SB 79 Takes Effect: Major Changes for Housing Density Near Transit in San Diego

 

California's new SB 79 housing law officially took effect on July 1 and is expected to have a significant impact on land use, redevelopment opportunities, and housing density near major transit corridors throughout San Diego County. The law requires cities to allow substantially greater residential density near qualifying transit stops, although implementation will vary by location.

The article below provides a helpful overview of where the law will apply immediately, where implementation may be delayed, and some of the local planning considerations that remain unresolved.

For property owners, developers, investors, lenders, and real estate professionals, understanding these changes will become increasingly important as the market evaluates potential redevelopment opportunities and land values in affected areas.

Article:KPBS Article for San Diego

Graph of The San Diego County Case Shiller Index by Year

The Case Shiller San Diego County market appreciation year-to-date, through July 2024.  This table shows the annual market appreciation by year.

Apartment Rental Increases in San Diego

 

Some San Diego apartment landlords are increasing rents above the legally allowed limit.

Apartment Construction in San Diego

 

The Construction Industry Research Board Reports the Final Numbers for Apartment and Housing Construction in San Diego.  According to the report, San Diego County built more housing in 2023 than in the previous 17 years. The 2023 total for multi-family was 9,100 units. The additional inventory has done little to curb apartment rental rates. The San Diego apartment market has very limited vacancy and historically high rental rates.

NPR Reports on New Zoning Laws to Encourage More Apartments and Housing

 

NPR reports on New Zoning Laws where cities are adopting new laws that allow for higher-density apartment projects with reduced parking requirements and allow for multiple units on standard residential lots.  As a result of changes in local zoning laws and the sharp increase in residential values and apartment rents, the highest and best use of many properties has shifted. 

Apartment Renters

 

CNN has a report on apartment renters who are getting tapped out. 

New Laws In California Attempt to Address Housing Shortage

 

The Business Insider has an interesting article about New Laws Attempt to Increase Housing Stock In California.   A high percentage of the homeless in the U.S. are in the State of California, and the governor has been signing a number of bills to increase the housing stock by making it easier to develop apartments and condominiums on sites that would not have normally qualified for multi-family development.  The increase in housing prices by approximately 5,000 basis points since the pandemic has created a situation where most properties must be carefully screened during the commercial appraisal process to determine their highest and best use, especially in coastal areas.  Many more properties qualify as tear-downs because real estate developers are willing to pay top dollar for buildable sites.  

San Diego Approves New Tenant Protection Ordinance

 

New laws to take effect for local apartment owners.

According to KUSI, "The Tenant Protection Ordinance will apply protections from day one of a lease with exemptions for short-term leases, offer financial assistance to tenants from landlords when a tenant’s lease is terminated through no fault of their own and have accountability measures to punish those violating tenant protections."

San Diego Authorizes Rapid Approval of Affordable Housing Projects

 

The City of San Diego is starting to pull out all the stops to get more housing approved and online.  The Mayor has issued a new executive order.  It will be interesting to see how many developers step up based on the potential for fast-track project approval. 

San Diego Executive Order For Rapid Approval of Affordable Housing Projects

Apartment Renters In Downtown San Diego Consider Cancelling Leases Due to the High Homeless Population

  

Apartment renters want to pull out of leases in downtown San Diego due to the increase in the homeless population.  Renters that have leased downtown are reporting that they are concerned enough about the increase in the homeless population that they are considering relocating.  

Governor Targets Under Utilized Commercial Land For Future Housing Development

 

The Governor of California is trying to clear a path and make it easier for commercial real estate developers to re-purpose commercial land for new housing inventory with two new laws. 

California Governor Signs New Law Expanding Commercial Zoning Rights To Increase Housing

Short-Term Rental Market Changes

 

 As larger investment groups have gone into the short-term rental market, the Airbnb Industry Is Changing with fewer single property owner/operators.  We are also seeing broader advertising and more competition among rental units in many markets.  Websites that previously only advertised apartment units are now starting to sell short-term rentals.  The City of San Diego has finalized its short-term rental permit requirements and limiting the number of permits it will issue each year.  

Costar Reports Apartment Rents Continue to Increase Throughout San Diego County

 

According to Costar's Second Quarter, 2022, Multifamily Report, "asking market rent growth is soaring, and it is trending near its highest level in two decades. Performance has been driven by mid-tier and 4 & 5 Star inventory where rents are rising 15.8% and 13.3%, respectively, year over year. More than half of San Diego submarkets have recorded double-digit rent growth in the past 12 months."

The City of San Diego Approves a New Eviction Moratorium For Apartment Owners

 

The City of San Diego Approves A New Eviction Moratorium For Apartment Owners

New Law Encourages Apartment Developments & Multi-Family Housing

 

California SB 10 took effect on January 1, 2022.  The new state-wide bill impacts vacant land with the potential for apartment and multi-family developments throughout San Diego.  The bill authorizes local governments to zone most parcels (there are a few exclusions) for up to 10 units of residential density when the parcel is located in a transit-rich area, a jobs-rich area, or an urban infill site.  Just as apartment rent control laws took a while to be processed by the market, it is expected that this law and how local regulators implement it will take some time to sort out.  A copy of the bill can be found here. New Law Encourages Apartment Developments & Multi-Family Housing 

Once the local regulators weigh in to which sites qualify, then the brokerage, appraisal, and banking community will then sort out how this impacts highest and best use, property valuations, and underwriting rules for new commercial loans and the commercial appraisals that will back these loans.  

Tiny Homes As Accessory Dwelling Units in San Diego

 The Latest On San Diego Short Term Rental Rules

KPBS is reporting on the next steps involving Tiny Homes as accessory dwelling units in San Diego.  Increased enforcement is anticipated in the future. 

The State of California already has a similar 10% cap on annual rental increases with a required notification...

The State of California already has a similar 10% cap on annual rental increases with a required notification timeline.
#CRE #Apartments
https://www.npr.org/2019/02/27/698509957/oregon-set-to-pass-the-first-statewide-rent-control-bill

Downtown apartment building intentionally flooded.

Downtown apartment building intentionally flooded. "Dispatchers received a call shortly before 12:25 a.m. from a person at an apartment complex in the 1800 block of State Street reporting that a man had turned on a fire hose on the eighth floor and was spraying water, according to San Diego police."

Vandals Flood Downtown Apartment & Condominium Property

#Multifamily #Apartments

#Multifamily #Apartments
http://www.sandiegouniontribune.com/communities/south-county/sd-se-rent-control-20180724-story.html

If you are a licensed realtor, property manager, or rental property owner managing your own rentals, remember that...

If you are a licensed realtor, property manager, or rental property owner managing your own rentals, remember that you are required to provide two months notice to the tenants before increasing rents by over 10% (relative to the preceding 12 months). This pertains to BOTH month-to-month and annual leases for the entire State of California. Below is a link to the State of California Civil Code. #Apartments #Multi-Family #Tenants
http://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CIV§ionNum=827.