Friday, Nov. 17, 2006 | As the number of downtown San Diego’s towering, gleaming condo developments has reached skyward, the proportion of affordable-housing units has dwindled.
More than 2,800 new housing units have flooded downtown since July 2004, upping the neighborhood’s housing stock by nearly 30 percent. And, despite a general slowdown in the region’s housing market, construction cranes still stand over the downtown landscape as builders hammer out the nearly 2,400 more due by the end of June 2007.
This new influx of market-rate units has diluted the legally mandated stock of affordable housing in downtown, an area that once was a regional nucleus of inexpensive units. The Centre City Development Corp. monitors the affordable housing mix, and what was a 24 percent ratio in the 2004 fiscal year dropped to 21 percent in 2005 and 20 percent in 2006. A further drop to 18 percent is projected for the fiscal year that will end June 30. The agency is required by law to keep a minimum of 15 percent of the housing stock available for households of low and moderate means.
Though the production of affordable units has stayed fairly constant – with about 100 funded each year by CCDC – the market-rate unit construction has far outpaced that growth.
Dale Royal, senior project manager for CCDC, projects the affordable- to market-rate ratio to dip further to 17 percent in fiscal year 2008 before rebounding to 19 percent in fiscal year 2009. That forecast takes into account some of the market-rate projects that have been pulled out of the pipeline due to homebuilder cutbacks.
Redevelopment efforts have made downtown a magnet for housing, business, hospitality and entertainment ventures, all of which have contributed to a significant population increase in the downtown core in the last few years.
But most of the people who work the jobs to keep the magnet charged – those employed in cleaning, security, food, hospitality and parking services – can’t afford to live downtown. And the problem’s worse if they have families.
“If we’re going to create low-wage service sector jobs, we’re going to have to have housing for them in downtown,” said Murtaza Baxamusa, economist for the Center on Policy Initiatives, a think tank that advocates for the working poor and labor issues.
CCDC officials say creating affordable housing units downtown is a priority. The city requires builders and developers to either include affordable units in their project or pay “in-lieu” fees into an affordable housing fund. Downtown residential developers have overwhelmingly chosen to pay the fees instead of incorporating affordable units.
Hoping to spur developers to build the affordable units rather than opting for the fees, CCDC has adopted this year a complex bonus plan for builders who include affordable units in their new projects. Officials say the plan will help with the agency’s density goals for downtown as well as with the affordable-unit percentage.
“The whole idea of a downtown is to give people an alternative to not have to drive to the suburbs,” Royal said. “It just makes sense to have housing that matches the needs of the employees in this area.”
Redevelopment agencies are mandated to monitor and preserve the 15 percent ratio for the development under their influence. They issue loans and subsidies – sometimes to developers, sometimes to tenants or homeowners. Affordable units are reserved for households considered to be of low or moderate means. The stock reserved for the lowest income category must make up 40 percent of the affordable units.
But critics say it’s important to look not just at the number but also at the type of units produced for affordable rates. Currently, none of the affordable units in downtown are for-sale units. Of CCDC’s 2,644 affordable rental units, 1,011 are single-room occupancy hotel rooms, a type of transitional housing for formerly homeless individuals that usually consist of a bed, a small refrigerator and a microwave.
In addition to the SROs, about 800 units house senior adults, leaving about 850 apartments and lofts. Only 100 units have two bedrooms, and 57 have three bedrooms, according to a CCDC breakdown of the inventory.
Sometimes tax monies and fees collected from, for example, a downtown project, can be used to fund affordable housing projects outside of the redevelopment zone. Those units count on a “two-for-one” basis – for every two affordable units funded outside of downtown, CCDC can count one of them toward meeting its housing requirement.
CCDC has subsidized more than 500 units since July 2004. About 170 of those have been in downtown.
While many analysts are happy to see anything being done to combat the city’s affordable-housing shortage across the region, some say the units coming online still aren’t addressing the major deficiency of affordable, family-sized housing in downtown. They say CCDC has milked the easier-to-finance, cost-effective SROs by including them in its affordable housing ratio, thus achieving a higher percentage than the agency would without the SRO units.
“For over a year, we’ve been emphasizing family housing, which is being left out,” Baxamusa said. “It’s a regulation-driven enterprise, rather than a need-based one.”
But Royal said the market pressures often dictate what kind of housing is built.
“We’re committed to making downtown an alternative for all income levels and, as much as possible, for families with children,” he said. “But builders have told us they want to see stronger demand for family housing before they’re willing to aggressively build for that.”
The addition of Petco Park and higher-end condo complexes to downtown has attracted the yuppie and investor crowds to the area, Baxamusa said. For some of them, their primary residence is elsewhere in the county – “that’s why you see a lot of dark lights downtown at night,” he said. But he said the attitude of many city officials has been one of “market fatalism” that has let developers determine the course for the city, with the city officials barely questioning the kinds of units they’d be building.
“We’re really worried about the housing boom downtown,” he said. “Once you let the market take control – we cannot have the city subject to this kind of fatalism.”
But Royal said CCDC is not taking a passive role in the affordable housing efforts. The bonus program, called the floor area ratio bonus, essentially offers builders exemptions from space and height restrictions (in some recent plans, an additional eight to 10 floors), if the builder presents a plan to reserve 10 percent of the project’s units for affordable rental or sale.
“It’s had a marvelous impact by making it very attractive for developers to seriously consider building affordable units,” Royal said.
A development called Mondrian is one of the first to take advantage of the bonus. The mixed-use high-rise with more than 860 units, of which 65 are affordable, is planned to be built between 8th and 9th avenues and A and B streets downtown. Because of the included price-restricted units, the developer, Phoenix-based Gray Development Group, was awarded an additional 253,000 square feet for the project. The project is currently in the final stages of getting approval from the Planning Commission.
But with belt-tightening in order for most housing developers these days, even “seriously considering” including affordable units may be tabled for most developers until the market stabilizes. The financing structure for the price-restricted units – incorporating government subsidies and other nontraditional funding sources – is more complicated than financing the market-rate units.
“Who’s going to build these things?” Baxamusa said. “The problem CCDC’s facing is the question of developers being willing to build these types of housing. Financiers are not comfortable with these bonuses.”