Friday, Jan. 19, 2007 | When El Cajon opened its arms to condo converters a few years ago, it wasn’t just looking for increased property taxes or other benefits received by other cities during the housing boom. It sought the developments as a way to revolutionize the city’s rental-dominated, run-down neighborhoods — with private developers picking up most of the bill.
And revolutionize the city they have since the first condo conversions popped up there in 2003. With about 18,000 apartments and 17,000 detached homes, El Cajon was looking to improve the aesthetics of its streets and to cut down on crime and noise rampant in several of its apartment buildings with absentee landlords. Now, with about 1,700 units converted to condos, sections of the city have undergone a facelift.
Decades-old, nondescript homes with sparse lawns line stretches of Mollison Avenue, a main thoroughfare in the shadow of East County hills. But between Broadway and Chase streets, the chic facades popular in brand-new subdivisions prove a stark contrast to some older, boxlike apartment buildings. For sale signs broadcast developments with names like “Casa Granada” and “The Galleria.” It’s these kinds of upgrades the city’s movers and shakers hoped private residential development could bring their town.
“They’ve got flagstone, new stucco, gated communities, nice lawns,” said Jim Taylor, a member of the former condo-conversion oversight committee. “El Cajon has sort of seen a metamorphosis. It’s not the city it was five or six years ago.”
The condo-conversion phenomenon in El Cajon came in a flash. Where only a few apartments-turned-condo existed countywide at the start of the decade, some 1,400 apartments had been approved for conversion in El Cajon by the end of 2004. And in 2005 alone, the City Council approved another 1,146 units for conversion.
But the general housing slowdown of 2006 didn’t leave El Cajon untouched. Last year, the council approved only about half as many projects — 641 units — as it had in 2005. And many of the projects that started building when real estate was sizzling finished construction just as the market had cooled. For much of the year, buyers exhibited reluctance to purchase at current prices and the number of converted condos sitting unsold grew.
“We’re saturated,” said local real estate agent Carol Carey, who’s been selling mostly new construction in El Cajon for 20 years and now sells condo conversions.
The 230-some units currently sitting unsold in El Cajon represent one of the lowest-priced batches of housing units in San Diego County, said Michael Colby, economist at MarketPointe Realty Advisors. About 125 more units are in the pipeline to be released in the near future.
Developers got so excited about the product that they kept converting until the market started to change in 2006, Taylor. Some apartment building owners went through the process of “mapping” their buildings for conversion but find themselves with nervous backers now as housing has cooled in the last six months. At least one project, Lexington Park, is on hold indefinitely while its developer, Maisel Presley, waits for financing, according to a sales representative for that project.
“In El Cajon and across the county, we had a ‘feeding frenzy’ — eventually we ended up with a glut,” Taylor said. “I don’t think anyone really realized it’d be as popular as it was.”
Despite the general slowdown in the county’s housing market in 2006, Colby said the prices for these units have hovered at about $200,000 for one-bedroom units, $275,000 for two-bedroom, and $320,000 for three-bedroom units for about two years. A new condo with similar square footage could cost at least twice that in downtown San Diego.
With its abundance of low-priced housing units, the city has orchestrated an effort to encourage people to buy homes rather than to rent. When people take pride in their home, they say, the community benefits. Converters have hired marketers and partnered with banks and lenders to promote homeownership fairs and forums, and to change the stigmas associated with El Cajon as an unexceptional place to live.
Indeed, in one of the condo-conversion developments on the city’s Mollison Avenue, water trickles from a sculpted fountain in a quiet, palm-shadowed courtyard, surrounded by a ring of chic brown and taupe buildings.
If you’d described that setting to real estate broker Rich Baxter when he was growing up in the East County city — his “teenage stomping grounds” — a couple of decades ago, he’d have laughed you out of town.
“I’ve watched it all change,” he said. “It’s more of a neighborhood. Then it was ghetto.”
That the city’s desire for a metamorphosis would be met with condo conversions was kind of a coincidence at the start, said Jim Griffin, the city’s director of community development. El Cajon wanted to fix up its apartments, of which it had thousands. Investors were looking for ways to make money off of a tremendous real estate boom in San Diego County. In the boom, prices for traditional houses and condos soared past affordable levels for a vast majority of homebuyers.
The City Council amended its planning code to attract the developers to the city. For example, it eased parking requirements so that converters, who would otherwise have to ensure each unit had one-and-one-half parking spaces, would not have to add any spaces that didn’t previously exist.
“[The council members] have taken the position that it’s a market-driven issue,” Griffin said. “If you don’t have any parking, your chances of selling your units are less.”
But that doesn’t mean the city’s officials have taken a hands-off approach and let private development take over, Griffin said. The City Council issued a nine-page booklet of requirements for would-be converters, requiring certain levels of fix-ups to the developments’ roofs, foundations, exterior paint, plumbing and a long list of others. And converters, more so at the beginning of the trend, were required to give money to tenants they would displace with the conversion.
Griffin and other city officials don’t know how to forecast the future for the conversion market. After a slow first half of 2006, sales have picked up. In the last three months of 2006, 173 condo conversions sold. That was the best quarter for sales the conversions in El Cajon have ever seen, following the largest run-up in unsold units in the previous three-month period, according to MarketPointe.
“The market appears to have turned somewhat,” Colby said. “You’re seeing people coming off the sidelines.”
It will take awhile for such a turn, if it continues, to jumpstart the conversion activity again. The city has seen few applications for new projects in the last six months. And prices, though they’ve fluctuated just slightly in the last two years, don’t reflect incentives offered by sellers. Among several of the sales reps for conversion projects surveyed, a typical incentive package currently includes between $10,000 and $15,000 — about 50 percent more than would have been offered on similar projects a year ago, Colby said.
Griffin said it’s difficult to quantify the way these products have changed El Cajon, especially since the phenomenon has evolved without much prescience.
“The benefits are going to be significant,” he said. “Some of these units are selling for much more than I even thought.”
El Cajon hopes to quantify soon how the condo conversions will have changed its ratio of homeowners to renters, increased property taxes and affected demographics.
“In another year, we’ll see how this balances,” he said of the phenomenon. “It’s something that just evolved.”
And in the meantime, he said, a prettier streetscape resulting from private development is one thing worth looking at.
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