By Justin DeCesare
It is never good to make headlines for being among the worst areas in the United States for home ownership affordability. Sadly, in recent weeks, this is what San Diegans read about our housing and job markets.
Pathways to the middle class have long been rooted in the ability to carve out a life through hard work and dedication, to be compensated fairly for effort, and, for many, to one day buy a home and put down roots.
For San Diegans today, this dream seems out of reach for many who continuously strive, but are surrounded by slow wage growth and a growing cost of home ownership.
For perspective, home ownership is considered affordable when the mortgage on a median-priced home does not cost buyers who earn a region’s median wage more than 30 percent of their monthly income (otherwise known as the mortgage-to-income ratio).
On Tuesday, REALTOR.com, the National Association of Realtors partner website, released data showing San Diego as the second least affordable home buying market among U.S. metro areas. San Diego’s mortgage-to-income ratio is 56.9 percent, double the affordable target rate. Plainly stated, San Diegans who earn our median income would have to offer up more than half of their monthly income to afford a median-priced home in our region.
Living in an area like San Diego will always be more expensive than other metro areas mid-country, but how can home buyers hope to own their own home if they are not earning a decent wage?
As our home prices rise, our wages are going in the opposite direction. As reported in the U-T San Diego, from the third quarter of 2013 to 2014, the average worker’s pay only increased by 0.8%. That’s less than half of the rate of inflation at 1.8%.
The average San Diego worker’s money is worth less than it was a year ago while houses are costing more.
There are plenty of factors behind the rise of housing costs. Development costs like school fees, affordable housing fees, and sewer fees that help to repair our infrastructure are a necessity to help ensure community function. They are not going anywhere, so it is imperative that as they are collected they are put to work for what they are intended and not stuck in the bureaucratic process.
Another factor in the change in affordability is that our home prices have rebounded since the market crash far quicker than wages have grown. It is great for homeowners that prices are rising, of course, but wages must keep pace if we hope to keep the housing market sustainable.
There is also an “opportunity cost” in building in San Diego that developers, both large and small, take into account when building. We need to attract the right kind of development that will help us grow in line with SANDAG’s projected population growth, but it doesn’t mean building units for units’ sake. With community plans that are outdated by decades, even the right kind of developments — those that focus on smart growth in line with our region’s overall goals — can make anyone gun-shy when looking to add anything more than four residential units to a neighborhood.
We know that our population is growing. We know that we need to get to the bottom of where our communities are headed in regard to new homes, and we know that people want to continue to buy homes in our region.
Until average workers, who are spending 40-plus hours a week making solid contributions to our community, see a fair increase in their pockets in relation to the record-breaking profits they are helping produce, and until we can assure builders that our city is open to making it easier to at least get a fair decision on a project, housing costs and the ability to buy a home will continue to move in opposite directions.
Every time a home is sold, jobs are created or secured and our economy is bolstered. While owning your own home may be part of the American Dream, it shouldn’t actually be a dream. It should be attractive and attainable for anyone who is giving back to our local economy.
Justin DeCesare is an eight-year veteran of the U.S. Navy, a real estate broker and president of the Tierrasanta Community Council. He has announced plans to run for the City Council in 2016.