The average San Diegan cannot afford to purchase a median-priced home, because they simply do not make enough money. It does not look like this situation is going to change anytime soon, but there is something government can do to help: Stop raising taxes and ease up on onerous lending constraints.

CommentaryThe median income for a family of four in San Diego is $63,400. Affordable housing for a low-income family would be a home priced under $225,000; a median-priced home in San Diego is $593,000. The permit fees alone to build a new home account for over 45 percent of the total building costs. A low-income family could not even afford the permit fees required to build a home.

San Diego residents need to earn $113,530.43 a year to qualify for a median-priced home, and if they put down 10 percent instead of 20 percent, the required annual salary jumps to $137,056.40. Supply and demand drives up home prices, and the region as a whole is building only 50 percent of the homes needed. Very few of the homes that are being built are for low- to moderate-income buyers.

San Diegans also pay among the highest income tax, sales tax and gas tax in the nation. San Diego residents are paying 76.7 cents per gallon of gas in state and federal taxes, and when gas prices go up, almost every consumable item goes up as well. Gov. Jerry Brown’s new gas tax scheduled to take effect in November will raise the tax on fuel by 67 cents. We already pay more per gallon for regular gasoline than the national average, because it is more expensive to refine our fuel to meet California’s requirements for cleaner-burning gasoline. The same law will also raise annual vehicle registration fees to $175. Commercial vehicles will pay even more, with the taxes on diesel fuel increasing.

California has the highest state-level sales tax rate in the nation at 7.25 percent, and San Diego’s sale tax is even higher at 7.75 percent. And if state lawmakers pass Sen. Toni Atkins’ SB 2, California residents will also pay a $75 fee to file some real estate documents, such as deeds and notices, with a cap of $225 per transaction to subsidize affordable housing projects.

The fee is expected to generate between $200 and $300 million annually for affordable housing projects. But the government’s proposed method of solving the housing crisis they helped create through excessive fees by adding more fess is an incredibly bad idea. Taxing ourselves out of the housing crisis on the backs of current homeowners is not the answer, especially when San Diegans already pay 39.6 percent of their income on mortgage payments.

We Stand Up for You. Will You Stand Up for Us?

As local, state and federal governments continue to raise and impose new taxes and permit fees, they make it harder for families – especially low-income families – to save for a home. Instead of taxing, government should provide incentives for homeowners, such as a home savings account. Similar to a health savings account, a home savings account would allow you to set aside money on a pre-tax basis for the down payment on a home.

Several government-imposed regulations have been established to prevent another real estate meltdown, and those regulations have been successful, as demonstrated by the low numbers of foreclosures. The unintended consequences of those regulations, though, are constricting lending requirements that have made it very difficult for qualified borrowers to qualify for a loan.

The government has over-corrected and could loosen lending requirements without significantly increasing risk. For example, 40-year financing is not within the definition of a qualified mortgage under the government Consumer Protection Act, also known as Dodd-Frank. If the government changed the rules for fixed-rate, 40-year loans, there’s little doubt that more borrowers would safely qualify for financing. Since a typical home is sold within 10 years, much of the higher cost for 40-year financing could be avoided. Many more San Diegans would also qualify for a Federal Housing Administration loan if the FHA reduced its property mortgage insurance interest slightly.

It is time for local, state and federal government to lower taxes, lower fees and ease up on lending regulations. Government should encourage home ownership with incentives, not subsidies, fees and taxes.

Mark Powell is a member of the board of directors for the San Diego Association of Realtors and the San Diego County Board of Education, representing District 1. Powell’s commentary has been edited for style and clarity. See anything in there we should fact check? Tell us what to check out here.

    This article relates to: Growth and Housing, Housing, Opinion

    Written by Opinion

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    craig Nelson
    craig Nelson

    Taxin' Toni Atkins is the problem , not the solution. Only a politician would think that raising the cost of building, buying, or owning a home will do anything other than make prices and rents go up. 

    I propose we tax politicians 30% of their salary and have 100% of the proceeds go to pay for filling potholes.

    Toni , you have one job - fill some potholes , once you get that right you can take on mathematics. 

    Greg Martin
    Greg Martin subscriber

    A better metric to use would be combined housing plus transportation costs.  Both housing and transportation are more expensive in the San Diego area than for most other cities because of the type of housing being built and where it's being built.

