The City Council is slated to vote tomorrow on a settlement of a long-running lawsuit challenging the city’s oversight of the conversion of apartment units into condos for individual sale.

The settlement would affect the approval process for future conversions. Terms of the settlement would limit the council from approving any more than 1,000 such units per year, and would mandate a yearly report on the environmental impacts of the developments. The plaintiffs, the Citizens for Responsible Equitable Environmental Development, led by environmental attorney Cory Briggs, would receive $75,000.

Though tentatively approved by the City Council in a closed meeting in March, the settlement is far from a sure thing, Briggs said. But even if it’s passed, Briggs said the settlement is geared toward the future and wouldn’t affect the thousands of units that have come on the scene in the last few years.

Developers have applied to the city’s Development Services Department to convert more than 20,000 such units since 2003. Any of those units whose applications are deemed complete would be exempt from the 1,000-unit yearly allowance, should the settlement be passed.

“We never expected to be able to turn back the clock on the tens of thousands that were approved,” Briggs said. “We’re trying to make sure we never have a … housing crisis of the sort we just went through.”

Briggs contends that condo conversions have been detrimental to the city’s affordable housing stock, as they’ve displaced tenants from apartments and placed costly upgrades in for-sale units that ratchet up sale prices.

But Matthew Adams, lobbyist for the Building Industry Association of San Diego, said the 1,000-unit cap is arbitrary, and that limiting the phenomenon will cut out some of the most accessible units for first-time homebuyers. He contrasted the potential settlement with the council’s request of the building industry: that it build more units at lower prices.

“To place these artificial restrictions on what can be the most affordable homeownership opportunities seems counter to what they’re saying, that [there’s a] housing state of emergency,” Adams said.

Conditions in the housing market have dictated a slowdown in the condo conversion trend. But the prospective settlement comes after an unprecedented boom for the apartment-turned-condo phenomenon.

The conversion projects that opened in the city of San Diego in 2002 brought about 440 units to the market. But that number increased exponentially, with 1,270 units added by projects opening in 2003, and more than 4,300 in 2004. The trend peaked in 2005, with new projects bringing about 5,600 units to the scene. Those statistics come from MarketPointe Realty Advisors.

(About these numbers: Developers often convert projects in stages, but as soon as at least one unit opens, MarketPointe adds the total coming units to its total.)

In the first three months of 2007, just 16 units in a condo conversion project came to the market, according to MarketPointe.

Adams said the settlement may not have a noticeable effect in the current market conditions, but could be punitive should the market return to the fervor it saw in 2004 and 2005. He said if the settlement is passed, the BIA is pushing for a “sunset” clause that would require the City Council to re-examine the cap in a few years to gauge its effectiveness and impact on the market.


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