The Building
Walk through almost any older San Diego neighborhood, North Park, City Heights, parts of Clairemont, and you'll find them: modest two-story courtyard apartment buildings built in the 1960s, usually 8 to 16 units, wood-framed, with surface parking out front. They were fast and cheap to build, and today they remain some of the last naturally occurring affordable housing left in the city, no subsidy, no deed restriction, just older buildings that never got expensive to build in the first place and have depreciated enough to rent for less than anything new.
The Economics
Try to replace one of these buildings today at the same unit count and the math falls apart almost immediately. Construction costs have risen dramatically since the 1960s even after adjusting for inflation, while modern building codes, fire and seismic requirements, accessibility standards, and parking minimums all add cost per unit that simply didn't exist when the original buildings went up. In many cases, a developer can only make a project pencil by building fewer, larger, more expensive units than the original structure had, or by assembling multiple adjacent lots to build far more units than any single 1960s building contained, spreading fixed costs like permitting, design, and site work across a much bigger project.
That second path, lot assembly, is increasingly where the real opportunity lives, but it takes years, capital, and a level of patience most small investors don't have. The result is a strange equilibrium: the buildings that would be easiest to replace, on paper, are often the ones least likely to actually get replaced, because the economics only work at a scale most owners of a single 12-unit courtyard building can't reach on their own.
What Construction Actually Costs Now
It's worth being specific about why the math has changed so much. A wood-framed apartment building today routinely costs several hundred dollars per square foot to construct once labor, materials, permitting, and soft costs are included, depending on finish level and location. Add in San Diego's higher-than-average land costs, and the total cost to deliver a new unit, even a modest one, frequently exceeds what that unit could realistically rent for on a rent-to-cost basis that would make sense to a lender or investor.
Compare that to the 1960s, when land was cheap, labor was cheap, and the regulatory environment was thin by today's standards. A developer could build a simple, code-minimum courtyard building quickly and profitably at rents that ordinary working households could afford. That combination, low costs plus light regulation, is essentially unrepeatable today, which is exactly why so little new housing gets built at that same price point.
The Parking Problem
Parking minimums deserve their own mention, because they've historically been one of the more underappreciated cost drivers in California infill development. A surface parking lot is relatively cheap to build. Structured or underground parking, which is often what's required once a lot is redeveloped at higher density, can add tens of thousands of dollars per space. On a small lot, that cost can single-handedly make a project financially unworkable, which is part of why state lawmakers have spent the last several years chipping away at local parking requirements near transit and for smaller developments.
Missing Middle Reform Is Trying to Catch Up
This is exactly why cities and the state have started experimenting with density bonuses, parking reductions, and streamlined permitting for what planners call missing-middle housing, the duplexes, fourplexes, and small apartment buildings that sit between single-family homes and large apartment complexes. Laws like SB 9, which allows homeowners to split a single-family lot or add a second unit without a lengthy discretionary review, and SB 10, which lets cities opt in to allow up to ten units on parcels near transit without a full environmental review, are aimed directly at making small-scale infill development pencil again.
The honest assessment so far is that uptake has been slower than proponents hoped. SB 9 in particular has produced far fewer lot splits and new units than early projections suggested, partly because the underlying economics, construction costs, financing, and the complexity of actually executing a small development project, are still difficult even with the zoning barrier removed. Newer measures, including a 2025 infill exemption from full environmental review for qualifying housing projects, are an attempt to address the parts of the process that zoning reform alone didn't fix.
The Rent-to-Cost Problem, in Plain Terms
Underwriting a new apartment building comes down to a fairly simple question: does the rent the market will actually bear justify what it costs to build? For decades, San Diego's rents have been high enough, relative to construction costs, to make new apartment development pencil at the middle and upper end of the market. What's broken is the lower end. A new, code-compliant unit costs roughly the same to build whether it eventually rents for a modest amount or a premium one, because land, labor, and materials don't care what income bracket the future tenant belongs to. That means new construction almost never lands at the rents a 1960s building can charge, not because developers don't want to build affordably, but because the cost side of the equation doesn't leave room for it.
This is the real reason so much "workforce housing" policy conversation has shifted toward preserving and lightly renovating existing older buildings rather than only chasing new construction. It's often the only way to add or maintain units at rents a working household can actually afford without a direct subsidy.
Historic Designation: A Complication, Not a Solution
A wrinkle worth knowing about: some of San Diego's better mid-century buildings, particularly ones with real architectural pedigree, have picked up historic designation over the years, which protects them from demolition but also constrains what an owner can do to modify or expand them. That's generally a good outcome for the city's architectural fabric, but it's an important distinction for investors to understand before buying. A building doesn't need to be individually designated to be a poor redevelopment candidate; as this piece has argued, the economics alone usually settle that question. But designation removes any ambiguity and should factor into how a buyer thinks about long-term flexibility.
What This Means for Investors
For investors, all of this points toward a fairly clear conclusion: well-located mid-century buildings are worth more today, as-is or with a modest renovation, than as teardown-and-rebuild candidates in most cases. The rebuild math simply doesn't work at the same unit count on a typical single lot, and the alternative, a much bigger, much more expensive project, requires a kind of capital and lot assembly that's outside most individual investors' reach.
That doesn't mean these buildings are risk-free holds. Deferred maintenance is common in properties this age, and buyers should budget realistically for roofing, plumbing, electrical, and seismic retrofit work rather than assuming a building that's stood for sixty years will simply keep standing without intervention. But the underlying real estate, a well-located lot with an income-producing building already on it, is arguably more valuable precisely because it can't be easily replicated at today's construction costs.
What to Check Before You Buy One
If you're looking at one of these buildings as an investment, a few due-diligence items matter more here than they would with newer construction. Ask for permit history to understand what's been upgraded and what hasn't. Get a real assessment of the roof, plumbing, and electrical systems rather than relying on the seller's characterization. Understand the seismic retrofit requirements that may apply, since older wood-framed buildings, particularly ones with tuck-under parking, are exactly the type of structure some California cities have started requiring retrofits for. And look closely at the rent roll relative to market rents nearby: buildings like these sometimes carry long-term tenants at rents well below what a new tenant would pay, which affects both current cash flow and the timeline for bringing income up to market.
None of these are reasons to avoid this category of building. They're simply the real costs of owning something that's sixty years old, and they should be priced into the offer rather than discovered after closing.
The Longer-Term Outlook
None of this means new housing stops getting built in San Diego. It means the character of what gets built keeps shifting toward larger projects on assembled lots, ADUs added one at a time on existing single-family parcels, and, where the zoning and economics finally align, genuinely new missing-middle projects that take advantage of the last several years of state reform. The 1960s courtyard building isn't coming back as a model for new construction. But understanding why it can't be replicated is the key to understanding both the risk and the opportunity in owning one.