Last fall, the Los Angeles Times reported that “Almost no one is building new apartments in Los Angeles.” Fewer than 19,000 apartment units were under construction in the third quarter of last year. It was a 30% dip from three years earlier, the Times reported, based on a review from real estate data provider CoStar. Institutional investors have been moving their capital out of Los Angeles into real estate projects where the rules are more transparent and steady so they can earn profits on their investments.
Ari Kahan, a principal at California Landmark Group, told the Times last year that his company hadn’t “bought a site with the intention to develop it in over two years. I don’t know when we will be building in L.A next.”
It’s a different world in San Diego. There, apartment construction has grown by 10% over the last three years while apartment construction has fallen by a third in Los Angeles over the same period. 2025 was a record year for San Diego County, with 6,176 units opened, most of them — almost eight in 10 — in the city. San Diego has become far more accommodating than its uncooperative neighbor to the north.
Kevin Shannon, a co-head of U.S. capital markets for Newmark, a key player in San Diego commercial real estate, explained to the Los Angeles Times that it’s “easier to build in San Diego over Los Angeles because of its legal structure, political culture and defined processes.”
Building apartments in Los Angeles has required more than patience and a singular focus. It’s a grueling task with a meager, at best, payoff for those who try to stick it out. A lethargic permitting and approval process is the norm for homebuilding in Los Angeles and has been for some time. Three decades ago, a business group called Progress LA commissioned a study that found the city took “up to 16 times as long as other cities in the region to process building permits and charges up to 22 times more in fees more in fees to do so.” It’s become a tradition that no one in City Hall seems to be inclined to break.
Meanwhile, San Diego is allowing market dynamics to mostly lead the building boom. In contrast to Los Angeles, San Diego doesn’t have conventional rent control, while the former made its rent-control laws even more restrictive last year. The permitting and approval process in San Diego has been streamlined — an idea that has been tossed around in Los Angeles to accelerate rebuilding from last year’s wildfires, but not fully implemented — and created a predictable path for developers to follow.
Neither does San Diego have a mansion tax, a voter-passed measure that imposes a 4% duty on both homes, apartments and commercial properties whose valued exceeds $5.3 million and 5.5% on those valued at more than $10.6 million, that’s been scaring away developers since it was implemented three years ago. According to the Rand Corporation, it’s “one of the steepest such levies in the nation.”
San Diego also found a way to work around the most restrictive elements of the California Environmental Quality Act (CEQA), which is unmatched among public policies for its hindrance of any sort of development. In some instances, reviews that had before bogged down and even crashed planned projects are now bypassed. The city has opened itself to rational rezoning, as well, giving developers more options.
The freedom to build wasn’t always so in San Diego. Not too long ago, it was hardly indistinguishable from other California cities in its limits on housing development. But it decided to move “aggressively in pursuit” of freeing developers, as one report described it.
“San Diego has reformed both its planning policies and its permitting processes so that housing moves through the system much more quickly and with greater certainty as to the ultimate outcome,” says the report published last fall by the University of California, Berkeley’s Terner Center for Housing Innovation. “The San Diego story contains important lessons that other cities can learn from in taking a more pro-housing approach,” says the report.
But will they be learned? Maybe lawmakers in California’s other big cities will do a little studying on the subject when they see San Diego’s growth outpacing their own.
Kerry Jackson is the William Clement Fellow in California Reform at the Pacific Research Institute.