    As a result, people in this area are spending a larger share of their income on housing plus transportation than people in the Bay Area and the NYC metro area.

    Making better land use decisions, not 40-year mortgages, is a much better way to address housing and transportation costs.

    Bill Bradshaw
    Bill Bradshaw subscribermember

    "The permit fees alone to build a new home account for over 45 percent of the total building costs."  That's what Mr. Powell, who ought to know, claims in this piece.  Pardon my doubt, but the number seems a bit high, don't you think?  How about furnishing the details, Mr. Powell?

    Mark Giffin
    Mark Giffin subscribermember

    @Bill Bradshaw 

    Not 45 but I believe the figures are from this articlke

    "First up is Lynn Reaser, chief economist of the Fermanian Business & Economic Institute at Point Loma Nazarene University, who in 2014, led a research team that found local regulations accounted for an astonishing 40 percent of the cost of a new house, condo or apartment in San Diego County."

    philip piel
    philip piel subscriber

    Yet our esteemed city council is busy drafting laws to punish any person / business that participates in building a border wall, you'd think little things like affordable housing had already been dealt with...

    bcat subscriber

    Do you really think that lower the cost of homes will bring down the price?  I don't have faith in that at all.

    I see speculators flip houses all the time.  One moved in across the street a couple years ago... made like he was going to stay in the home.  No way.  He told me he flipped (x15) houses in our neighborhood (a few block radius) over the years.  That has nothing to do with taxes or fees to build.

    Look at the competition to purchase a home:  speculators, folks from Arizona, AirBnB, landlords looking to cash in on rentals, vacation homes, oh... and actual homeowners.

    Buying a home is not the only way to live.  People don't own in NYC - why?  because the demand is so high.  There will NEVER be enough homes for people that want to live in San Diego.  So, pick apart the problem.  What is the problem you really want to solve?

    Do you want home owners so neighborhoods are filled with long-term residents?  Sounds like a good thing.  The only way to achieve that is to provide a disincentive for landlords and vacation rentals.  Are you prepared to vote for that?

    Do you want home owners because you feel sorry for people that cannot afford a home?  That's the situation in NYC.  Everybody rents.  Is renting a good solution?  If not, how do you make homes actually affordable?  Do you really think you can bring the price down SO LOW that only low income people will buy the home?  Likely, speculators or landlords will just buy it and make money off of flipping or AirBnB.

    Why would somebody buy a home in San Diego when they can just commute in from Temecula, Ramona, or Tijuana?  I know lots of professionals and working poor that do any number of those. 

    The only way to get local people to buy local houses is to make it less affordable to commute into San Diego.  If you want a low income family to purchase a home and not commute in from Orange, Riverside, or Imperial Counties you need to erect barriers for commuters and force local businesses to pay high enough wages to afford to live in San Diego.

    In reality, you can only do a few things:

    1.  Tax landlords

    2.  Zone against vacation rentals

    3.  Tax absent houses (e.g. summer vacation homes)

    4.  Erect toll roads to make it expense to commute in from outside San Diego County

    Seems like nobody is interested in any of those solutions.  So, if you just "lower the cost of building homes", you'll get more homes, more profits for developers and real estate and then you'll reach a new equilibrium in a few years with the same number of people complaining about the price of homes.

    Mark Robak
    Mark Robak subscriber

    Had a great conversation with a long time San Diego developer yesterday,  He said there is pretty much no way for a small developer to break into the market today as development costs have spun out of control, due largely to government regulations/fees.  He then described what a huge difference it is just across the border in Arizona, where development is far easier.  

    Speaking of Arizona, Phoenix has the lowest water rates in the country and the San Diego region among the highest.

    Derek Hofmann
    Derek Hofmann subscribermember

    Another problem is the way the federal government makes it difficult to take out an FHA loan on a condo, so people instead buy single-family detached houses and use up land that could have been used to house more families per acre.

    And then there's the way our heavily subsidized roads and freeways make it almost impossible to live without a car and drives up our sales taxes to make up the shortfall in gas taxes. This drives up costs for everyone, uses even more of our valuable land for roads and parking, and much of our hard-earned money leaves the local economy to out of state to car manufacturers and oil companies. So it's time to end the subsidies and let people choose how they want to live without the government influencing our decisions.