About 3,000 new apartment units are expected to open in San Diego County in 2017, a roughly 55 percent increase from 2016.
Rent prices are not expected to decrease but the new apartment upsurge may slow the rate of the rise. Industry watchers argue that the amount of construction is still not enough to meet demand.
“It’s still quite a bit too short,” said Mark Goldman, finance and real estate lecturer at San Diego State University.
The lack of available apartments is so acute that a noticeable change in rent is unlikely, he said.
Based on population projections, local builders will have needed to build more than 7,000 multifamily (apartments and condos) units every year from 2008 to 2020, said the San Diego Association of Governments’ regional housing needs assessment.
Borre Wickel, CEO of the local Building Industry Association, said the county needs to build more apartments than condos but it is hard to catch up at this point.
“We have been building a deficit of units that should have gone into the market to simply keep up with population growth and household formation,” he said.
The majority of new units, more than 2,000, will be downtown. The biggest project is The Rey on B Street that will have 475 apartments. Rent starts at $1,765 for studios, $2,050 for a one-bedroom and $2,810 for a two-bedroom.
Other notable projects opening are Millennium Mission Valley with 291 units, AV8 in Little Italy with 129 units and The Louie in Bankers Hill with 49 units.
As of September, rent prices had increased 8.4 percent in a year to an average $1,743 a month, said MarketPointe Realty Advisors. Real estate tracker CoStar predicts San Diego County rent will increase 3.6 percent next year.
San Diego County has added nearly 35,000 new apartments since 1999, according to MarketPointe Realty Advisors. Still, the number of units has not kept up with job growth.
Just 885 new apartments were added in 2010, more than 1,250 less than the yearly average in the decade preceding it. That number increased slightly in 2011 to 988 new units and 1,317 units in 2012.
The increase in the recent construction is reflected in building permits. In the third quarter of 2016, 1,739 multifamily permits were issued, an increase of 49 percent from the year before, said the Construction Industry Research Board.
At the same time, permits for single-family units, office buildings and retail buildings were down.
While new construction can take years to pay off, many investors are seeking out older units to take advantage of rising rent, said Marcus & Millichap’s fourth quarter multifamily research market report. The sale of San Diego County apartments increased 9 percent in the last year to an average price per unit of $219,500 in September.
In 2017, increasing rent and home prices, along with historic lows in construction, will continue, especially as builders have difficulty in getting housing projects — such as Lilac Hills — approved.
Winckel said industry groups, YIMBYs (yes in my backyard) advocates and others will need to pressure local governments to build more. He criticized a recent vote by Poway City Council to deny a Habitat for Humanity project to build low-to-moderate income housing for veterans.
“It is the definition of the depth to which NIMBYs (not in my backyard) go to simply say no,” he said.
Poway City Council voted down the project following community opposition to the project, mostly because of traffic concerns.