Despite push, San Diego County built less housing in 2017

San Diego County communities approved slightly fewer homes last year despite increasing political pressure for more housing in California.

Cities and the county issued 4 percent fewer residential building permits in 2017 than the previous year, said the Real Estate Research Council of Southern California in a report released this week.

Overall building was down because of a reduction in apartment and condo construction, despite an increase in single-family home construction. The year started out with a major reduction in home building, but made up for it with an extremely busy fourth quarter.

Building permits for 9,580 new housing units were pulled in 2017. That’s down from 9,972 in 2016 and 9,975 in 2015. It’s up from a low during the Great Recession, when fewer than 3,000 homes were built in 2009.

The report comes as lawmakers seek new ways to get more homes built as a way to reduce housing costs. Two of the state’s leading candidates for governor, Lt. Gov. Gavin Newsom and former Los Angeles Mayor Antonio Villaraigosa, have said they want developers to build a half million homes a year for the next seven years, according to the Los Angeles Times.

Most of Southern California saw increased building permits in 2017, up 7 percent among the seven counties, compared to 2016. Only San Diego and Orange counties saw less demand.

Borre Winckel, CEO of the local Building Industry Association, said it was good San Diego County was down just 4 percent from the year before — he had predicted a bigger dip — but it didn’t make the news much better.

“We are still operating at very modest volumes,” he said. “Nowhere near what we need for housing people.”

Single-family home construction had a bit of a comeback last year as 3,979 permits were issued, up from 2,409 in 2016. The county has built an average of roughly 2,600 homes a year since 2007.

Most new homes coming out this year are in Otay Ranch, Del Sur and East County.

Multifamily construction, which includes apartments, condos and town homes, was down by 26 percent in 2017. San Diego County issued 5,601 multifamily permits last year, down from 7,563 in 2016 and 6,852 in 2015.

Downtown residents and workers may have a hard time believing multifamily building is down because it seems at times like the whole place is under construction with new high-rises. Yet 80 percent of all new apartments coming out this year are downtown, according to a report issued by real estate broker Marcus & Millichap, leaving much of the county behind yearly averages.

Kevin Mulhern, senior vice president a CBRE, said a big reason for a slowdown in apartment construction is rising construction costs. He said because there is a lot of building going on at the same time, the cost of materials is going up. He said there is also a lack of labor because of the frequency of projects and fewer workers available from south of the border.

“Costs of construction have gone up exponentially over the last 36 months,” he said.

Mulhern said outside of downtown it still very hard for multifamily projects to get approved because of community opposition to dense housing.

Winckel called the last few months’ building of large luxury apartment projects in 2017 the “last gasp of high-end activity.”

He predicted builders will be scaling back multifamily projects in the coming year because of a shrinking pool of high-end renters.

There may start to be more pressure on communities to build housing in the coming years, no matter what happens in the governor’s race. The California Department of Housing and Community Development released a list last month of cities and counties not on track to building enough market-rate and subsidized housing.

The law that prompted the list — Senate Bill 35 — requires cities that fall behind to make it easier to permit new construction.

Construction in non-residential sectors of the county was mostly up last year. There were 89 percent more permits issued for retail buildings; 272 percent more for industrial; and 71 percent for hotels and motels. Office building permits were down by 18 percent.

phillip.molnar@sduniontribune.com (619) 293-1891 Twitter: @phillipmolnar

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