EconoMeter Panel: The High Price of Less Homebuilding

    — Published by The San Diego Union-Tribune, May 9, 2016. Republished by Lilac Hills Ranch, May 10, 2016.

 



A number of new housing complexes have been built along Friars Road in Mission Valley in recent years, but the overall market remains weak and holds back the wider economy. — K.C. Alfred / UT San Diego

Q: Does San Diego’s low production of housing pose a threat to the health of the local economy?


Kelly Cunningham
Kelly Cunningham,
National University System

Answer: YES

Housing affordability is among San Diego’s biggest economic concerns. The lack of new construction only amplifies this pervasive problem. This makes it difficult for businesses to recruit and retain employees, and challenges residents and our children to live here. Many workers already commute out of the county for housing. Even higher wages will not solve the problem, as this adds demand to the static supply of homes, and home prices will far outpace income gains.

 

 


Phil Blair

Phil Blair,
Manpower


Answer: YES

San Diego is able to poach both businesses and employees from the Bay area because housing costs have gone sky high. Salaries have to be exorbitant for employees to live anywhere within an hour’s commute to work – each way. We need to take the topic of a city of villages very seriously and increase density around bus and trolley stations so that San Diego maintains a supply of “workforce housing” for our young and middle-class employees. Keep our talent in San Diego and we will continue to attract new, innovative businesses.

 

 


David Ely

David Ely,
San Diego State University

San Diego State University, associate dean and professor of finance (EconoMeter panelist from 11/22/2015)— San Diego State University

Answer: YES

Rapidly rising home prices, an outcome of slack housing production, makes attracting employees to San Diego and retaining them more expensive. In such an environment, many homeowners face high monthly mortgage payments or long commutes. With a large share of a homeowner’s budget being spent on housing and transportation, less income is left over to spend on goods and services produced by other sectors in the San Diego economy.

 

 


Gina Champion-Cain

Gina Champion-Cain,
American National Investments


Answer: YES

Decreasing residential housing permit applications will, in turn, further exacerbate our low-supply, high-cost housing market. This condition is largely caused by two factors: government-imposed fees (reaching as high as 40 percent of unit sales prices) and restrictions on density. It's increasingly distressing to see little action taken on these two fronts. Only by taking on both of these issues will we move the market toward increased supply and affordability.

 

 


Alan Gin

Alan Gin,
University of San Diego


Answer: YES

High housing costs make it more difficult to do business in San Diego. Businesses have to pay higher wages to attract employees, which raises labor costs. Particularly problematic is the lack of single-family construction. Prior to the Great Recession, about 10,000 single-family units a year were being authorized. The levels now are in the 2,000 3,000 range. Besides raising labor costs, this affects employment in a number of sectors, including construction, real estate, lending, and even retail sales of furniture and appliances.

 

 


Jamie Moraga

Jamie Moraga,
intelliSolutions


Answer: YES

Whether you rent or own a home, it’s expensive to call San Diego home. Regulations, zoning and ongoing opposition are major contributors to the production slowdown. It’s estimated that Californians spend close to 27 percent of their monthly incomes on housing. Because of this, a significant threat to our local economy is the possibility of middle-class residents moving to more affordable cities. Our local businesses need to attract and retain a strong and talented workforce, and a lack of housing (to own or rent) remains an ongoing threat.

 

 


James Hamilton

James Hamilton,
University of California San Diego


Answer: NO

Building permits for the first quarter of 2016 were down in San Diego while they were heading up in much of the rest of the country. But there is a lot of month-to-month noise in these numbers, so you can’t read too much into any short-term development. We saw strong growth in building permits in San Diego for most of 2015. However, if the recent trend were to continue, it would definitely mean higher house prices and rents.

 

 


Gail Naughton

Gail Naughton,
Histogen


Answer: YES

Home building in San Diego is lagging compared the national average and is affecting the local economy in a negative way. Not only is it causing increased rents and home prices, which result in the need to pay higher salaries to attract and retain employees, but it also reduces the need for real estate agents, lenders, workers and supplies associated with new developments. These result in San Diego is the city being more expensive rather than more expansive.

 

 


Gary London

Gary London,
The London Group Realty Advisors


Answer: YES

Lack of housing production bids up pricing. Those prices have almost reached an inflection point, where the excessive costs devoted to your housing needs will impact what you have left to spend on other goods and services. The macro danger is a regional economic transformation to a “boutique” economy servicing mainly high-paying jobs in places like Tech and Pharma, and a concomitant compacting through business and job exits from our region.

 

 


Austin Neudecker

Austin Neudecker,
Rev


Answer: YES

San Diego needs a steady influx of new construction in order to keep housing and rental prices from quickly increasing. Without these new projects – both residential and commercial – the cost of living will continue to increase, making our region less attractive for recent college grads, new tech talent, retirees, and even businesses. We should remove certain artificial barriers that prevent or slow development – especially in and around urban centers.

 

 


Norm Miller

Norm Miller,
University of San Diego


Answer: YES

As a result of our supply constraints and NIMBYs, the average household here spends about 10 percent more of its income on housing than the typical maximum, resulting in spending less on everything else. We lack not just units, but also density and smaller units necessary to offset the high regulatory and land costs that is essential to bringing down the cost of housing. This puts an untenable burden on employers and limits our economic prospects.

 

 


Robert Rauch

Bob Rauch,
R.A. Rauch and Associates


Answer: YES

But the real problem is housing affordability and the restrictions on housing development in our region. We do not build nearly enough housing to keep up with demand and, if we want to attract and retain new workers, we need to provide units for them to live in.

 

 

 


Lynn Reaser

Lynn Reaser,
Point Loma Nazarene University


Answer: YES

Construction lagging behind demand is driving up prices of new homes, existing homes and rents. This is producing three major negatives: It is a constraint on business attempting to retain or attract employees to the region. It limits the ability of households to spend on other goods and services produced in San Diego. It hampers the ability of San Diego individuals to save and invest for retirement. Land use and regulatory reform are now sorely needed.

 

 


John Sarkisian

John Sarkisian,
SKLZ

Pro Performance Sports

Answer: YES

Housing development creates jobs and significant economic activity as new homeowners spend to create a home from a house. Housing shortages foster increased costs to buy or rent and are impediments to overall economic growth. Housing is a major component of the cost of living for all San Diegans. High housing costs make it difficult for companies to recruit workers to the San Diego region, making us less competitive with other parts of the nation.

 

Dan Seiver,
Reilly Financial Advisors

Dan Seiver is not participating this week.

 


Chris Van Gorder

Chris Van Gorder,
Scripps Health


Answer: YES

If the slow housing production trend continues, it could decrease the housing supply. If demand continues to increase at the same time the supply tightens, housing costs and rents also will increase. That would put pressure on wages and impact the economy. In addition, a slowdown in housing starts will hamper the recent recovery of the construction industry, resulting in lost jobs.

 

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