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KPBS Midday Edition

San Diego Housing Crisis Drives Some To Relocate, Others To Invest

Michael Fernandez sits on steps in front of a home he purchased in Golden Hill near downtown San Diego, October 2016.
Katie Schoolov
Michael Fernandez sits on steps in front of a home he purchased in Golden Hill near downtown San Diego, October 2016.
San Diego Housing Crisis Drives Some To Relocate, Others To Invest
San Diego Housing Crisis Drives Some To Relocate, Others To Invest
San Diego Housing Crisis Drives Some To Relocate, Others To Invest GUEST: Stephen Russell, executive director, San Diego Housing Federation

San Diego County is in the grips of a housing crisis. KPBS reporter Susan Murphy says it's pushing some to relocate out of state. Others fall further into poverty and some to find opportunities for investments. This is our living room Jennifer Van Winkle has lived in San Diego her whole life. It seems the 31 two road and her husband James are living the millennial dream. They have good paying jobs and they own their home. They are packing up and moving to Texas. We both realize that we want to start a family and that's a possible when we read two of our three bedrooms to tenants to help with the $2600 mortgage that we pay. Spec we could've survived in San Diego but in Texas we can thrive. Spec Jennifer is an assistant who holds a master's degree. James and 80 veteran and diesel mechanic the van Weikel's mother 1200 ft.² home near the college area 2 1/2 years ago for $400,000. We thought we could deal with the mortgage. We will find a way and we did. We have remains, but we saw things are getting any easier. They sold their home and they are using some of the $60,000 profit to start a new life in Austin Texas. Tosses average half the cost of San Diego homes. To stay here would be scribbling at nothing. We would be clawing and scraping our way to attain nothing. The van Weikel's are not alone in their search for greener pastures. Skyrocketing house costs in San Diego County are among the highest in the nation. Nearly a quarter of people are spending more than half their income to put a roof over their head. The average price of a single-family home is $545,000. Renting a two-bedroom house is nearly $2300 a month, behind the numbers at major housing supply problem. Some of the estimates are 35,000 units short in San Diego County. Spec Mark Goldman is a real estate instructor at San Diego State University. Population is expanding, housing supply is already too small, and the growth in housing supply is not fast enough. Low and middle class families are being hit hardest. Goldman says impacts of the record low supply could become increasingly visible as more people are forced to double up. More people are seeking fewer units, so obviously, this going to be more people per room. He says people in the upper income bracket are the ones buying homes and sustaining a competitive market. People who are buying those homes had incomes that are keeping pace with the rate of increase more or less. That's a good thing because that reduces the possibility of another housing crash. One area of opportunity for those with means is one struggling urban neighborhood, the up-and-coming communities are attracting buyers because of the relative affordability in proximity to job centers. This home was purchased in 2013. Michael Fernandez first realized the opportunity three years ago. Spec I fell in love with the view, the proximity to downtown, the proximity to Coronado, and the price. Fernandez bought and renovated a two bedroom two bath house in Golden Hill on the eastern edge of downtown. The married father of two says he's not a house flipper, he works in digital cinema technology. There are two ways to look at this: you can leave them in the current condition which is poor, or somebody can come in and bring it back to life. He didn't want to reveal what he paid for the home for records show houses in the neighborhood at the time averaged less than $300,000. He's now renting a home fourth $2000 a month. The real profit yet he says. I wanted to go to the higher side of that red, but in doing so I had to justify it. Hence, the home benefited from new appliances, new bathrooms, new kitchen. This year he bought renovated and started renting out a second home. This one in barrio Logan. He plans to hold onto both homes is long-term investments he is seeing others in the neighborhood's doing the same. Was going to be a eclectic, vibrant and cool. It's always been but is going to approve. What's not going to improve anytime soon is San Diego's housing inventory. Because developing and new housing complexes from conception to completion takes an average of 7 to 10 years. The van Weikel say they don't have time to wait. Do I feel let down by San Diego because of having to relocate? No it's the bitterness from not having a way to make this work and now having to leave family. Spec Susan Murphy KPBS news. Joining me now is Stephen Russell executive director of the San Diego housing Federation. Welcome to the program. The story told in Susan Murphy's report is probably something you've heard many times before. How did San Diego fall so far behind in affordable housing.? Year after year we've just failed to produce what the job growth has demanded. That's the primary driver of housing in a market like this, growth of jobs. We haven't in any years in the past decade, maybe one year, have we produce what our annual demand would be. We are years behind in producing