Conversations with Advocates of Fair Growth
Overview | Conversations with Advocates of Fair Growth | Living on the Fenceline
Michael Stepner
Michael Stepner is the former city architect of San Diego and dean of the design school. He designs infill developments in the city and helped preserved and transform Single Room Occupancy (SRO) hotels, which were scheduled for demolition, into efficiency apartments for low-income residents...
Interview
Steve Lerner (SDL): How long have you lived and worked in San Diego?
Michael Stepner (MS): I have worked in San Diego since 1971. I served in the Navy prior to that. I was in the engineering department in the engine room. I came from Chicago originally and the Navy brought me out here. In 1971 I went to work for the City Planning Department where I worked until 1997 when I started doing some teaching and consulting. I became the City Architect, the Assistant Planning Director, and the Acting Planning Director. In those capacities I was responsible for a lot of programs.
The SRO program was one. It was an interesting project because, like many other cities, we had a lot of single room occupancy hotels and they were getting knocked down. The city went back and forth about how to deal with this loss of low-income housing but never quite got a handle on doing anything. Then the Blood Bank bought one and was going to tear it down for a parking lot.
Timing is everything. The word came out that they were going to evict all the tenants two or three days before Thanksgiving. The newspapers talked about vampires and bloodsuckers. The City could not let that happen and the Blood Bank, after the press releases came out, could not let it happen either. So they said they would hold off on doing anything and they wanted the City to come up with some solution.
The City had a hearing and directed the Planning Department to come up with some solution. They gave us a couple three or four months to come back with the answers. The feeling was that they would hold off on the demolition through Thanksgiving and Christmas and after that it would be business as usual At that time we had a woman working at the Planning Department who was formerly a banker in real estate lending and she took hold of this project and discovered that the yield off an SRO was greater than the yield off most market-rate housing. The reason for this was that because the rooms were smaller the rent per square foot was pretty good. This attracted interest. So we went to the SRO owners and worked out a lot of the code issues that had prevented them from being rehabilitated but once we got over the economic issue people began to see that there was some economic value to them. Some of the code issues had to do with putting some sort of toilet in each room, which was expensive, rather than having a bathroom at the end of the hall. The separation you had to have between the toilet and the kitchen area was also expensive to build.
We thought about putting kitchens in. The reason we thought about these things was that we wanted to put some sort of place in the room so that the tenants had the ability to cook. The reason to do this was that we had a lot of problems all over the country where residents went down and bought a hot plate at the Salvation Army. The problem was that there was no place to use it safely in the room and a lot of the hot plates were second hand and not in very good condition. As a result, they would plug it in and burn down the building. So we said that in terms of insurance if everybody had a microwave provided by the building owner then the insurance would be less.
We also talked about individual toilets and about having the building code changed so we would not be required to have a separation between the area where the microwave was located and the toilet facility. A lot of these places already had a sink in the room, which we wanted to replace with a kitchen-grade sink with a garbage disposal. We went through the exercise of looking at that. The problem was that when you had a small sink in there people would do stuff that would clog up the plumbing and cost a fortune to fix but if you put a garbage disposal in the sink and an industrial grade sink you ended up solving the maintenance problem and it was cheaper..
SDL: Were there showers in the room?
MS: No, we didn't put them in, at least in the ones where we got the code changed. The showers were down at the end of the hall. We also looked at changing codes in terms of plastic pipe vs. copper pipe.
In the end, there were not a lot you had to do to start building these SROs and number of them were built in the City, primarily downtown but not exclusively. There are some in this neighborhood and other neighborhoods. The program began to address part of the housing problem. We got a Ford Foundation Innovation Grant for that in the mid 1980s.
SDL: Was there a lot of Not-In-My-Backyard (NIMBY) resistance to this? Were neighbors worried that an SRO would bring poor people into the neighborhood?
MS: There was a lot of concern. Questions were raised as to whether we were actually building substandard housing. We overcame that by showing people what we built. There was some NIMBY resistance but we found that when the Redevelopment Agency built a few of these SROs downtown it ceased to be a problem. If you go downtown and look at these places some of them are in areas that are not desirable but others are located across from multi-million dollar condos and they don't seem to be a problem. We found that it is a management issue: if the facilities are managed well and the managers keep out the chronic alcoholics and drug users, then it seems to be the working poor primarily who live in these facilities. We have some that are still pretty far down the economic chain but in general these SROs are doing quite well. One of the most popular breakfast spots downtown is located in an SRO. It is Caf 222 and it is across the street from market rate townhouse developments and a block away is another SRO and it is across from One Harbor Place, which include multi-million dollar, high-rise condo towers. And it is surrounded by market-rate housing and it co-exists just fine.
