New data confirms the lack of affordability in San Diego

S1: Welcome in San Diego , it's Jade Hindman. On today's show , a conversation about our local economy , the cost of living , and the wages that won't keep up. This is KPBS Midday Edition. Connecting our communities through conversation. So San Diego's high cost of living is just a topic. We cover a lot here on midday. From housing to energy , food insecurity to unemployment. Affordability is one of those things on many minds. But will that change in 2026 ? Well , here to talk more about how San Diego's economy is doing in the quest for affordability is Daniel and Mark. He is chief economist at the Policy Innovation Center. Daniel , welcome back to midday.

S2: Thanks for having me , Dave.

S1: Always glad to have you here. So some recent data out of the US census was recently released.

S2: Um , so the median household income in San Diego County is 108,000. That's household income. That's not an individual's income , but that's for the whole household. And , um , the median house is 1.08 million. So the a typical , um , mortgage on that house , plus , uh , property tax and , uh , insurance , you know , it's going to put you over 5200 a month. Okay. And the , the monthly , you know , they say you shouldn't spend 30% more if you're doing more than 30% of your income , right ? So 30% of your monthly income for that median household is One 800. So how are you going to afford twice that much for a mortgage ? For a house ? Right. So the median household would spend 60% or more of their income on housing to set aside the down payment. I mean , how are you going to raise the money for that down payment ? But even if you could , you'd be spending more than 60% of your income on housing. So really , the median home is only affordable to a , to a household that's making more like $208,000 a year.

S1:

S2: I think , um , you know , the the best efforts. And really , there are great efforts going on at the city and many , many cities in the county , um , to introduce more opportunities to build housing , even if those are all successful , we wouldn't expect that to result in a decrease in the price of housing. We might think a really successful effort to build housing would stabilize that market , and we wouldn't see housing prices grow as fast as they've grown. But but we're not going back to a $400,000 house , right ? That's just never going to happen. And in the same way that we're not going to go back to a $5 sandwich , you know , like inflation just it's sticky. And actually you wouldn't want dramatic deflation in the economy. Um , the real challenge is will incomes rise faster than housing prices ? And if that's the case , then we could see some relief , albeit slowly , over many years.

S1: Um hmm. What would it take to to get that to happen , do you think ? Would it take legislation ? Would it ? I mean , what what would.

S2: Yeah , I think it would take really concerted effort by our local governments to support building more housing.

S1: Um , no , I mean , about the wages. Oh.

S2: Oh. About wages ? Yeah. Um hmm. Uh , maybe we could just cancel this whole AI thing.

S3: Oh , boy. Yeah.

S2: Yeah. I mean , I think the challenge is , you know , lately in the economy , we've seen that increases in productivity tend to accumulate toward not wages but corporate profits. And so this dramatic increase and it is dramatic that we are seeing currently with adoption of AI , um , you know that that's not necessarily good news long term for wages. It's going to result in a bigger separation between the haves and the have nots. And um , and yeah , I mean , I worry , I worry.

S1: Yeah , there's lots to worry about.

S2: And the self-sufficiency wage is something that was defined at the University of Washington. And and it's defined as the lowest possible income that you can make while cut to cover your basic needs at a lower standard of living. So this is not your going to Vegas. Woo baby , this is just making a pie. This is not even a you know , accounting for retirement savings and things like that. Um , by that measure , 38.5% of San Diego County residents are below a self-sufficiency wage , meaning that they do not have enough income coming in to cover the basic cost of living without government assistance. That's a problem. And long term , we really worry that if that continues to be the case , do more and more people leave San Diego ? You know , a significant portion of county residents say that they are considering leaving the county. And the largest portion of those people , I think it's 80% identify that the cost of living as the reason. Why wouldn't you want to live in San Diego if you could , if you could afford it ? And the danger is long term that we become Santa Barbara , which is , you know , a beautiful place if you can possibly afford it. And that's great for Oprah , but not for the rest of us mortals know exactly.

S1:

S2: Um , ever really since the the recovery from the pandemic , which was the sharpest and highest unemployment jump that we've ever seen. Um , it was the shortest , uh , um , recession on record , but we recovered really quickly from that. But then unemployment has been edging up slowly , you know , not just through this administration but through the past administration as well. Um , uh , over the last few years. So we're now above what economists would call like the , the natural rate of unemployment or the non cyclical rate of unemployment , which is kind of like the rate that you want to be at , which is , you know , in the mid 40s. And we're a little higher than that now. So it's not a great place.