housing for the region. In talking about housing crisis, the two main problems pointed to our them into the inventory and low wages in San Diego causing housing prices to skyrocket and leaving most San Diegans unable to afford to buy. Is that how you see it? I would say we are concerned with San Diego housing Federation with some of the more vulnerable residents. Those of the low-wage working families, seniors, disabled veterans, who are on fixed incomes or low incomes and not in the purchase market. These are renters. The challenge there is that the limited supply of new rental housing means that in typical market, housing is available at all different levels. In a tight market, those with the most money did up the available housing to higher prices. They price out families and folks on fixed incomes. That means more people are actually looking for rental units. In the best situation, more people are out in the market, some possible rumble it up on the streets. Stephen you told us that San Diego has fallen far behind in affordable housing. How did that happen? How do we stop that? How do we make up for lost ground? We are here because in large part we had under built a lot of the land in the city with a lot of single-family homes where we actually had sown for multi family. This was a response to market pressures. How do we get out of here is really that we have to continue to identify all available land in the urban areas, especially along transit core doors and build densities that both support transit network and provide largest possible supply of housing within the existing supply of land. We've run out of coming in the past we could build out larger parts of San Diego and we could build housing for all income groups. When you think of Clairemont Mesa, it was big, expensive and every, you could build for every income group. Right now we have a constrained supply of land and that supply is now being bid up to the highest income homeowners. Folks with a lot of money have a lot of choices, folks without money and that's the middle and low class don't have many choices. One of the tricky areas here is how do you develop more housing, more housing density in particular. And maintain quality of life? I'm thinking about increased traffic, parking, things of that nature. One of the things we need to do is look at the way that we fund public infrastructure. Right now in a post-prop 13 environment, we burden each individual housing unit with the cost of its impact. What that means is it's expensive to develop those units and communities like midcity who were traditionally overlooked and did not have facilities need a huge infusion of infrastructure dollars that would make the streets pleasant places to walk and provide parks that are required and really make it a place where we could support a higher density of housing. The people that we heard about in Susan Murphy's report are leaving San Diego because they would like to buy somewhere and they are not able to afford it. There are cities in America where most citydwellers rent instead of own. New York and San Francisco, is that the direction you think that we are heading? Absolutely, and there's nothing wrong with that. We have used homeownership as a measure of success when in fact what we really are looking for is social stability. Stable environment where people can live of their lives with some sense of security about the future. That's really what the American dream is about. Knowing that you have a place here in the community that you love where you lived your life and you will be displaced by rising rents. Or basically want be displaced. When you talk about rising rents, there have been some idea, but Ford about more rent control in San Diego. Do you support that? Rent control is problematic because it has been shown to have a negative impact on new supply. It creates uncertainties in the investment environment that creates new supply. That's where we have to focus efforts on increasing the supply of housing in general. For specifically, for the poorest of San Diegans we have to increase supply of housing available to them. Rent control has an immediate benefit for those folks who already have housing and a disadvantage for those who will be looking for housing in the future. The San Diego's housing problem something you expect to improve anytime soon? It is going to be a long haul. We will have to have year-over-year overproduction. I would say for at least a decade. Before we would begin to make a dent, that's why a lot of the subsidized housing that is provided, tax credit subsidized housing is really critical because most housing becomes affordable as it ages and as inflation makes it seem relatively inexpensive, but in a constrained market it takes 20 years. For folks who are at the poor end of the spectrum, they can't wait 20 years to become affordable. I've been speaking with Stephen Russell executive director of the San Diego housing Federation. Thank you. Thank you.

Jennifer Van Winkle, 31, has lived in San Diego her whole life. It appears she and her husband, James, are living the millennial dream: They have good paying jobs and own their home. Yet, they’re packing up and moving to Austin, Texas.

“We both realize that we want to start a family,” Jennifer Van Winkle said. “And that’s not possible when we rent two of our three bedrooms to tenants to help with the $2,600 mortgage that we’re paying.”

“We could’ve made this work,” James Van Winkle added. “We could’ve survived in San Diego, but out in Texas we can thrive.”

