Why California Stopped Building Homes You Can Own — And Why San Diego May Be Leading What Comes Next
Introduction
There are only two condominium projects currently under construction in downtown California.
In a state facing a housing crisis, that statistic is not just surprising—it’s revealing.
The Policy Shift That Changed Everything
In 2002, California passed Senate Bill 800, the Right to Repair Act.
It standardized construction defect law, but also expanded liability:
- Claims could be filed before actual damage
- Exposure timelines extended up to 10 years
- Defined performance standards increased accountability
While intended to create clarity, it fundamentally shifted risk.
Why Condos Stopped Getting Built
Condominiums became particularly vulnerable due to:
- Shared systems and building components
- HOA governance structures
- Collective litigation potential
- Long-term liability exposure
Insurance costs rose dramatically.
Coverage tightened.
In many cases, it became difficult to obtain at all.
Developers adapted.
They didn’t stop building—they shifted to apartments.
The Result: A Broken Path to Homeownership
Over time, California’s housing production became heavily weighted toward rentals.
Ownership housing—particularly condos—declined significantly.
The result is a widening gap between renting and owning, especially for first-time buyers.
A Legislative Correction
Today, the state is attempting to address these constraints:
- AB 1903 reduces litigation exposure
- AB 1406 improves financing conditions
- SB 1116 enables missing middle housing
- AB 2074 introduces capital support for urban housing
Together, these bills target the root issue: risk.
San Diego’s Local Alignment
At the same time, San Diego is implementing local changes through the 2026 Land Development Code Update.
Through Complete Communities Housing Solutions (CCHS), the City is:
- Creating formal pathways for for-sale housing
- Increasing development flexibility through density tools
- Supporting ownership structuring through subdivision mechanisms
- Reevaluating development impact fee structures
This creates a rare alignment between state and local policy.
The Missing Middle Problem
Despite progress, a critical gap remains.
Today’s housing market resembles an hourglass:
- Strong incentives for low-income housing
- Continued delivery of market-rate housing
- Limited feasibility for middle-income ownership
The missing middle—often the most accessible entry point to homeownership—is still constrained.
The Next Policy Shift
If the goal is to expand homeownership, the next step is clear:
This could include:
- Expanded development impact fee waivers
- Targeted incentives for moderate-income housing
- Additional financial tools to close feasibility gaps
Without addressing this layer, the pipeline remains incomplete.
What Still Needs to Be Solved
Even with reform, key challenges remain:
- Insurance costs are still high
- HOA structures still introduce litigation risk
- Condos remain more expensive to deliver than apartments
Two identical projects—one rental, one condo—do not pencil the same.
Strategic Takeaway
The decline of condo development was never about design.
It was about risk.
That risk profile is beginning to shift—but not disappear.
San Diego may be one of the first markets where:
- policy alignment
- zoning flexibility
- and financial tools
begin to support homeownership again.
Conclusion
California didn’t stop building homes people can own by accident.
It happened through policy.
Now, through both state legislation and local implementation, that policy environment is beginning to change.
But we are still in transition.
Final Thought
If we want to meaningfully expand homeownership, we need to look beyond just litigation reform.
We need to address:
- cost of delivery
- insurance structures
- and incentives for the missing middle
The opportunity is emerging—but it requires precision.
Closing
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This content is provided for general informational purposes only and does not constitute legal, financial, or entitlement advice. Legislative measures, local policy implementation, and project feasibility are subject to change and vary based on site conditions, jurisdiction, and agency interpretation. Project feasibility must be evaluated on a site-specific basis in coordination with qualified professionals and the appropriate public agencies.