SDL: When you say good management I imagine that includes some pretty vigorous screening.
MS: It does. And the better places they screen the tenants to make sure they are not going to cause problems. We still have the homeless problem here and it is chronic.
SDL: I was just talking with Patrick Kennedy at Panorama Interest in Berkeley who does urban mixed-income infill development. They have 20 percent subsidized housing in some very upscale buildings. He argues that there is a tipping point where if you bring in too large a percentage of low-income residents with chronic problems you are going to scare away the market rate tenants.
MS: Yes, I don't know if it is a question of 20 percent or if it is about management and screening. Because of the redevelopment law here we have projects that are mixed-income where you have market-rate housing and units of subsidized housing in the same structure.
SDL: What does the redevelopment law require?
MS: The California Redevelopment Law requires that 20 percent of the tax increment generated in a redevelopment zone go to low-income housing and that dislocated or displaced people be relocated in equivalent of better housing. There is always a debate about whether or not that is happening or not. But there has been an attempt to do it and several of the projects downtown did a decent job of it. We also just adopted an inclusionary housing ordinance here in San Diego. It is a complicated formula but if you are building below about 25 units you have to have a certain percent of low or moderate income housing based on the Area Median Income in your project. Or you can pay an in lieu of fee. We have an area of the city called the Future Urbanized Units the outlying area in most of the northern half of the city. In 1985 the cit council said that this area could not be developed without a vote of the people; and that also 20 percent of the housing built had to be affordable. It is a huge area. About five years ago a vote was taken to allow some projects in this area to go ahead and they were required to include 20 percent affordable units. A lot of the planning is based on New Urbanism and Neo-Traditional Design. I worked on some of the projects and the affordable units are being mixed into the developments.
SDL: Who is the point person on that?
MS: Betsy Morris who is the CEO of the Housing Commission, which is our housing authority.
SDL: I take it that is a fairly large number of units.
MS: It will be.
We have a housing crisis in San Diego County. People have not wanted higher-density housing to be built or housing in certain areas at all. You have the whole NIMBY thing and some of it is justified and some of it is, perhaps, not. We have a shortfall of a lot of units of housing. A group of organizations and the San Diego Organizing Project, which is part of a nation-wide effort of community organizing through the churches came to the City Council in August of last year and pushed for some attention to the housing crisis the city was avoiding. The City appointed a Task Force chaired by a former city manager, who is now with Price Charities, the charitable arm of Price Costco, which is doing City Heights Urban Village.
This broad based committee was to come up with a series of recommendations in six months about how to address the housing situation. The issued a report in May and the Council said that after the budget hearings they were going to get into it in September. Here is an article where the Chamber of Commerce said that the City is not doing anything about it and that it needs to address the recommendations of the Task Force. In the last article the mayor put it on the shelf. He didn't want the City to be the only entity dealing with the housing crisis. He wasn't going to raise taxes. They suggested a series of things from a car rental tax to raising the hotel room tax to pay for infrastructure so you could build neighborhoods with higher densities; and float a bond issue for $1 billion to pay for infrastructure. So it is in limbo right now. The report is on the city web pages. But it was interesting. It was a broad-based coalition of citizen groups and community organizations and builders and environmentalists that came up with these proposals.
Downtown we also have a redevelopment corporation, which is owned by the City, but is, nevertheless, an independent agency redeveloping downtown. We have the same thing in the south eastern community. And the city has its own redevelopment staff that operates in regards to the city. They all folded their housing money into one pot to float a bond issue of $55 million to build more housing. And that did go forward.
SDL: Did the mayor put the proposed plan on the shelf because he is feeling the heat from the NIMBY forces?
