Why Construction Costs are so High in San Diego

The cost of construction has been skyrocketing in the United States.  However, the price is higher in San Diego and other parts of California than in any other region in the US. These costs have made renting and acquiring a new home more expensive. Generally, construction costs are determined by the forces of supply and demand; but other factors also influence the rising costs of construction in San Diego. 

Here are the factors making the costs of construction very high in San Diego:


More than two-thirds of building costs are incurred on labor and materials. The prices of building materials and labor are very high in San Diego and are on the rise. These costs have increased due to the imposed tariffs and the strict building codes in San Diego. The tariffs have significantly increased the costs of steel, concrete, and timber, thereby increasing the costs of producing lumber, tile, cabinets, and other household appliances. The standard building codes require more expensive labor and materials such as heating and cooling systems, insulation, and windows to achieve the set energy goals.

It is estimated that the labor cost in San Diego is more than twenty percent higher than in other states. After the great recession, many workers abandoned the construction industry, making skilled labor less available. After the economic boom, the number of permits housing grew, leading to a further shortage of workers.


The biggest challenge for general contractors in San Diego is its long time to approve housing projects. It must be signed by the county supervisor, city council, planning board, and building and planning agencies for a project to go through. During the approval process, the interested groups have more power in San Diego than in other states making the process slower. The interested groups can apply for a lawsuit using the Environmental Quality Act derailing the development of housing projects. The act allows local agencies and states to ensure a lesser environmental impact on endangered species, noise, and traffic development projects. The law has led to protracted court battles in San Diego, leading to longer housing projects timelines. The local requirements in San Diego are ambiguous and complex, adding more costs to the construction projects.

Development Impact Fees

San Diego imposes contractors’ impact fees to cater to the amenities and improvement of the sewer system, roads, schools, fire, and police services. The average impact fee in San Diego is much higher than in other areas. An impact fee for a single housing unit is three times higher than the US average. The other problem is that these fees are higher and unpredictable, threatening the viability of housing development in San Diego. The increased impact fee is because federal funding on infrastructure has decreased, making San Diego rely more on developer fees. Moreover, states other than California enjoys less red tape and fees, making construction costs higher in San Diego.

Density Restrictions

Density restrictions determine the housing project’s limit to be built on a specific area. The regulation adds to the cost of developing housing units. The approval rate of large housing projects that would have otherwise provided for an economy of scale to contractors is very low. The construction of large-scale affordable housing projects in San Diego faces many restrictions at the approval level. The community input required before increasing the housing density makes the process less efficient and more costly. Density restriction due to environmental protection, accountability, and public information makes the process of housing development more complex and expensive.

High Cost of Building Apartments

Financing affordable housing for low-income people in San Diego is a significant factor. Funding sources for these projects, which contribute to project costs are many. The factors include appraisals, consultants, and legal fees. These factors contribute to more than fifteen percent of construction costs compared to other regions. These costs, plus the costs of labor and materials, have doubled over time, making the construction costs higher. The changes in construction standards of apartments in San Diego have contributed to the increase in construction costs. The standpoint of codes, requirements, and sustainability have changed over time. Nowadays, the apartments are more efficient and better overall, hence more expensive and complicated to construct.


Even with the high cost of construction development in San Diego, people still dream of owning the home they have always wanted. If you desire an excellent housing project in San Diego, contact us at House to Home. We will help you with the entire design-build process for your dream home. We provide solution-based designs and high-quality homebuilding. You can be sure to receive the highest level of service at House and Home, combined with high-quality and experienced craftsmanship in building design. Whether you are looking for a remodel or a new build, we will help you design a high-quality house in San Diego.