San Diego continues to fall behind on housing production. Here’s what it means for 2026

San Diego Mayor Todd Gloria celebrated the results of the latest housing report, which shows the city greenlit construction on nearly 8,800 new homes in 2024.

“That’s more than double the annual average from the past two decades and proof that the changes we’ve made are working,” Gloria said in a newsletter. He added that the city has authorized construction on nearly 31,500 new homes in the first four years of his administration. 

But peeling back the numbers reveals the stark reality facing local leaders in the midst of an ongoing housing and affordability crisis.

Year after year, San Diego fails to keep pace with the projected housing demand. The city has permitted barely two-thirds of the homes it should have by now, based on long-term targets. And the existing rental supply is 97% full, records show, which keeps rents high.

As officials look ahead to 2026, some are seeing a fork in the road.

“Is San Diego going to be a place where everyday people see a bright future for themselves, their families, the people they love?” Councilmember Sean Elo-Rivera said in an interview with inewsource. “Or is this going to be a place where only wealthy people can live, and everyday people come into the city to work during the day and leave at night because they can’t afford to live here anymore?”

Targets set by trends

The number of building permits issued is the main metric government agencies use to keep track of housing production. It represents the number of times an agency greenlit construction — not the number of homes actually built or moved into.  

To keep pressure on locals to build more housing, the state requires regional agencies to conduct an analysis of existing and future housing needs. The analysis, known as the Regional Housing Needs Assessment, projects housing demand for each municipality and unincorporated area, and it’s updated every eight years. The San Diego Association of Governments is responsible for overseeing the process for the region. 

The lion’s share of the region’s projected demand is in the city of San Diego, accounting for nearly two-thirds of all new housing needs. The assessment estimates San Diego will need 108,000 new homes by the end of the decade to meet the demand of all income levels. That means the city needs to approve at least 13,500 new homes every year. 

For perspective, Chula Vista, the second largest city in the region, will need only 11,100 new homes to meet demand by the end of the decade.

Comparing building permits issued against the projected demand reveals the expanding gulf between what San Diego is approving and what it needs.

Norm Miller, a real estate professor emeritus at the University of San Diego, said these projections are guesses that generally overestimate demand based on past trends. 

“We are starting to lose population and this could continue,” Miller said, “and this will greatly reduce the demand for new housing supply.”

At the same time, he added, there needs to be a surplus of housing to make any significant impact on housing prices and rents.

Market demands

To be sure, no jurisdiction is doing exceptionally well when it comes to building housing. Chula Vista, Del Mar and Encinitas have exceeded their housing targets for residents in the highest income bracket, but have made little to no progress for low-income residents.

However, Gloria said San Diego is leading the state, permitting more homes per capita than any of California’s other big cities.

When asked about San Diego’s progress compared to projected demand, his team said there isn’t some magic wand that officials can wave to build more housing.

“Many factors, including economic conditions, the cost of materials and labor, and the availability of financing, affect the production of homes,” said spokesperson Rachel Laing, “however, the increase in permitting over the last two years shows the city’s programs and changes to regulations and processes are working to address the housing shortage.”

Gloria will continue to push for progress by updating policies, regulations and community plans to provide more incentives and opportunities for home development, Laing added.

Elo-Rivera thinks governments should take a more active role in housing production, saying it would be nearly impossible to make a tangible difference in housing affordability if officials continue with the same strategy.

“We need a critical mass of political leaders to recognize that the market is not responding to the needs of everyday people,” he said. “And the only way for us to meet the need is to do it ourselves.”

That could look like the city taking over vacant or struggling office buildings, hotels or motels, and converting them into homes for low-income or formerly unhoused residents. The San Diego Housing Commission is already doing this work, but Elo-Rivera said the city needs more of it.

San Diego does not have a dedicated funding source for these deals, but Elo-Rivera is pushing for a tax on vacant second homes and full-time vacation rentals that he says could fund this effort. He said the idea is simple: The city should collect some of the money generated by property owners who swallow up homes that could be lived in by San Diegans. Officials hope to put the proposal on the June ballot.

“We cannot sit back and wait for the market to do something that it’s clearly showing it is not interested in doing,” he said.