More than a quarter of homes in San Diego will change ownership in the next 20 years, according to a recent analysis by the real estate data company Zillow.
The influx of available housing between now and the mid-2030s is linked to the exodus of baby boomers, as many reach the end of their lives or move to smaller homes.
“What’s the challenge on the national scale? A lot of the homes the boomers will be re-releasing into the market might be very old,” said Skyler Olsen, the director of economic research at Zillow. “They’ll need some tender love and care. How do you rehab homes?”
Zillow’s analysis released Friday raises speculation about the ripple effects of the baby boomers’ exodus from the housing market. The analysis found that cities with large communities of retirees will be the most affected. In Tampa and Tucson, close to a third of homeowners are above the age of 60.
“The boomers were a really really large generation,” Olsen said. “What happens when that generation is no longer the real force behind the housing market?”
But baby boomers aging out as homeowners won’t end the housing woes for younger San Diegans. These demographic trends may not be able to counteract the long-term effects of California’s property-tax laws governed by Proposition 13, which rewards homeowners and their heirs for holding onto their houses.
Since it passed in 1978, Prop. 13 has set taxes based on the market value at the time of sale or transfer with a maximum increase of 2% each year. A 1986 addendum allowed parents to pass on their property tax rates to their children if they inherit the property.
“That makes housing in California exclusive,” Olsen said. “On top of that, it’s on the coast in a gorgeous place like San Diego, that takes the exclusivity up a notch.”
Norm Miller, a real estate professor at the University of San Diego, doesn’t expect a significant effect on San Diego’s housing market, primarily because baby boomers won’t be selling their homes all at once.
“It’ll help mitigate the housing problem a little bit, but not enough to dramatically lower prices,” he said. The inheritance tax break of Prop. 13, he said, could only widen wealth gaps.
Miller said one feasible solution would be to create higher density housing for middle-income residents in areas like transportation hubs.
“Unless we increase the housing supply significantly, it’s going to be an increasingly expensive place to live,” he said. “I think a lot of millennials will do well, and others will leave the state.”
