Burnham-Moores Center's 17th Annual Residential Real Estate Conference: Outlook 2018 Recap

Friday, December 8, 2017

On Thursday, December 7, 2017, the Burnham-Moores Center for Real Estate hosted its 17th Annual Residential Real Estate Conference: Outlook 2018 on the University of San Diego campus. The event provided a national, state and local economic update and addressed the housing crisis and housing affordability issues that exist within the San Diego region.

Norm Miller, Hahn Chair of Real Estate Finance at the University of San Diego School of Business, opened the program with a housing overview. His presentation addressed five main topics, including: home ownership trends; immigration and migration figures; the new tax proposal; new California housing affordability bills; and San Diego expectations. Miller quoted a Hoyt Advisory Team for NMHC study (2017) which demonstrates that forecast home ownership trends are expected to go down between 2017-2030 and cited a few of these reasons due to school debt, housing and tax policies, demographic shifts and the increasing age of first marriages, which also delays family plans. Miller explained that legal immigration represents a large portion of the population increase, as immigrants are almost equaling the rate of natural population increases.

Miller cited some of the new tax proposal implications which included the standard deduction rate change which will go from $12,700 to $24,000, which will be good for renters but not for homeowners; and the new mortgage interest deduction which may be limited to $500,000 for mortgage interest deductions and $10,000 for property tax deductions, which will hurt California homeowners, especially those in San Diego. Miller cited the Collateral Analytics figure of the national average price for a single family home in the U.S. as of September 2017, as $288,000—suggesting that affordable housing exists in most major cities across the U.S. Yet, the average single family home in San Diego is $830,000 (not including condominiums).

The second featured speaker, Tim Sullivan, managing principal of Meyers Research, provided a local overview of the San Diego economy and housing market with projections of where the city is headed and what San Diegans can do about it. Sullivan offered a micro snapshot of our current status—the third longest recovery period in history. He shared that during the last six years, there has been an increase of 15 million jobs, but that in San Diego, the job figures are increasing at a slower rate. He also offered the following statistics: new home prices are up 63 percent since the trough; there is a disparity between new home prices (six percent increase) vs. average wage in San Diego (three percent increase); San Diego has less than a two month’s supply of homes for sale and those homes get multiple offers and ultimately sell for more than the asking price.

Sullivan also addressed the Southern California building permit issue. In 1986 there were 204,862 permits, compared to 2017 (fiscal) where there have only been 54,500 (a deficit of 150,362 building permits), and yet there has been an increase of 5.1 million people in this region over the same period of time. As a result, while demands have shifted, there still is not ample housing.  In fact, San Diego needs 150,000-200,000 new housing units within the next 10 years. He predicts that modular housing will be the wave of the future.

Following his presentation, Sullivan moderated a panel, which included David Graham, deputy chief operating officer of neighborhood services at the City of San Diego, Rear Admiral Yancy B. Lindsey '01 MSGL, commander of Navy Region Southwest, Deborah Ruane '14 MSEL, executive vice president and chief strategy officer of San Diego Housing Commission, and Norm Miller. The panel addressed solutions to the housing crisis in San Diego. The panel agreed that the housing problem exists in our region because the San Diego economy is good. Sullivan shared that the military accounts for 340,000 San Diego jobs (22 percent) and $50.1 billion in total commercial activity in fiscal 2017. San Diego County’s defense contractors received more than $500 million in contracts. Lindsey described some of the military’s housing challenges given that the Navy will be growing in this region over the next seven to eight years. He also addressed the myth that military has ample land to build housing in the region. In fact, much of military-owned land is encumbered by land ordinances which restrict housing development, thereby limiting much needed housing development for military families.   

Ruane shared the San Diego Housing Commission’s position that San Diego has the capacity and the space to build 150,000-220,000 new housing units through rezoning, adaptive reuse, and accessory dwelling units (such as granny flats). Ruane also shared the results of the study completed by SDHC, showing specifically the 11 action steps that could be taken to help mitigate the housing crisis and specifically where additional development could occur within each community.

Graham shared the City of San Diego’s efforts to facilitate the development and redevelopment processes, including zoning, discretionary and by-right processes and city plan updates. Streamlining these processes will help expedite the ability to reach the needed housing requirements in the San Diego region.

Panelists’ projections and suggestions:

  • Bold developers should integrate micro units (600-800 square feet maximum) into their portfolio. These units are also eligible for density bonuses.
  • The State of California will need to give power back to the local governments to enforce density requirements.
  • Building process needs to continue to change so that development can happen more quickly.
  • Over the next four years housing prices will continue to increase, but at a decreasing rate and interest rates will increase.
  • Adaptive reuse and dis-use of vacant lots owned by the City will need to be rezoned to accommodate for housing development.
  • Look to Tijuana to meet housing demands and to re-use of old warehouse/industrial areas for new development.
  • There are alternatives for San Diegans, as 340 out of 380 metropolitan cities across the U.S. offer affordable housing.

View Norm Miller’s slides.
View photos of the event.
Read Union Tribune coverage of the event.
Read GlobeSt.com coverage of the event.
Read SDTranscript coverage of the event. Requires a subscription to the publication. Email the BMC for a copy of the article.