San Diego's "Spike or Freeze" Housing Problem

There’s an excellent book on our housing affordability crisis, Escaping the Housing Trap, by Charles Marohn and Daniel Herriges. And there's a reason the cover of the book shows a place in San Diego to illustrate an oddity of our housing system. Here, you often see a 15- to 20-story tower next to modest one- or two-story homes. This extreme contrast isn't an accident; it’s the direct result of San Diego’s “spike or freeze” approach to growth.

For decades, the city used zoning and other tools aggressively to discourage even the mildest increase in density, gradually creating the housing shortage we now face. Newer policies allow much larger buildings, but they have not eliminated the shortage and have created new problems. This system keeps most areas static as if frozen in amber, but unleashes out-of-scale mega-project “spikes” on the relatively few parcels where the financial numbers line up for this scale. The housing debate too often turns into a bitter, binary conflict: leave neighborhoods untouched forever, or accept radical, high-rise transformation overnight.

Beyond the aesthetic shock, this hyper-concentrated approach creates serious economic, fiscal, and social dysfunctions that hurt San Diego even before the towers are completed.

1. Wall Street vs. Main Street: Siphoning Local Wealth

The jump from a single-story home to a 20-story tower isn’t just a visual shift, it’s a financial barrier. Building a high-rise requires huge upfront capital, complex mezzanine financing, specialized steel-and-concrete engineering, teams of land-use attorneys, and years spent navigating discretionary approvals. Because of these formidable barriers to entry, mega-projects are quite often built by institutional private equity firms and out-of-town development conglomerates. This creates several hidden economic costs for San Diego:

• Capital Becomes All-Important: The enormous capital requirements of a high-rise favor institutional investors and large development companies, often headquartered outside San Diego. Some of the economic benefits of development (profits and often design work) leave the area, rather than circulating through our local economy.
• The System Disadvantages Most Local Builders: Small local general contractors, boutique architects, and mom-and-pop builders cannot bid on or finance a $60 million tower.
• Land Speculation Surges: When zoning changes to allow substantially greater density, as with Complete Communities, land values often jump right away. The city will eventually capture a little of that windfall in increased property- and sales-tax revenues, but speculators drive up development costs immediately. Not only does land cost more, but vacant or underused parcels can sit for years while their owners wait for the "big payday." That may be perfectly rational from the owner's perspective, but in the meantime those vacant properties make the shortage worse.

2. Infrastructure: Pushing City Services to the Brink

San Diego is already struggling under a multi-billion-dollar infrastructure backlog. Many miles of aging roads need resurfacing, water mains routinely burst, and the city’s structural budget deficit leaves little room for emergency repairs. Unfortunately, we also don't have a good mechanism for matching the incremental value created by development with the long-term cost of maintaining the infrastructure that supports it. Under these conditions, building expensive infrastructure to accommodate sudden spikes in demand can amount to continuing to dig the hole we have already created. Instead of making efficient use of our municipal infrastructure, "spiking" forces the city into reactive, capital-intensive fixes it can ill afford.

3. The Risk of “Big Bets”

Whenever the city relies on an enormous project like Midway Rising, not only does the project suffer from being a political and economic football, where many interested parties add costs and/or delays, but it’s devastating to the city’s housing production if it doesn’t happen. If we don't allow many different ways to add homes, we shouldn't be surprised when housing stays scarce and expensive.

4. The Toxic Gridlock: A Political System Built on Conflict

Perhaps the most damaging fallout of the "spike or freeze" model is how it poisons local political dialogue. Public hearings at City Hall or community planning group meetings all too often devolve into a trench war between two opposing camps:

• Total Stagnation: Fearing sudden, radical changes to neighborhood scale, sunlight, and parking, long-time residents push against anything that seems tall or dense, even as housing costs skyrocket out of reach for their own children and local workforce.
• Unfettered High-Rise Overlays: Pushing for abundant supply at all costs, advocates champion game-changing top-down mandates, often dismissing legitimate concerns about scale, infrastructure capacity, or neighborhood context.

This toxic polarization traps San Diego in a false choice. Neighbors feel helpless in the face of sudden, overwhelming change, while housing advocates feel frustrated by years of NIMBY resistance.

There Has to Be a Better Way.

The fundamental flaw of San Diego's housing policy isn't that we are growing—it’s how we are growing. By chopping out every intermediate step between a single-family home and a high-rise tower, we have created a system that enriches out-of-town investors, strains city budgets, and alienates everyday residents.

Growth doesn't have to feel like a shock, and density doesn't have to come from Wall Street.

In Part 2, we will look at a better alternative: Incremental Housing. We’ll explore how restoring the "missing middle" can empower local builders, make better use of existing infrastructure, and create a resilient San Diego built by many hands.