MS: There is a certain amount of that. The City embarked on updating the city plan a couple of years ago. It was 20 years old last done in 1978. During my tenure I kept trying to get them to update it because state law says they should do it every five years. We would just tinker with it over the years. This time they had a broad-based committee. The city had just won an award from the Ellen Putnam Foundation for all the citizen involvement in putting together this plan. The Strategy was called "a city of villages." The plan was to take the neighborhoods and increase the densities where appropriate. We did a lot of studies about where it might be appropriate. The idea was to provide housing and handle the population. The region is expected to grow by another million people in the next 20 to 30 years.
The other part of the initiative aimed at dealing with infrastructure because we have a multi-billion dollar shortfall in public service infrastructure financing here in the city. We did not have the money because of Prop 13 and every politician has been afraid of saying anything about raising fees or taxes unless they can figure out a way to do it without it costing someone money who might vote for them. The communities said they did not want any more housing until the city found ways to upgrade the schools, the infrastructure, and the parks. The City Council had been very strong in saying that they are not going to raise any taxes. Instead we raised all kinds of impact fees and that has raised the cost of housing. The reason it was possible to do this was that the people who would be the future owners of these houses were not voters at the time. But now there is recognition that these one million people who are coming to the region are [often] the children and grandchildren [of current residents] so it hits a little closer to home.
SDL: Does the current law require that developers provide 20 percent affordable housing units in their projects if the development is above a certain size?
MS: Under redevelopment law 20 percent of tax increment financing off the top needs to go to affordable housing. If you displace existing residents you have to take care of them as well. Either you give them money to relocate or you find them housing or you build them housing.
SDL: So it is not necessarily one to one replacement in the same area.
MS: That's right although there have been a lot of arguments in California that it should be one-to-one replacement in the actual project redevelopment area or in some area that you can make the argument that this would be a logical place for them to want to live because of jobs. Those are debates going on at the state level.
SDL: Is there anything that requires that communities carry their fair share of affordable housing?
MS: Yes, the state has all kinds of fair share requirements. For example, the state of California requires that each general plan have a housing element and the element be looked at every five years and that the element look at all the housing needs and the solution to those housing needs in your community. Theoretically, if your housing element is not approved because it doesn't address all these questions, state funds could be eliminated or you could be enjoined from issuing any permits for housing. Typically that doesn't happen. But there are worries about cities being sued [for failing to provide affordable housing] and then all the zoning permits would come to a stop. We have been sued a couple of times and negotiations go on forever and ever.
SDL: So it is in the letter of the law but in practice the law doesn't have teeth?
MS: I don't think so. And the San Diego Area Governments do a fair share analysis based on population projections and everything else. They say that a community has so many people so it should build so many houses. Then you get all sorts of arguments back that the community is already built out [and there is no room for affordable housing]. The San Diego mayor argues that that the city of San Diego either carries the brunt of the requirement for affordable housing. The other areas that are asked to provide affordable housing are some of the poor communities, like National City, which is about 80 percent renters and it is at the low end of the economic scale. National City is about eight square miles and has about 60,000 people and most of them are Latino and Asian. The Latino population is relatively poor and the Asian population is more middle class.
SDL: So the mayor's point was: why should San Diego be the only jurisdiction asked to build affordable housing? How about the other, wealthier communities?
MS: Right. Some communities are doing much better than we are. Oceanside and Escondido are doing quite a bit of affordable housing. The numbers are not comparable because their populations are much less but relatively speaking they are probably doing a hell of a lot better than we are in providing affordable housing.
SDL: I guess a broader, regional plan for affordable housing that includes not just the city but also the suburbs would be politically difficult to agree upon.
MS: It would be. Susan Baldwin is someone you might want to talk to about that. During my career at the city I have had my ups and downs and at one point I was given a job that drives people out of public office. It comes up periodically when we try to consolidate public services. This effort would make sense because of duplication of services between the city and the county. The question is: how do you begin to consolidate public services. So I went through that exercise. We had 20 services we were trying to put together and housing was one of them. It was a logical because each city maintains a long list of people who want to get into affordable housing or get Section 8 certificates. And each jurisdiction maintains its own list. So, if you are trying to get into an affordable unit, you have to go get on everybody's list, which is very difficulty.
