Achieving the dream of homeownership in San Diego is still within reach, but it requires a willingness to think outside the box.
One path to homeownership is for individuals to pool together their resources and form a legal partnership or LLC. By purchasing a property through an LLC, individuals can hold title as tenants in common, where each person owns a distinct, undivided share of the property.
You often see groups of three to four working individuals renting a home together because none of them, on their own, makes enough to qualify for a mortgage. If they gathered their resources to buy these individuals could turn their rental payments into mortgage payments and build equity together, unlocking the door to homeownership in ways they might not have imagined possible.
This structure transforms paying rent into an opportunity for equity-building — rather than sending money to a landlord. Renters are investing in their own asset securing their financial future. Related families can also successfully purchase a home together by following a similar approach.
Only about 11% of households in the county make enough money to comfortably afford a home, and San Diego has some of the fastest rising home prices in the nation. With an average home price of almost $1 million, the dream of home ownership is becoming unattainable for families. A working couple would need an income of nearly $275,000 a year to afford a mortgage on a home, which is nearly double what it was in 2019 when interest rates where about half of what they are today.
Between 2020 and the end of 2023, the median single-family home price increased by about $180,000 and prices have continued to increase. There was a slight drop this year, but not enough to make a substantial difference when it comes to the average buyer.
Consequently, a family with a median household income of $98,657 would need a nearly impossible down payment to afford a mortgage. But families that pool their resources together for the down payment could purchase a home, creating generational wealth which is one of the goals of homeownership.
In addition to creative financing approaches changes are needed in local government to help bring home prices down. These changes include lowering permit fees, streamlining the permitting process, and embracing new building technologies. Regulatory costs to build a home are high in San Diego, representing between 34% and 51% of the average cost of building housing. Local governments can help make homes more affordable by reducing regulatory costs.
The government’s go-to solution for affordable housing crisis has been rent control, but this comes with significant drawbacks and does not create more housing units. Rent control undermines private property rights, and overly aggressive regulations can have unintended consequences.
When landlords face restrictive rent controls, many may choose to take their properties off the rental market or invest in states with more favorable policies for property owners. This would reduce the housing supply in San Diego, creating an even tighter market that will inevitably drive up home prices, ultimately hurting the very people controls were supposed to help. In order to bring housing prices down a better approach is needed.
San Diego needs to replicate what officials did in Phoenix and shift a significant portion of the planning and inspection functions to the private sector. Phoenix has instituted what’s known as a “self-certification” model, which means architects and engineers who have been through city training are able to submit plans and walk out with a permit on the same visit.
Another effective way to reduce building costs is through the utilization of modern building technologies, as seen with modular homes. Modular construction involves manufacturing key components of a home in a controlled, factory-like environment, which increases efficiency, reduces waste, and shortens construction timelines.
By assembling these pre-built sections on-site, construction costs can run anywhere from 20% to 35% less that traditionally built homes. Builders can also significantly cut labor costs and minimize the risks associated with weather delays or other on-site challenges. This approach makes building homes faster at a lower price point.
San Diego County built more housing last year than it did in any of the past 17 years. However, the county is still short approximately 100,000 units after years of under building. Many more homes need to be built at a much faster rate.
By using creative financing, reducing permitting fees, streamlining the permitting process and utilizing new constructions methods, we can help many more San Diegan’s achieve the American dream of home ownership.
Mark Powell is a licensed California real estate broker and a former San Diego County Board of Education member.
