The median rent at the bottom rung of the San Diego County apartment market rose nearly 16 percent faster in the last year than the market as a whole, said a new study from real estate website Zillow.

Eleven percent of new construction since 2014 has been at the low-end, but high-end has accounted for 64 percent of building — leading to more competition for cheaper places.

The study illustrates tension between builders, who say they need to construct high-end units to pay for permits and regulations, and housing advocates pushing for more options across all income levels.

At the same time, there continues to be no shortage of renters who are willing to pay for luxury apartments.


Zillow chief economist Svenja Gudell said it makes sense for builders to maximize profits but it’s important for planners to think of housing at the lower or mid-level. “We can still stand to build more at every price point,” she said.

Zillow defined the bottom third of apartments, which they called “low-end,” in San Diego as having a monthly rent of anything under $1,950; middle $1,951 to $2,389; and high-end $2,390 and up. Rent prices as a whole went up about 6 percent from June 2015 to June 2016, but the low-end zoomed up 21.7 percent.

Borre Wickel, CEO of the local Building Industry Association, said developers must pay high fees for variances, parking, water and sewer, schools, open space, affordable housing and the latest energy requirements. All that adds up to little wiggle room on final rental cost, he said.

“It’s not that builders are voluntarily not building for the middle of the market. It’s that they can’t,” Winckel said.


San Diego County’s lowest-income renters spend 69 percent of income on rent, said the latest report from the California Housing Partnership Corp. It said the median rent had increased 32 percent since 2000 while median renter household income, adjusted for inflation, had declined 2 percent.

Matt Schwartz, CEO of California Housing Partnership Corp., said curbing regulations in California may not mean builders will decide to build more low-end units.

“If your goal is to make money, you’re probably always going to chose the biggest margin you can,” he said. “If you got rid of a bunch of regulation, how much do we think builders would then lower their prices to make it affordable for people at 50 to 60 percent of median (income)? No, they would take the profit.”

Schwartz acknowledged there is a market for high-end apartments and thousands of Californians seem to have no problem shelling out cash for them. Yet, he said what concerns housing advocates is everyone can battle for a cheap apartment but only a few can fight for high-end units.


“The competition at the low-end is just fierce,” he said.

Vacancy rates at San Diego County apartments in March were higher at the top than the bottom, according to a rental report from MarketPointe Realty Advisors. Apartments less than $1,400 a month had a vacancy rate of less than 1 percent, but units costing more than $1,900 had rates higher than 5 percent.

The partnership and others are eagerly waiting word on Gov. Jerry Brown’s plan to streamline housing developments and allocate $400 million for housing subsidies. It has run into opposition from environmental and tenants groups because of the proposal’s plan to strip away some environmental review, the Los Angeles Times reported.

Although the trend highlighted by Zillow seems like a natural occurrence, — like, of course, new construction will be high-end and cost much more — San Diego builders’ drive for pricier units is still outpacing some cities.


Since 2014, San Diego has built more high-end units a percentage of new apartments than Dallas, St. Louis, Denver, San Francisco, Washington, D.C. and Los Angeles, Zillow said.

But, seven other cities are even more focused on high-end, including Tampa, which built 93.1 percent as high-end or Chicago with 79.2 percent.

San Diego’s low-end rent increases were the fourth highest compared to 14 other cities. Sacramento’s low-end rent increased 32.7 percent, Los Angeles went up 27.5 percent and San Francisco up 24.6 percent. St. Louis’ low-income units went up the least at 5.5 percent.

Shamus Roller, executive director of Housing California, said the burden on low-income renters is a function of other factors besides builders.


He said money for subsidized housing has decreased at the federal and state levels, not enough housing is being built, and opposition to building new housing remains a factor in most suburban construction.

“The last development anyone wants to see is the one they move into,” Roller joked.

phillip.molnar@sduniontribune.com (619) 293-1891 Twitter: @phillipmolnar