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Tuesday, Mar 19, 2024
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Creating a Livable San Diego Begins With Housing

Creating a Livable San Diego Begins With Housing

Opinion

by Rick Snyder

The issue of housing affordability is not unique to San Diego.

A recent study by the Center for Housing Policy in Washington, D.C., reported that nationally the number of low and moderate income families who spent more than half of their income on shelter rose by 24 percent between 1999 and 2001.

It is no secret that San Diego is an expensive place to live. For years we have been hovering in various top 10 lists of the least affordable communities in the nation. This problem has caused an affordability gap that is fueled by the lack of housing supply in all forms.

In the case of the rental housing industry, the lack of land zoned for multifamily housing and community opposition to creation of additional rental housing in existing communities has further exacerbated the affordability and availability of rental homes.

Renters constitute 45 percent of the housing market, yet according to the San Diego Association of Governments only 8 percent of remaining developable land is zoned for multifamily housing. The California Department of Housing and Community Development statistics show that the average permit processing time to construct multifamily housing is 20 months.

Compare this to the overall average for other California cities, which is a little over six months. All these factors contribute to the lack of supply needed to keep up with demand.

As if the barriers to the delivery of new housing units are not difficult enough, the hurdles associated with the day-to-day operation of rental housing are even more. Rental property owners and managers are faced with dozens of problems. Keep in mind the high operating expenses incurred by these business persons, which include increasing property taxes, property and liability insurance, license and permit fees, gas and electric, water and sewer, and trash service. Add to this the changing and increasingly stringent regulations implemented on the rental housing industry and the challenges grow. An example of an operating expense that is currently rising sharply is the cost of insurance coverage.

An owner of a 19-unit complex recently shared that his annual property insurance for last year was $2,200. This year that same company quoted him $23,000 for the same coverage. Luckily, he kept looking and eventually found another insurance carrier. However, the cost had increased to $6,000 for comparable insurance coverage, more than doubling what he paid last year.

It is operational costs like this that property owners have absolutely no control over and lead to increasing the costs of rental housing in San Diego.

The costs of doing business incurred by rental property owners continue to increase. As with all businesses the consumer, in this case the resident, will bear the true costs.

Rental property owners are routinely placed in the role of keeping their residents/customers happy while keeping their businesses afloat. Vacancies represent lost income, and no group of rental property owners is hurt more than operators with smaller rental communities. According to DataQuick, in our region nearly 87 percent of all rental communities fall within the two- to 15-unit category. The majority of these small-business owners are best served by low turnover of their residents/customers.

In this highly charged environment with barriers to new construction and increasing operating costs, some local elected officials have suggested that rent increases be tied to the Consumer Price Index. What they fail to realize is that the operational expenses incurred by property owners are not tied to any economic indicators.

Therefore, while the CPI may rise slightly, operational costs such as property taxes, property insurance, license and permits, gas and electric, water and sewer, and trash service may rise dramatically, increasing rental property costs at a significantly higher rate than the CPI.

While we are pursuing the lasting solution of increasing our housing supply, a short-term strategy could involve the use of existing funds the city of San Diego already collects from the rental housing industry in the form of the Rental Unit Business License Tax. This tax requires the average apartment owner to pay a base fee plus an additional per-unit fee every year.

This tax, which is paid by all rental property owners of both large and small rental communities, raises more than $5 million per year from the industry. Unfortunately, these funds provide absolutely no direct benefit to the renter or the affordable housing problem. The money simply disappears into the city’s general fund.

The San Diego County Apartment Association would like to see these funds put to good use to address the affordable housing crisis facing San Diego. These resources could be allocated for mediation services to resolve disputes between property owners and residents. Portions of the fund could also be allocated for rental assistance, thereby becoming part of the solution to our housing crisis. It is unfortunate that these funds are not currently dedicated to benefit San Diego’s residents.

The San Diego County Apartment Association stands ready to work with the decision makers and opinion leaders in San Diego to raise the quality of life for all residents and use the existing resources to combat housing costs.

Snyder is the president-elect of the San Diego County Apartment Association and a past president of the Resident Relations Foundation.

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