We went through this exercise of trying to combine this into a regional housing agency and no one wanted to give up any turf. Everyone wanted to maintain the status quo. While there are all kinds of advantages to the individual who is using the service and efficiencies in combining and managing the services, the politicians were afraid of someone taking control and doing something in their area over which they had no control. Community groups were worried that if they gave up [their control over housing decisions] they would put all the affordable housing in their area. So the consolidation effort didn't go anywhere. The only thing that did work was that we had a number of meals on wheels programs for seniors that none of the jurisdictions wanted. So we were able to foist that off on some agency that had no control over their future. Everybody gave that up willingly and then they patted themselves on the back about how well they did. I'm cynical. I'm sorry.
SDL: Is most of the affordable housing built here 100 percent affordable and done in a relatively poor neighborhood where there is not a lot of opposition?
MS: I think it is mixed. We have success on a number of levels. The Housing Commission has built a number of units on a small scale that fit into neighborhoods very well. They usually serve the same income stream but I would argue that it is of a higher quality than some of the stuff that is privately done. On the other hand there are cities like Carmel Valley, a relatively high-end part of the city, which put in a relatively large affordable housing project with an award winning design. And I admire the city for fighting to put it in there despite the opposition and threats of recall and everything else. Now nobody knows it is there. It is 100 percent affordable and it fits right in the neighborhood so you don't know that it is not market-rate just like everybody else.
On the other hand, behind you is a poster from an international design competition we ran in 1992 to build affordable housing projects. The idea was we would then go out and develop it. One site is in Linda Vista, which is a neighborhood of mixed ethnicity and is also the site of the University of San Diego which is the largest Catholic University. And it is on land next to the trolley station. It is separated from a lot for the housing because of the topography. The plans called for a mixed-use project. They finally broke ground and it has commercial, market-rate and affordable housing. The neighbors didn't want any more affordable housing in their neighborhood and traffic congestion comes in no matter what you build. But it is being built. It is quite large. It is being built by a group called City Link. William Jones is the president of City Link. He is a former Councilman from southeast San Diego, a strong advocate for his district. He is a young guy who went to the Kennedy School of Government and was in investment banking. He decided he wanted to start a firm to build mixed-use housing at an affordable rate. He teamed up with Price Charities. Jack McGrory, who headed that committee, the former city manager who built City Heights Urban Village, is building this project right now. He overcame difficulties. He does good work but there was still opposition to it.
SDL: This is not just mixed-use it is mixed-income?
MS: Yes. It is a good project to look at.
The other project we looked at was an old railroad right-of-way in La Jolla. It was an outstanding scheme of row homes that the architect did that captured the flavor of La Jolla. (Irving Gill was one of our prime architects at the turn of the century.) But the neighbors just came unglued. This was also going to be affordable. Physically it fit right into the neighborhood. It could have been managed properly. La Jolla, which is a high-end neighborhood, had a black ghetto for a long time but it keeps shrinking. This was some affordable housing that was built 25 years ago. It has been encroached upon quite a bit. A coalition of church groups there built the first house. This housing was going to be built in the same general area. And we had people come forward who said they really supported the housing. But, they said: "We know those people will feel uncomfortable living in La Jolla and it is not fair for you to impose that on them."
Then there were arguments that even though the city had owned the land for 100 years, the city should sell the land at a high price and use the money to build in a place where they could build more units in a lower-price community. The bottom line was that it never got built for affordable housing. I think the project is moving ahead for high-end housing. It is the same design. I think the city has sold some of the land and the money goes into a pot but how much housing that really buys is always a question because we dip into that pot for fixing potholes and other emergencies measures.
SDL: The argument that the low-income people who move in here are not going to feel comfortable is truly perverse.
MS: That is the same argument we heard in Del Mar Heights and Carmel Valley. If you build five units it will destroy the traffic circulation and therefore you can't do it. Everybody is afraid of change. We have had situations at Script's Ranch in an area with $300,000 houses where a developer came in with a proposal for $200,000 houses. We heard the same arguments that it would lower property values. The neighbors fought it because they thought it would change their property values.
SDL: What do you think of that argument? Do you think it would?
