San Diego is about to jack up water rates again
Why utilities are becoming a bigger factor in San Diego apartment returns
By Nick Hernandez ·
San Diego just warned that water rates may need to rise significantly over the next several years. That is on top of rate increases already approved for 2026 and 2027 of roughly 15% per year. This came out of a financial outlook released by the city and reported by the San Diego Union Tribune this week. If that forecast holds, many properties will be paying meaningfully more for water and sewer than they do today.
Most apartment owners I talk to still treat water and sewer as fairly stable costs. That assumption is starting to get tested.
The city’s financial outlook shows that even with the increases already approved, the water and sewer system is still under pressure from infrastructure needs, imported water costs and regulatory requirements. Their own projections suggest more adjustments will likely be needed starting in 2028.
In plain terms, this is not just a one time tweak. It reflects a longer term shift in what it costs to run basic utilities in San Diego.
On most apartment buildings, water and sewer are already one of the larger operating expenses behind taxes and insurance. When those rates move by double digit percentages over consecutive years, it quietly eats into cash flow.
By itself, this is not going to make or break a deal. It is simply one more cost layer that landlords have to deal with on top of insurance, maintenance, compliance and labor.
Part of what is driving this is where San Diego gets its water. The city imports most of its supply and those wholesale costs continue to rise. At the same time, the wastewater system is old and expensive to maintain and upgrade.
None of that is going away. Even if the year to year increases change, the overall direction is higher, not lower.
I work with apartment owners across San Diego on valuations, sales and long term planning, so I spend a lot of time looking at how operating costs like water, insurance and maintenance affect real world returns.
Most owners see their water and sewer bill every month. What tends to get missed is how those numbers look a few years out if the current trend continues.
That is part of understanding what your property is really earning you over time.