How Millennials Impact Affordable Housing Supply

How are population growth and demographics related to affordable housing supply? In San Diego, the population growth has been a steady .6% annually for the last decade, and millennials and gen-Z make up more than half of the population, according to a recent report from Cushman & Wakefield. In addition, like many Southern California markets, the supply of affordable housing is becoming increasingly limited.

“Housing affordability remains an issue in San Diego where a minimum income of $126,400 is required to qualify to purchase a house compared to $54,800 nationwide,” Jolanta Campion, director of research in San Diego at Cushman & Wakefield, tells GlobeSt.com. “Median single-family home price is forecasted to increase 5% on average per year between 2019 and 2023 compared to 3% of median household income. Only 29% of households could afford to purchase a median priced home compared to 31% in California and 56% nationwide as of Q3 2019, according to California Association of Realtor’s Traditional Housing Affordability Index.”

While the market is suffering from a shortage of affordable housing stock, it is still much more affordable than other submarkets with similar employment centers. “When compared to other tech hubs such as San Francisco (18), San Mateo (20) or Orange County (25), however, housing in San Diego is comparatively less expensive,” says Campion. “Despite the cost, San Diego is a desirable destination, and many people are still willing to pay a premium to live here due to the appealing lifestyle, experience and employment opportunities it brings. However, there is certainly a need for more affordability.”

One of the other contributing factors to the affordability crisis in San Diego is a trend toward single-income households, which inherently doubles the need for housing supply. “In addition, with 51% of households being other than married couples, the tendency towards single-person households ultimately translates to a need for more housing units per individual in San Diego as well as in California,” says Campion. “These housing units look different than the housing units of most married couples as single-person households generally make less money and desire less space than married couples.”

Still, there is a strong and growing demand for housing that is only going to continue to gain momentum. “The demand for less costly multi-family dwellings, including condominiums and rental units in apartment buildings near public transportation is high and is expected to grow,” says Campion.