MS: I live in an old neighborhood in Mission Hills adjacent to Hillcrest and it is a high-end neighborhood that is looked at as single family, low-density residential area. But the average density is actually about 14 units an acre because we have granny flats and small apartment buildings. The extended lot size in San Diego is 50 by 100 feet. We have 25 by 100 and 50 by 50, smaller lots and larger lots. Our property values have gone up tremendously since I moved in and the small lots have not affected the value of the large lots. Everything has gone up proportionately. It was a policy of the city in the 1920s and 1930s to lay out the city so you could have a mixture or incomes. You see this on what is called the mid-city mesa. In the city the lots on the north south streets are the standard 50 by 100 but on the east west streets the lots are all 50 by 50 -- half the land area. [This makes them considerably cheaper and it means that people with lower incomes can live in this affluent area]. The idea was that from the street all the houses look the same so when you drove around you never said: "That is a poor house." It worked very well. And the houses on the 50x50 lots were cheaper because they were on a half-sized piece of land. And the houses were actually smaller.
We also used to allow granny flats. Now people have the right to have a granny flat according to state law. But some cities have fought that. Here the Council found a way to allow them without actually allowing them. Basically they said that you could have a granny flat on your property if the zoning was for two units on your property, which it doesn't allow. The issue is going to court. Our neighborhood has a lot of these. During the Korean War and World War Two the city encouraged building a lot of those units. The house I paid $40,000 for thirty years ago is now worth $900,000. There are three granny flats right around me and it has not changed the value of my house.
SDL: Are there a lot of illegal apartments and granny flats in houses?
MS: In order to meet this housing crisis we are having people double and triple up and convert illegally garages into apartments. In my neighborhood you have garages that were built that way with cars on the ground floor and a residential unit above it. People build them without kitchens because a kitchen is what makes it a legal unit. But then people go back and bootleg in the kitchen later. Some people look at them as problems because of who might live there. In the area around the University they worry about getting a lot of college kids. Actually what happens around the University is that people rent out their house to six or seven college kids and it becomes a problem.
SDL: In San Francisco and Berkeley people are building affordable housing because they have to. Is San Diego different?
MS: You can get a 25 percent density bonus if you build 20 percent as affordable units. Some people have taken advantage of that but a lot don't. A lot of communities have fought affordable housing. The resistance comes from people's fear of who might live there and how it might affect their property values.
The density bonuses are an incentive program. Builders do not have to take advantage of it. It is not required. Developers sometimes don't want to deal with it because of the hassle. We have another problem where the zoning allows you to have a higher number of units but developers opt for a lower number of units because it is simpler and you can build ten units and sell them at a higher price than if you built 20. The city has talked about density requirements. Downtown they have imposed it. In other places they are still talking about it. The inclusionary housing law is going to make it mandatory for developers to make a certain percentage of their units affordable. You either do it as an in lieu fee or build it as part of your project or as part of another project.
SDL: So there are still ways around this. But if the inclusionary housing requirement works it will scatter more affordable housing around the city. If developers opt for the in lieu of fee then the money can be used to build 100 percent affordable housing in an area where property values are lower. Is that good?
[Here, Michael Stepner introduces Tom Carter, an in-fill developer with whom he works in San Diego.]
Tom Carter: I don't think so. I came up as a lender. Early in my history I was told by the appraisers that it was a negative thing to have a $150,000 house near your $300,000. I found out when we started to do SROs downtown next to half million dollar and million dollar condominiums that it didn't seem to make any difference. We did a project down the street here that is in the air port's flight path. We built housing at 30th and Alcahone (sp?) from 1,000 square feet to about 2,200 s.f. and we priced them between $200,000 and $500,000 all in one city block for distinctly different housing types. It worked great and no one seemed to be bothered.
We are doing another where we are going to have 96 senior apartments that are affordable at 50 percent or below AMI. We will have 14 town homes for families at 100 percent AMI. And we will have 24-market rate town homes. They will probably sell for close to $400,000. We are also building 13,000 square feet of retail and about 6,000 s.f. of that will be taken by the city for a community center. So we mix them up and we believe it works, particularly in the urban community.
When we started out we wanted to build 30 units. The city wanted 120 units. We said we wouldn't build a four story stack building. So we got into this deal. They wanted to densify the area in North Park in San Diego
SDL: Do you get resistance from people who are already there?
Tom Carter: No.
SDL: How do you explain that?
Tom Carter: Seniors are less threatening to people. I think if we came in with 96 affordable apartments for families it would be a different stories. People are willing to accept seniors. And they are willing to accept families in a town home a for sale product. But when they look at the larger rental developments they see that is where there have been problems in the past.
