With a median price of $2,020 for a two-bedroom, and $1,510 for a one-bedroom, San Diego is the fourth most expensive city in California, according to Apartmentlist.com. The Internet search engine, utilized by apartment hunters countrywide, reported in its 2016 national rent report, released in July that rents in San Diego were up 3 percent in the past year compared to 2 percent for the rest of the United States.
“The vacancy rate in the San Diego area was 3.9 percent in the first quarter of 2016, and the limited supply is causing upward pressure on rents,” said Andrew Woo, director of Growth and Data Science at Apartmentlist.com. “Rents tend to increase even more rapidly in popular areas like Pacific Beach and Ocean Beach, where demand is high and supply especially limited.”
Coastal cities were found to be the most expensive, with California making it into the Top 10 list of cities with the highest rents. Monthly rents for an apartment or condo in Mission Bay and Pacific Beach can be found for under $1,000 for a studio, $1,400 for a one-bedroom and between $1,800 and $2100 for a two and three-bedroom.
The report indicated that median rent prices grew more slowly year-over-year than in prior months, and that overall, rents have increased by 2.0 percent nationwide and 2.2 percent in California between June 2015 and June 2016. The median price for a two-bedroom apartment in the U.S. currently is $1,300, while one-bedrooms are at $1,140.
Alan Nevin, director of Economic and Market Research for the Xpera Group, a real estate and construction consulting firm based in San Diego, said that rents in California’s second largest city make no sense at all. He added that investment values are at $300,000 per unit from $150,000 to $200,000 five years ago.
“Rent is a function of what apartments are worth in terms of their investment value,” Nevin said. “Owners must charge 1.1 percent per month of what they paid per unit making an average unit around $3,300 per month in today’s market where interest rates are low.”
According to Certified Commercial Investment member Terry Moore, of Apartment Consultants Inc., an income property brokerage firm in San Diego, only 6,000 multi-family units were approved for construction in 2015 and none were permitted in the beach communities. He stated that the San Diego region gained 30,000 new jobs last year and that a typical apartment has 1.6 people employed creating a need of 18,000 to 20,000 new housing units per year.
Moore blamed regulatory conditions, a negligible supply of shovel ready lots, zoning laws that keep high density neighborhoods zoned for low-density developments and opposition from the Coastal Commission and neighbors as the primary causes for unusually high rents in Pacific Beach, Ocean Beach, Mission Beach and Point Loma.
“Elected officials haven’t done a lot to develop high density housing, so demand outstrips supply and rents go up,” Moore said. “The City just did pass some new regulations in transit areas, but that should have been done 20 years ago.”
Howard Blackson is urban design director at Michael Baker International, an engineering and consulting firm, and a former employee of San Diego's Civic Innovation Lab. He pointed to the 30-foot height building limits in beach communities and an unpredictable entitlement process that requires builders to go through a discretionary review process that is unpredictable, lengthy, expensive and which only a few people can enter into, as impediments to developing new housing in beach areas.
Another problem he pointed out is that the San Francisco housing crisis is driving a spillover of high tech firms, with high paying jobs to the San Diego region. This he said is allowing people to bid up prices, which he described as the highest he’s ever seen in San Diego’s history.
“San Diego has always had a housing crisis, said Blackson. “But we can’t wait until there is a crisis to try to fix things, because by then it’s too late, which is what we’re facing right now.”