Jennifer Van Winkle is a legal assistant who holds a master’s degree. James Van Winkle is a Navy veteran and diesel mechanic. The Van Winkles bought their 1,200 square foot home near the College Area two and a half years ago for about $400,000. Jennifer Van Winkle recalled they were ecstatic — at first.

“We thought we could deal with the mortgage. We could find a way. And we did — we have roommates,” she said. “But then we saw things aren’t getting any easier.”

Something had to change, Jennifer Van Winkle said.

So they sold their home, and they’re using some of the $60,000 profit to start a new life in Austin. There, houses average around half the cost of a San Diego home.

“To stay here would be scrambling at nothing. We’d be clawing and scraping our way to attain nothing,” Jennifer Van Winkle said.

The Van Winkles are not alone in their search for greener pastures. Skyrocketing housing costs in San Diego County are among the highest in the nation. Nearly a quarter of people are spending more than half their income to put a roof over their head, leaving little room to save for retirement or pay the bills.

The average price of single family home has climbed to $545,000, a 6 percent increase over last year. The average cost to rent in San Diego County is $1,743 — an 8 percent increase since March, and 33 percent rise since 2010. Prices are expected to continue escalating.

Behind the numbers is a major housing supply problem.

“Some of the estimates are approximately 35,000 units short in San Diego County,” said Mark Goldman, a real estate instructor at San Diego State University.

“Our population is expanding, our housing supply is already too small and the growth in our housing supply is not fast enough,” Goldman said. “We’re getting further behind every year.”

Low-income and middle-class families are being hit hardest, and impacts of the housing deficit could become increasingly visible as more people are forced to double up, Goldman said.

“More people are seeking fewer units, so the obvious solution is there’s going to be more people per room,” Goldman said. “There’s just not that many places for people to live and have a home."

Goldman said people in the upper-income bracket are the ones buying homes and sustaining the competitive market, for now.

"People who are buying those homes have incomes that are keeping pace with the rate of increase, more or less,” Goldman said. “So that’s a good thing because that reduces the possibility of another housing crash."

Some are finding opportunities in once-struggling urban neighborhoods. The up-and-coming communities are increasingly attracting buyers because of their relative affordability and proximity to job centers.

Michael Fernandez first realized the opportunity three years ago in a designated historic neighborhood in Golden Hill near downtown. It wasn't just the 800-square-foot house, riddled with termite damage and in dire need of electrical, plumbing and overall renovation that caught his eye.

“I fell in love with the view from the park, the proximity to downtown, the proximity to Coronado and the price,” said Fernandez, who works in digital cinema technology.

He bought the two-bedroom, two-bathroom home with intentions of living there with his family. But halfway through the remodel, they found out their second child was on the way and they would need a bigger home. Fernandez completed the renovation and started renting it out.

Fernandez didn’t want to reveal what he paid for the home, but records show houses in the neighborhood at that time averaged approximately $300,000. He’s now renting the home for $2,000 a month. No real profit yet, he said.

"I wanted to go kind of on the higher side of that rent but in doing so I had to justify it. Hence the home benefited from new appliances, new bathroom, new kitchen, new floors," he said.

“If I was to calculate what I invested into the home and what I’m charging rent, it might take 20 years before I get that money back,” Fernandez said.

Fernandez purchased a second home earlier this year in Barrio Logan. After a full renovation, he's renting the one-bedroom, one-bathroom home for $1,900 a month.

He’s seeing others in the neighborhood doing the same.

“There’s essentially two ways to look at this,” Fernandez said. “You can either leave them in the current position, which is poor, or somebody can come in and bring them back to life.”

Fernandez plans to hold onto both homes as long-term investments. "I'm not a flipper," Fernandez said. "I think the real potential is 20 to 30 years from now."

He’s optimistic about the future of both communities.

“I think what you’re going to see is a lot more improvements, rehabbing of these older homes,” Fernandez said. “It’s going to be eclectic, it’s going to be vibrant... It’s going to improve."

What isn’t likely to improve anytime soon is San Diego’s housing inventory. That’s because developing a new housing complex from conception to completion takes an average of seven to 10 years.

The Van Winkles said they don’t have time to wait.

“Do I feel let down by San Diego because of having to relocate? No," Jennifer Van Winkle said. "The bitterness comes from just not having a way to make this work and now having to leave family.”