SDL: Are there advantages to you for doing it this way? Do you have access to financing you wouldn't otherwise get?
Tom Carter: Yes. This is something the city wanted so they bought the land and we demonstrated that we could build these for a fee.
SDL: Is this type of mixed-income development quite rare in San Diego?
Tom Carter: Yes.
SDL: Have you done it before?
Tom Carter: Yes and I did it as a lender. But as Michael will tell you I am a little different than people in the rest of the industry. The idea is to try to leave something good behind when you leave; and to try to take the older communities and bring them back to where they should be.
SDL: This is being done in the older parts of San Diego that are economically more depressed than other parts of town?
Tom Carter: Yes.
SDL: And by bringing in a development that has a mix of incomes and retail that helps bring up an area?
Tom Carter: Yes. And we have done other things. We have done a couple of subdivisions in the southeast San Diego in a low-income and very heavily-minority area where there are a lot of apartments that are old FHA 236 and Section 8. I did a couple of subdivisions there with Michael that had these cul-de-sacs and he doesn't like cul-de-sacs. We built across from a very old FHA 236 project and another one that had a lot of Section 8 residents. It was a very tough street named Logan Avenue in San Diego. And we came off Logan at a cul-de-sac so the houses were all fronted inside. It changed the whole area. We sold these five years ago for $130,000 to $160,000 and they would sell today for $350,000. So it has brought things up and you can walk that street today and feel comfortable.
I called this banker about this lot and the banker asked: "Do you know what you are doing?" We bought this lot for $75,000 and put 23 houses on it. We had a storm drain and some other things we had to do. The point is that I think you can bring about change that way. I am a big believer in home ownership. I think you need to mix homeownership with rental and if you get too much rental it doesn't work as well. You have to have people on the street who are saying I don't like what is going on over here and are willing to call their City Council representative and say: "Hey"
MS: That [the insistence on home ownership] may be a west coast phenomenon because in my family we were always renters. My mother and father lived in the same apartment in Chicago from 1938 until she died in 2002. And except for the last 20 years when the building went condo, and my brother and I bought it for her, it was all rental. And there were long-term renters in that neighborhood who would get out and yell and scream about everything that a homeowner cares about. I think it is just part of the nature of the culture, perhaps. But San Diego is not Oakland or Baltimore; there is no comparison. We don't have that many stressed out areas. We have areas that need help. And we have some areas that are marginal. You don't want to deal with one house somewhere. You need to do enough [housing] to make a change.
SDL: You are doing this because you want to leave something good?
Tom Carter: And it is more interesting than doing traditional development. I was at San Diego Federal from 1964 to 1981 and I was the chief loan officer and the chief financial officer. Then I went on and built subdivisions in the 1980s. Then I went back for two or three years when San Diego Federal became Union American. Then I decided to do this with the rest of my life. It is far more challenging but it is also more rewarding personally but not financially, necessarily. Some of our projects we have done well on and some we don't do as well. The costs are much different. In traditional development you go out and build four models and you know what your costs are at that point and you have your lots and you are all set. You sell your houses and move on. In this situation, at Marston Point, we sold houses when we were framing them. There were four different types of housing on one city block. Michael got us a nice write up ion Urban Land about it. It was 42 units and there were 11 row homes and 16 court homes and 7 lane homes. There is a common drive of enhanced concrete and the garage is also the front door. Then we did a four story building over parking. And there were eight units there. They were all market-rate but the starting price was between $200,000 for the lane homes that were 1,000 square feet to $500,000 for the top units on the four-story building that were over 2,000 square feet. So this was a mix of incomes without a subsidy. The negative is that you do see airplanes come over the buildings. That made the land affordable. It was one of those failed projects of the 1980s. Reese and I bought two pieces like that in this area.
SDL: Do you see people in the city here building mixed-income complexes where there is both market-rate and subsidized housing in the same project.
Tom Carter: I don't see much of that. We were able to get started because we came in before anyone thought that this was going to work in this area. Now a lot of the big boys downtown like Intercorp, who are not going to build downtown any more because the price has gone up, are coming into our area. As a result, Reese and I have started moving east. We are more inclined to work with these community groups and to not build monolithic projects than are the larger developers. The national groups like their monolithic approach because they know how to do it.
