Creating affordable housing by expanding supply: San Diego case study

San Diego's housing crunch shares many similarities with the Bay Area: archaic zoning rules, regulatory overkill, and home prices doubling in the past 6 years. One notable difference: San Diego has embarked on an innovative building growth plan that targets particular neighborhoods where densification makes the most sense. The Wall Street Journal interviewed mayor Kevin Faulconer in its September 15 issue.

"Faulconer's campaign to restrain San Diego's home prices focuses on spurring construction in denser areas, neighborhood by neighborhood. In places already designed for apartment buildings, the mayor is seeking the City Council's approval for rezoning plans that streamline the environmental review process for new projects, with bonuses for density. Once each plan is approved, housing developers can break ground without having to go through moths and months of review and endless City Council hearings.

"Faulconer also won the council's approval in March to repeal parking requirements for new projects near transit centers, asserting that a parking spot adds anywhere from $60,000 to $90,000 to the cost of an apartment unit. Next he wants to do away with building-height limits in these areas--with an exception for the coastline--to allow more volume.

"The Democrat-controlled council has allied with the mayor to boost building, but it pushed further in July by voting to require that developers set aside more units for affordable housing. 'A veto is clearly on the table,' Faulconer says. 'We don't want to price the construction of units out of people's ability to actually construct them.'

"Mandating low-rent units reduces the number of apartment a developer can profitably build. Simply expanding the supply is a better way of creating affordable units, Faulconer says.