The housing crisis in San Diego is obvious, yet our policy makers apparently do not get it. Last month’s hearings of the San Diego City Councils’ Land Use & Housing Committee on creating new assessments to develop low- and moderate-cost housing show our leaders are having troubles both defining the problem and devising realistic solutions.

To come to terms with the housing problem, the issue needs to be split into two very different efforts:

1. Creating housing for the truly needy.
   
   
2. Creating housing for the vast middle class being rapidly priced out of the market.

Housing the poor is where the government needs to intervene. Housing for the middle class is being made more difficult by public agency interference.

What the City Council is considering is a polite form of agency building. On the backs of new housing consumers, the government is proposing fees be directed toward other government agencies charged with building and financing low- and moderate-income housing. This tax on new home owners will raise by 5 percent the price of an already out-of-control expensive new San Diego home, which recently passed a median of almost $400,000. In the end it will fund 500, maybe up to 1,000 new housing units each year. Considering San Diego has roughly a million homes, this is truly the proverbial drop in the bucket.

The chart on Page 26, labeled “San Diego County Multi-Family Market,” tracks the last two decades of multifamily construction in San Diego. The last year that 6,000 condominium units were added to the market was 1990. Since then, fewer than 1,000 condos have been built annually. In the 1980s a minimum of 4,000 apartment units were built each year. Since 1990, that level only has been achieved twice, in 1999 and 2000.

The chart also demonstrates the inexorable link between lack of construction and apartment vacancies. Today’s virtual zero apartment vacancies has everything to do with a dearth of condominium construction, forcing young, relatively affluent people to live in their apartments an extra decade. The average age of a first-time homebuyer has risen from 25 in 1985 to 33 in 2001.

Single-family homes almost exclusively are built in this market, usually between 8,000 and 12,000 units each year. But demand calls for double that number, which means that since 1990 the region is short 120,000 housing units.

The proof is shown in the second chart labeled “Average Annual Jobs Per Housing Unit.” It demonstrates that the ratio of jobs per housing unit in San Diego was only slightly above national averages for 25 years until 1990, when it roller coastered from an oversupply of housing during the first half of the ’90s (when the local economy was in severe recession) to a doubling of the ratio since.

San Diego’s economy currently supplies 3.59 jobs for every housing unit created, more than double the national average. In other words, strong economic growth is not being matched by housing construction. It is no wonder that housing prices have been bid up to record levels.

Which leads to the question, what public good can possibly come from a program that provides housing to 1,000 new households when the San Diego region has been shorted 10,000 housing units each year since 1990?

Anything the San Diego City Council passes to address low and moderate-priced housing in the form of a housing tax on new homeowners will have the complete reverse effect of what is intended. Taxes and fees do not encourage new housing construction. Incentives and deregulation cause new construction.

Here are a few real solutions:

• Dispatch our city and county lobbyists to Sacramento to demand tort reform from the California State Legislature. It has been too easy to sue developers, contractors, engineers and architects and their insurance companies for alleged defects. While some of the myriad of construction defect lawsuits directed toward condominiums have undoubtedly been legitimate, the majority simply haven’t. And the delivery of condominiums has been essentially shut down for 12 years, except steel and concrete high-rises Downtown.
  
  
• Adopt the new City of Villages Strategic Framework Plan. This effort is working its way to the City Council in the form of a revised General Plan that encourages higher density development in existing neighborhoods. The city of San Diego is a community that has “grown out” about as much as it can. Now it must “grow up,” rediscovering development infill opportunities.
  
  
• Revamp the agency review process. While the planning department has it right, the key reviewing agencies, including buildings, roads, parks and recreation and fire, must re-examine their rules and processing time frames. Internal consistency is essential or the whole policy is incoherent.
  
  
• Temper the role of community planning groups. They have not been empowered to create change. They will resist density and land use change every step of the way. While all voices have a right to be heard, and people should be encouraged to contribute, these groups have a bias just as pronounced as builders and environmentalists. The political courage of policy-makers will be tested when faced with the adversarial shouts within the communities.
  
  
• Create new financing approaches to pay for the needed upgrade in infrastructure and services that will be required in the communities that must accept more housing. This is the proper role of the taxing authority. All residents in San Diego need to be bonded and taxed, not just new homeowners. Ultimately, only through a region-wide taxing approach can we afford to build both a new urban framework and the required housing.

It actually is remarkable how far these concepts have progressed over the past two years. It is refreshing that the planning department and planning commission are encouraging more density. Yet it is discouraging that the City Council cannot yet seem to find the collective courage to get to the meat of the problem.

As long as the City Council interferes with the housing delivery system, the housing crisis will only be exacerbated. And ultimately, it will adversely affect the economy and quality of life by reducing job growth, causing greater freeway congestion as people commute greater distances between home and work, creating more pollution and environmental problems, and putting more pressure on our infrastructure and services. Killing the golden goose didn’t work in fairy tales and it won’t work in real life either.

Gary H. London is president of The London Group Realty Advisors Inc., providing real estate consulting and economic analysis. Check him out on the Web at www.londongroup.com.