Luxury Apartments Empty Out While Workforce Housing Stays Scarce
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San Diego's multifamily housing market is exhibiting a sharp internal contradiction heading into the second half of 2026. The city's overall vacancy rate reached 4.8% in the first quarter of the year — the highest level since 2010, according to J.P. Morgan and Moody's data published in May — and analysts project it will rise further to 5.1% by year's end. A flood of new Class A supply, particularly concentrated in the Downtown submarket, is the primary driver: roughly 5,900 new units are expected to enter the market across all of 2026. Average effective rents are forecast to grow only 1.2% this year, following an actual 2% decline in 2025.
That softness, however, is almost entirely concentrated in the luxury tier. Class B and C workforce housing — older, more modest apartment stock — sits at just 3.3% vacancy, an extremely tight market where lower-income renters face intense competition for the few available units. The gap between a softening luxury market and a near-locked workforce market is precisely the environment in which the City Council's $8.5 million Affordable Housing Preservation Fund becomes relevant: developers able to acquire Class B and C buildings at relatively modest prices could renovate and reposition them as Class A units, eliminating affordable supply at the moment it is most needed.
On a more optimistic note, the East Village Green — the city's $83.9 million downtown park project under construction since 2022 — is now on track to open in August 2026. The Economic Development Committee approved an additional $4.6 million earlier this year to address construction delays and restore the project's performance pavilion. When complete, it will be the largest new downtown park San Diego has built, featuring a recreation center, dog park, playground, and a 14th Street Promenade. At the Convention Center, newly installed President and CEO Mardeen Mattix — a 28-year SDCC veteran who took over on June 24 following the retirement of longtime CEO Cliff Rippetoe — assumes leadership on the same morning the hospitality wage ordinance activates, immediately confronting a labor cost structure materially different from the one her predecessor managed.