Many San Diego developers lack incentives to build homes for middle-income earners, experts say, potentially worsening the city's housing crisis.
For developers, said Kevin Nolen, a Director at Cushman and Wakefield, a commercial real estate services company, it comes down to time and money.
“There’s a huge disparity in the time it takes to develop a project here, compared to other parts of the country,” said Nolen.
In San Diego, developing a single-family home can take between three to five years. That time includes processing entitlements, in addition to many other processes.
In other parts of the country, the same process takes between six months to a year.
“There’s a lot of layers of regulation in California,” Nolen said. “Satisfying all the regulations takes time.”
But it takes more than just time -- developers need to have a hefty sum of cash, too.
The development process could cost around half a million dollars per year, which means developers are looking at $1.5 to $3 million in processing fees.
"There’s also city fees which go toward schools, roads, fire and police stations. City fees can cost you anywhere between $50,000 to $75,000 and even north of $100,000 in some cases in North County,” Nolen said.
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That doesn't include the cost of construction.
“Your base value before you even sold it is $600 [to] $700,000,” Nolen said.
That is why residents are seeing million dollar homes being built in communities like Eastlake, near Chula Vista, and that is why residents see high-density projects in Bankers Hill, just north of Downtown San Diego.
Yet few homes being developed in San Diego are homes that middle-income earners can afford.
A bill is currently in the works to address the disparity in housing affordability.
The Missing Middle Housing Act passed the State Assembly in May and is now in the State Senate for review. The bill would authorize a housing authority to provide gap financing to middle-income housing, announced a representative for Assemblymember Todd Gloria.
The bill aims to relieve pressure on the housing crisis by authorizing a housing authority to develop, operate and fund mixed-income housing projects.
If the bill is signed by Governor Jerry Brown, it should go into effect on Jan. 1, 2018.