S1: Not a great place to be. Well , some major employers have announced layoffs in recent months , including Amazon , which , you know , has a sizable presence here in San Diego.

S2: Uh , what we're seeing is , I mean , for example , Amazon has got a million and a half employees , but they've only got 10% as many of those in the corporate realm , right ? Like the 150,000 people who are working for Amazon corporate , who are the ones who are making the most money. And these cuts are like getting to about 10% of that , of that , of that workforce. So , um , that that's not great. And , and the , the challenge there is that , um , AI is making workers more productive. And if you are just trying to do the same amount of work as you were doing last year , and your workers are more productive. You don't need as many of them now. Innovative companies. Companies that really value their employees and who want to grow , will find ways to harness the skills and the greater productivity of those workers to accomplish more. And you know , I see there are companies like BD here in San Diego who are doing great work along those lines. And then there are companies that are just saying , oh , well , you know , we don't need these people. So let's let's lay them all off. Um , I think we'll see that impact here in San Diego. And we have seen that impact of a decline in employment in some of our highest innovation , highest wage jobs. Um , for example , professional business services , which have been declining , you know , consistently. Wow.

S1: Wow. Well , I know that you will be part of an upcoming roundtable on our regional economy later this week at the University of San Diego. Tell us more about that and the questions you're looking to answer.

S2: As will you. Jay.

S3: Jay.

S2: This is exciting. I get to see you twice in one week. Um , we're so excited to have Jayde come and moderate a panel for that conversation. Um , and it will be a more cheerful conversation than this one , I promise. The focus is on what we can do locally and some of the really great efforts that are occurring locally. Um , I'm really excited to share some of the , the really innovative ways that , you know , philanthropy and nonprofits and local companies have gotten together to to create access to opportunity for communities that have been kind of traditionally excluded from those opportunities. Um , yeah. We'll be talking a lot about the misconceptions about the current economy around AI. For example , you know , people think about AI as like the chatbot that we're all using. But AI implementation in companies goes much deeper than that. The Policy Innovation Center is working on a project funded by the state of California to look at how manufacturing is implementing AI. And really , it's more about using these large language models in really complex ways that affect business processes. It's not like I'm asking ChatGPT , you know , to write a letter to my grandmother for me. You know , it's it's more complex than that , right ? So misconceptions there , misconceptions in terms of the federal impact on on San Diego , you know , we're just kind of trying to demystify the economy a little bit and help people understand what's coming in 2026.

S1:

S2: We should be teaching , um , media literacy. Right. Like , I think a lot of our political challenges right now are around people not being able to , to , to consume media in an illiterate way. We should be teaching AI usage. We should we should be explaining to kids why AI is powerful , how it can be used in a productive way , and why they are robbing themselves of opportunities when they use it to write the essay for themselves. You know , and and I also think , you know , you have more Stem , but also more arts , right ? Because the it is easy for this free , universally available tool to rob kids of the opportunity to learn to write an essay and express their own thoughts. AI has not yet figured out a way to rob children of the opportunity to learn a bassoon , you know , or to be in a play. And so a lot of the more creative work that kids do that really does help develop their brain is maybe less threatened by AI. And I think it's a great time to be investing in arts education.

S1: But in the last , like 20s , we have. Yeah.

S2: Absolutely not. But are you going to be excluded from opportunity if you don't know how to use these tools ? Yes. Imagine if somebody came to KPBS and said , I'd like to work here , but I don't use computers. I mean. Yeah.

S1: Yeah.

S2: Not an option.

S1: All right. Well , I know we'll we'll continue to have this conversation. I've been speaking with Daniel Naimark , chief economist at the Policy and Innovation Center. As mentioned , he will be one of the experts speaking at the upcoming Economic Roundtable at the University of San Diego , happening this Thursday , February 5th. I'll also be moderating that conversation. But , Daniel , thank you so much.

S2: Thanks for having me.

S1: That's our show for today.

S4: I'm your host , Jade Hindman. Thanks for tuning in to Midday Edition. Be sure to have a great day on purpose , everyone.