San Diego County had the biggest drop in homebuilding in Southern California in the first six months of 2019.

The county constructed 43 percent fewer homes in the six-month period compared to the same time last year, said the Real Estate Research Council of Southern California.

The slowdown comes at a time when city and state leaders are offering several legislative measures to spur housing. Meanwhile, a statewide rent cap bill is working its way through Sacramento, and was recently endorsed by the governor. It has been argued by prominent business groups that it would slow housing construction — which appears to be happening anyway.

Southern California home construction is down 25 percent from the same time last year, led largely by a reduction in apartment building.

San Diego County had the biggest drop, but was not alone. Homebuilding was down 40 percent in Santa Barbara County, 29 percent in Los Angeles County, 20 percent in San Bernardino County, 9 percent in Riverside County and 7 percent in Orange County. Ventura County was the only place that saw an increase, building 193 more homes.

Borre Winckel, CEO of the local Building Industry Association, said builders are in a weird spot because new regulations, as well higher labor and material costs, have increased the price to build and the cost they pass on to buyers. At the same time, he said the price has gotten too high for many potential buyers.

“There is something changing in the cost environment of housing construction all the time,” he said.

There were 1,474 single-family houses built in the first six months, compared to 2,005 at the same time last year. The 26.1 percent drop was somewhat expected given years of declining building.

Some groups are still forecasting increased homebuilding for California by the end of the year. The California Department of Finance predicts 11.7 percent more units built this year compared to 2018, and the UCLA Business Forecasting Project predicts 6.3 percent. The California Association of Realtors goes in the opposite direction, forecasting a reduction of 11 percent.

What rent control could mean for construction

San Diego County may be close to having a form of rent control for the first time in its history. Legislation from a San Francisco Democrat, AB 1482, would cap statewide rent increases around 7 percent a year.

Building groups contend rent control would dissuade builders from constructing more apartments, something the region needs for its growing population.

The bill from Assemblyman David Chiu (D-San Francisco) caps rent increases at 5 percent, plus inflation, throughout the state. Gov. Gavin Newsom has endorsed the bill but it still needs the approval of the Legislature in the next two weeks.

“AB 1482 doesn’t address the core cause of the housing affordability crisis, which is the lack of supply,” said a statement from the real estate group, saying it would create a “disincentive for developers.”

However, Chiu has argued his bill is more aimed at extreme rent hikes, which he calls “rent gouging,” noting his bill would still allow for rent hikes. Even in the past few years of rent growth in San Diego County, it has been rare to get a more than 7 percent increase in a year.

Source: SDuniontribune by Phillip Molnar