San Diego Pulls Ahead of Los Angeles in Apartment Construction

As Los Angeles struggles with a worsening housing shortage, San Diego offers a telling contrast. The city has been far more successful at attracting apartment construction, thanks in part to a development environment industry insiders describe as clearer, faster and more predictable.

San Diego’s regulatory framework includes fewer fees, less rent control, more consistent planning and a streamlined approval process. “It is easier to build in San Diego than Los Angeles because of its legal structure, political culture and defined processes,” said Kevin Shannon, co-head of capital markets at Newmark.

The results are stark. CoStar data show that apartments under construction in San Diego County rose 10% over the past three years, while Los Angeles County’s pipeline fell 33%, hitting an 11-year low by the end of last year. San Diego is expanding its apartment supply at nearly twice the pace of Los Angeles and other major California metros.

That slowdown comes despite Los Angeles having one of the nation’s lowest vacancy rates and highest rents. While local officials have pursued renter protections to curb homelessness, developers and economists warn that overlapping regulations often raise costs and discourage new construction. Existing tenants may benefit, they say, but fewer homes get built over time.

Rent control has become a flashpoint. Los Angeles recently tightened caps on rent increases for rent-stabilized units, which house nearly half the city’s residents. Though newer buildings are exempt, developers say the policy signals growing risk. A similar state proposal to further limit rent hikes stalled in the Legislature after concerns it would be counterproductive.

San Diego, by contrast, does not have traditional rent control, relying instead on statewide tenant protections. Developers also cite Los Angeles’ Measure ULA transfer tax and strict eviction rules as reasons investment has shifted south. “L.A. has been redlined by the majority of the investment community,” apartment developer Ari Kahan said last year.

San Diego’s advantage, insiders say, lies in a clearly enforced General Plan. Projects that comply can often be approved at the staff level, avoiding lengthy political review. “San Diego updates its Community Plan and then lets projects proceed,” Shannon said. “In contrast, L.A.’s General Plan is outdated and inconsistent, and almost everything requires discretionary approvals.”

Los Angeles City Council oversight can add months to approvals as projects wind through hearings and negotiations. San Diego officials say they have prioritized housing by updating community plans, streamlining permits and aligning local rules with state housing laws.

Challenges remain. High interest rates, rising material costs and labor shortages affect both cities. Still, developers say San Diego has struck a balance that allows housing to move forward. “It’s still California,” said JLL broker Kip Malo, “but the political winds have shifted in developers’ favor.”

Read full story on Los Angeles Times