple years ago, 40% of the cost to construct housing was for matters that had nothing to do with the actual home. Regulations and time wasting and fees. We have not deregulated far enough in order to be able to economically reduce more housing. It is a math issue, it is a simple math problem. We believe that the time has come to look seriously at reform of the environmental equality act. Turn that back to environmental protection, not weapon iced tools to stop -- weapon iced projects -- weaponized tools to stop project -- projects. It is a very large reason why so many projects get downscaled, we lose units, and we exacerbate our traffic problems as we say no to housing and push it out to Riverside so that people can enjoy ever longer commutes.What about the affordable housing? Do you have a sense of the overview, the number of new units that have gone up in the county this year?It will be roughly 1200 by the years and. That is not a atypical number. It is never enough. 1200 units as a portion of the 8000 units that should be reduced this year, it is a fraction of the total production.And these houses are subsidized with federal tax credits?That's right.But as a developer you face the same problems?We experience the same challenges, 40% of the cost of housing production are not housing costs. A lot of these are infrastructure, the schools, roads, sewers, things we have decided here in California we will not pay for as a state but put that cost on the individual development. If we value housing enough, are we willing to pay collectively for the infrastructure that allows them to be built in and economic manner. -- An economic manner.I have read that 10% is pretty much what is expected, that seems high. As far as profit.I don't think we have a profit problem, we have a supply problem. I don't think the issue is that elders are making too much money. The issue is that we are not building enough housing that are at an attainable level for the public.But if they did accept lower profits, why do they need to aim for such high profits likes--?I would beg to differ that it is a problem with profits. The project is looked at from a feasibility perspective. If we look at that, we say, why does California has such a unique problem compared to adjoining states with no problem. The issue is that we have lost the middle income workforce housing component. This is the largest component of the market, it is the bellwether of our problem. We can't build it.One of the things we've seen over the year, a couple of initiatives, developers have gone directly to the voters and asked them what they think. They have both been defeated, the major ones like lilac hills and Stone Ridge golf club. Is there more talk of going directly to the voters?If you need a initiative to approve housing, you have already lost. It is not the role of the public to approve housing, it is the role of elected officials.We just heard of a new project called Park Circle, with 600 new homes. According to the County General plan, they do not need a special permit. Do you think developers are starting to think, let's just build where the general plan X affects us to build -- expects us to build.With respect to Park Circle, it is taken 10 years since they got initial approvals. It does have a inclusionary requirement, I think 20%, in exchange for a density bonus. Here is a project consistent with the general plan, providing inclusionary housing, and yet, has taken 10 years. From conception to groundbreaking. That is symptomatic of the problem, all housing is experience this.Tax credits, with the new tax reform, we are looking at federal tax credits, do you know how this will affect that?We feared there would be a bloodbath as there were some tax credits completely cut out and added back in. We were pleased with that. I won't get too much into the weeds, but basically tax credits are waived getting private investors, as a way to write off some of the taxes. If the tax burden is lower, some of those credits will be less competitive. In this year, if we had this tax regime in place, we would probably see a couple of million dollars less in the region. This is a couple million we would need to make up with local sources.Are there any bright spots for the coming year?I see two very right spots, the state housing bond. The veterans and affordable housing bonds. And we are exploring now, within the city of San Diego, a possible measure to raise money for seniors, veterans, and the recently homeless, with an emphasis on children.The price of housing has gone up 7%, will it continue? Or are there any bright spots for potential home buyers?First of all, the federal tax reform program, probably be approved today and it is not housing friendly. We worry that the upshot of tax reform adoption, there will be less housing constructed because it favors a do-nothing mentality. As people come up to speed with the new tax plan.Because of the ending mortgage deductions?Exactly. We are in a pickle with this tax reform plan from a housing perspective. It promotes staying in place, as people will find themselves having very little economic incentive to move out of their home and buy something new. We are further restricting the resale market, a lot of realtors will tell you they are gravely worried about the direct implications of the tax reforms on California real estate.We will be keeping a close eye on this. Thank you so much for coming in. That was Borre Winckle . And Stephen Russell of the housing Federation.Thank you.