MS: An area like Alcahone which is 15 minutes by car from here is an area that is under-utilized and is ripe for change. There is a fear of people who are different in terms of class and race but it works two ways because there is a fear in some of these neighborhoods of gentrification. And that also has to be dealt with. Then there is the under-funded infrastructure in these areas.
I do some work in National City and we are starting to get some interest from developers because it is close and there is land there lying fallow that is prime for housing and mixed-use development.
SDL: Why is the Rosecrantz strip below Point Loma not redeveloped with commercial spaces on the ground floor and apartments above?
Tom Carter: I think it will be.
MS: Tom and I both live in Mission Hills. Walkington Street is a main thoroughfare and it has small commercial stuff, a new Blockbuster Video, and just junk cheap stuff. Tom took a block that had a garage on it and some falling down houses and tore it all down and built a mixed-use project that has row houses, apartments, and lofts and about 6,000 feet of retail on the ground floor. It is the first such redevelopment in this area but the whole strip is going top change. We had a design workshop recently on the next block over that a developer has bought. The whole strip is going to change because the area is under utilized and at 30th and Alcahone there is stuff that has just outlived its usefulness. It is underdeveloped.
Tom Carter: I think this kind of redevelopment will keep going. You can look at the price of housing in California and if you start at the coast it will be high and if you move inland it will be cheaper. Mike and I live in Mission Hills which is about five miles from the beach.
MS: If I stand on my chimney I can see the ocean.
Tom Carter: We get this lovely breeze most of the time. And it is the best area to live in but we have been like Los Angeles: we developed out. Call it white flight or whatever but we now have places like Scripts Ranch, Rancho Bernardo, Penescitos. A lot of my friends I grew up with just bailed out. They didn't want to deal with people of different colors. When I went to high school in San Diego it was a third white, a third black, and a third brown. It wasn't a big deal. You mix it up every now and then but it was not a big deal. But my point is that people always thought there would be plenty of land here and that they would just keep building those freeways and we would have all these great suburbs and, candidly, it isn't working. We have a big problem in this community about getting people around.
SDL: Was the Mission Hills Commons a mixed-income development?
Tom Carter: It is a total of 65 units on a 60,000 square foot lot with 6,000 square feet of retail. We had eight row homes of 2,200 square feet that sold for $600,000. One of them resold for $850,000 three months later. The apartments are market-rate. We thought we would do better on the rents but we didn't but now they will probably come up. We thought we could rent for what downtown gets or Mission Valley gets and we couldn't but I think it will eventually get there.
MS: The Uptown area is a mile down the street here on University. It is 15 acres and it is a mixed-use development with 200,000 square feet of retail and office including a Ralph's supermarket and a Trader Joe's supermarket and it 300 housing units and some public space. Some of the housing is row houses and some is apartments and condos. It is a poster child for infill development. It is called the Uptown District.
Tom Carter: There was no redevelopment money in it.
MS: It was a Sears store and Sears decided that it was not upscale enough and the city ended up buying the site for a library that never materialized. Then the city developed a plan and solicited proposals from developers. It had its ups and downs in terms of the commercial space. The timing was bad.
SDL: These under-utilized areas next to a hill filled with houses (such as Point Loma) that go for a whole lot of money: why are they not being developed?
Tom Carter: Some will say it is because of community planning groups oppose development but we have found that if you work with them you can do fine. It requires a certain amount of diplomacy.
MS: There are other market obstacles. We have some parcels where they have been owned by the same person for a long time and they have a steady income from them and they think that if they just hold out long enough they can build a 100 story building on that site. The zoning won't allow it but if they hold out long enough it will change and they will make a bundle.
