Tim Winslow

Land sale activity has increased this year in San Diego, resulting in the development of more than 5,000 residential units in the market. Most of the new development activity is for-rent apartment product. Downtown has the largest number of new units with a pipeline of 2,029 units, while East Mission Valley is the next most active market with 996 units under construction.

"The politicians at the local and state level have set that stage and have come together to positively change the residential development environment in the State of California— a residential developer's best friends in our region are primarily the State, and County and City of San Diego," Tim Winslow, executive director at Cushman & Wakefield, which has brokered several land sales, tells GlobeSt.com. "The State of California, through the Housing Element and Regional Housing Need Allocation (RHNA), is not just encouraging but is forcing cities to increase residential density, something they have never really done until now. The state is very serious in this effort, having successfully sued and or is currently battling local cities to increase their housing density."

The city is supporting the increased density efforts, and helping to fuel new construction activity. "As part of this effort for increased density, the County of San Diego has pushed height limits beyond 30 feet in some areas of San Diego that were really off limits until recently," says Winslow. "The local superhero in this pursuit, San Diego Mayor Kevin Faulconer, is pressing forward on all fronts from density and heights along transit corridors to changing the definition of units per acre to floor area ratios, thereby allowing market demand to determine the size of units."

With the support from the government for more apartment supply—critical to helping solve the housing crisis—developers are responding. "Politicians at all three levels have finally come together and are sending a consistent message to the development community: that we need more residential density and that we will support you, and the development community is responding accordingly," says Winslow. "This is really the most fertile time in the past 30 years to be an apartment developer."

Winslow, however, said that rent control could impact the activity. "For all of the progress politicians have recently made to boost housing, it could all be undone by rent control," he says. "It remains to be seen how the rent control bill would negatively impact apartment values.  But one of the most solid areas of investing, apartments, could be open for downward pressure on sales prices as a result.  Once California has entered the rent control business it may only be a matter of time before politicians further limit rent increases and thereby values, which may kill the goose."