San Diego County is on track to build fewer homes than it did last year, said permit records released this week.
Residential building permits for all homes — condos, apartments and single-family homes — are down 18 percent in the first nine months of 2017 compared to the same time last year, said the Real Estate Research Council of Southern California.
The only county with slower building was Orange County, which had a 21 percent reduction. All other Southern California counties had an increase in building in the first three quarters.
The findings come at a time when local and state politicians are adopting policies aimed at increasing residential construction as a way to slow rising prices or limit commute times for environmental reasons. A San Diego Housing Commission report in September, produced along with two city councilmen, said the city needed to triple its yearly housing production.
San Diego County had 6,054 permits issued, down from 7,412 permits from the same time in 2016. The county had produced roughly 10,000 units by the end of 2015 and 2016. To reach that number, the county would have to build nearly 4,000 homes in the last quarter of the year.
The slowdown is led by a drop in permits for multifamily construction, down by 2,209 permits, or 40 percent, compared to the same time last year.
Real estate analyst Russ Valone, president of MarketPointe Realty Advisors, said fewer new builders are coming to town because of land costs. He also noted that some lenders are wary of new projects because rent increases for high-end apartments has slowed.
“As those newer projects’ rents push into the mid-$2,000 a month range, we started to see a slowdown in the rate of increases,” he said. “I think you may have some lenders looking at the slowed increases and starting to take a cautious view of the marketplace.”
However, he said many of the large apartment and condo projects being built right now had permits pulled at the end of 2016, so its possible the data isn’t as significant. The county has been building more apartments than traditional homes since the end of the Great Recession.
But one increase so far this year? Single-family homes are up, producing 851 more homes than the same time last year.
While the county is still on track to produce more single-family housing than last year, there will still be more multifamily housing — apartments and condos — overall, a trend not likely to be reversed as land becomes more scarce.
Borre Winckel, CEO of the local Building Industry Association, said it is very unlikely at this point that permits could catch up to previous years, already considered low because home building wasn’t keeping up with population growth.
“I would be very surprised at this point if there was a run on building” before the end of the year, he said.
Winckel said he suspects tax changes proposed in Congress, including a curtailing of the mortgage interest rate deduction, may slow interest in builders to start new projects.
Much of San Diego County’s single-family home construction has moved to Riverside County, where some San Diego workers have decided to commute from.
Riverside has issued 4,811 single-family building permits so far this year, up from 3,126 last year at the same time. Meanwhile, it has largely shied away from any multifamily development, issuing 430 permits for apartments and condos, up from 377 last year.
Low cost is likely also a factor in San Bernardino County, which has had the biggest percentage increase in home building of the seven counties at 82.6 percent. In September, San Bernardino and Riverside counties had the biggest annual home sale gains, CoreLogic said.
Los Angeles County had 7 percent more building permits issued in the first nine months compared to the same time in 2016. Both single-family (18.7 percent) and multifamily (3.4 percent) had increases.
Southern California can expect to get more housing next year, predicts three organizations included in the Research Council report. The California Association of Realtors predicted there would be 7.5 percent more permits in 2018; The California Department of Finance predicted 9.3 percent; and the UCLA Business Forecasting Project predicted 7.3 percent.
San Diego Union-Tribune