You might want to speak with William Jones. You might also want to speak with Jack McGrory at San Diego Revitalization, the Price/Costco charitable organization. It's similar to the Rouse Corporation in Maryland. City Heights Urban Village is an area that started out with the community wanting a police station in the neighborhood. The area was high crime and a port of entry which has 40 some languages spoken in the schools. It has social problems just due to the fact that it is a port of entry and the neighborhood has changed. A freeway went through and that increased the blight in the neighborhood. The community wanted a police station and to hang all the criminals from lampposts. They went through a whole process of building support and the city bought an old grocery store and they were going to convert part of it to a police station: just hang a sign on it but the community wanted something more than that. They didn't want a fortress. The thing has turned into a private public partnership with Price Charities in the lead. William Jones was involved with this. They developed a police station that also has a gymnasium in it and community rooms. It also has a branch of the community college, two elementary schools, a very large park, a swimming pool, and tennis courts. It is all part of this development. There is also a shopping center with one of the busiest Starbucks in town. And it has housing and offices. A lot of the housing is subsidized. A lot was used to house people who were displaced when stuff was torn out. It was crime ridden before but now things are changing. There are sweat equity deals to help offset the cost of the homes. There are also bridges across the freeway. It is quite a development. There is both rental and home ownership. Some of it is subsidized. They have a complicated thing they had to do because of the redevelopment law. It is very complicated. They are doing other things in the neighborhood with the Community Development Corporation. A couple blocks away they have broken ground and are under construction in a mixed-use project that has subsidized housing in it and services for the neighborhood. They are working closely with the community. There is some feeling that now we have this monster that controls everything. So there are mixed feelings about it but it has done something. Talk to Jack and William about it because it is one of our pride and joys and we are trying to emulate it.
Joan Crock, who just died, was the McDonalds [hamburger] heir; her husband was Ray Crock who founded McDonalds. She ran a foundation and on the eastern edge of the city the built something similar without housing but with all the public services and social services in it. It is a joint venture with the Salvation Army. They feel that by improving the neighborhood people will start investing and that is what is happening. It is a catalyst for private investing.
SDL: So we have poorer parts of the city where projects like this are bringing up the neighborhood. In wealthier parts of the city you have the SROs going in. Is there an effort to scatter affordable housing into lower middle class and middle class neighborhoods?
MS: The Housing Commissions project in Carmel Valley or Del Mar Heights they have some in University City where they have built affordable projects. We also have the North County we have a lot of non-profit housing developers in the city that go into low-income neighborhoods and build affordable projects. It is tailored for the neighborhood and provides homeownership opportunities for people in the neighborhood to step up into without leaving the neighborhood.
In National City, Alpha Project, which does homeless services, wants to scatter six or seven units at a time in National City and out of the seven five or six will be market-rate and one is going to be subsidized. And these will be market-rate units in a poor neighborhood so it will provide homeownership opportunities. They are looking at that as a financial tool and a way of serving their mission. Talk to Bob McElroy.
SDL: Tell me about Brad Wiblin at Bridge Housing.
MS: He is with Bridge Housing, a non-profit developer that builds market-rate housing. In an area called the Bronze Triangle, which is just east of downtown, a low-income black and brown neighborhood, there is a very strong CDC there run by Gail Walker who was a welfare mother. She started a daycare center and now has 90 employees and pulled in all sorts of money from the Annie Casey Foundation to provide social services and a plan for the area. The San Diego Unified School District has a school warehouse on a two and a half acre site in the Bronze Triangle. They are getting rid of it and they put it out for development. Bridge Housing and MAC Housing are the final two competitors to build mixed-use, some retail, some market-rate units and some subsidized housing. Out of that they have to figure out a way to pay money to the School Board that needs the money for school services.
Brad is doing that and it and he came up with a nice mix of mixed housing types and mixed incomes. When I say it is mixed incomes it is relative to the area. Some of it is market rate and some is subsidized. I think 80 percent of the people in that area are renters. It is a pocket of poverty. But they want to bring in new development because there is a lot of under-utilized land and they want to have it mixed income. But because of this relationship with downtown residents are also very afraid of gentrification and wiping out the existing development. Downtown is moving the new ballpark to an area just adjacent to the neighborhood. Residents feel that if they can have people look at some of this under-utilized land they can have new development without displacing the existing stuff and raise everyone's status
SDL: It might work for the people who are already there who own the land.
MS: And most of them don't.
SDL: But as the under-utilized land gets developed those people who are renting in the area may see their rents go up.
MSL Rising rents may be a problem. One of the things they are looking at is the city's inclusionary housing ordinance so that if the new developers come in and pay an in lieu fee rather than build [affordable housing], and then the housing commission can buy properties from some of these absentee landlords. Then they some rehab and keep people in place. It's an interesting approach. Whether it will work or not remains to be seen. It may be just talk.