The one-story building located at the corner of Fourth Avenue and Palm Street in Banker’s Hill is more than a dermatology office. It’s a window into the feud between preservationists and developers.
In 2021, the city’s volunteer Historic Resources Board determined the commercial building should be set aside for its cultural significance. They argued it was a rare example of the Streamline Moderne style by architect Charles Salyers in the 1930s.
There was one problem: the skin doctor who owned the property didn’t think it was worth protecting. He planned to sell the land to a developer to make way for a 72-unit mixed use building only two blocks from Balboa Park.
The dispute came to an end last year when the City Council intervened to remove the site’s historic designation. That act was notable by itself, but the discussion exposed a conflict within San Diego government.
On the one hand, officials are seeking to incentivize the development of taller, denser buildings on the rationale that boosting supply will bring down the cost of living and bring the city closer to its climate and mobility goals. But many of those same areas targeted for development — close to major transit corridors — also tend to be older.
Housing advocates have pointed to the dermatological office as evidence the historic review process needs reform. Their beef isn’t with historic structures per se, but the standards and frequency with which historic designations are applied and what the subsequent tax break awarded to historic structures means for the city’s bottom line.
Instead, advocates argue that historic designations are being weaponized to pump the brakes on construction while putting money in the pockets of single-family homeowners without much oversight from City Hall. Preservationists have countered that historic homes are a fraction of the region’s housing stock and that developers are attempting to knock down one more barrier to maximize their profits.
Yet another appeal to overturn the historic designation of the Mission Hills library is expected to come up for City Council discussion this summer.
“Some of the stuff we’re saving has nothing to do with history,” said Marcela Escobar-Eck, a landscape architect, planner and former city official. “It’s just about trying to stop development.”
Less than two years ago, she was part of a working group for Mayor Todd Gloria that included developers and labor leaders. They concluded “existing historic preservation criteria are generous and slow the pace of middle-income housing development.” Gloria’s staff agreed to “evaluate all historic regulations and develop a historic resources regulation reform program.”
That report came on the heels of a white paper produced by a group of land use consultants and shared with the city. It proposed, among other things, that officials stop designating entire areas as historically significant in community plan updates and raise the requirements for what’s deemed historic.
(Left to right) A home in South Park and a home and condominiums in La Jolla. / Photos by Ariana Drehsler
Escobar-Eck and others contend the Historic Resources Board is prevented from weighing the current use of a property against its long-term use, meaning the number of units the land could one day hold.
“I’m not saying let’s tear everything down. I’d be the first one to stop that,” she said. “But there’s got to be some balance.”
The groundwork is being laid for change. The mayor’s proposed fiscal year 2024 budget notes that the city’s historical resources program is being transferred from the Development Services Department to the Planning Department. The policy and individual site work were broken up and divided between the two departments in 2016.
“Restoring the City’s historic preservation program under a single department will have several benefits related primarily to the planned comprehensive reform to the City’s Historic Preservation program — a need identified by staff, the public, and most recently by the Mayor’s Middle-Income Working Group,” said Rachel Laing, the mayor’s director of communications, in an email. That includes, she added, “greater coordination and consistency in the application of historic standards and criteria across the various aspects of the City’s Historic Preservation program.”
Bruce Coons, executive director of Save Our Heritage Organisation, a local preservationist lobbying group, however, is skeptical that private industry can build its way out of the current housing crisis. Calls for reform come up every few years, he noted, but the overturning of a historic designation is not common.
“We tend to be the scapegoats for why developers don’t build low-income and middle-income housing,” he said. “They’re not building it, because it’s not as profitable as market rate.”
If the city does make substantive changes to the historic review process it will have a secondary effect on revenue. That’s because owners of historic structures are eligible to apply for a reduction in property taxes under the California Mills Act, a statewide incentive that can be passed on to the next buyer.
In other words, the more homes and offices on the historic list, the less tax revenue there is to go around.
Clint Daniels, a former SANDAG analyst who chairs the nonprofit Circulate San Diego, took a list of Mills Act properties in the city — more than 1,800 — and estimated that officials give up at least $20 million annually as a result. Most of that financial relief goes to single-family homeowners in La Jolla, Mission Hills, Kensington and the neighborhoods around Balboa Park.
The median annual tax break is around $6,000, but some are getting considerably more than that, and the biggest beneficiaries live in mansions along the coast. The most expensive of these estates gets an estimated annual tax break of $186,000, according to Daniels’ analysis.
Per policy set by the City Council, officials every year are only allowed to remove an additional $200,000 from the property tax roll. But Daniels has argued Mills Act designations have an even greater effect on other agencies’ ability to collect revenue. So the cumulative $20 million number that he’s come up with is, in his eyes, a conservative figure.
Coons argues that the lost tax revenue comes back in another form. He pointed to University of San Diego research from the early 2000s showing that the overall taxable basis for the neighborhood increases for each historical home.
Daniels, however, doesn’t find that research compelling because it doesn’t take into account the foregone value and property taxes that would come from redeveloping the property with additional units of housing. Nor does it take into consideration the longer term effects of pushing home construction to the farthest reaches of the metro. At some point, he said, the tax break, while pushing up the value of historic homes for the owners, must have a negative effect overall.
In theory, the tax breaks are supposed to offset the cost of maintaining historic property. State law requires inspections every five years to ensure the structure is still in good condition and the owner is abiding by the terms of the underlying agreement. But when Daniels asked the city for a list of Mills Act inspections, officials had none.
As the owner of one historic property in Golden Hill joked to Voice of San Diego: “As long as the plaque is visible the tax benefits roll on through.”
When it comes to historic designations, the city isn’t just looking at older homes and offices. Properties completed within the last decade, like the mixed-use North Parker at 30th and Upas streets, have been granted historic status on the grounds that the architect is a “master” craftsman. San Diego doesn’t have an age requirement for historic structures but tends to look more favorably on properties older than 45 years. By contrast, Coronado typically sets the bar at 75 years.
These and other complaints have not fallen on deaf ears. The Historic Resources Board’s policy subcommittee took up a discussion of its own standards in October but didn’t come to any firm conclusions.
Preservationists, in the meantime, are positioning themselves ahead of any reforms — by arguing that historic homes yet to be designated as such are a naturally affordable option and that, while some may seek to weaponize the city’s list of historic resources, the criteria is far from lax.
In a recent blog post, Coons called for the expansion rather than contraction of historic home policies in San Diego. He argued that historic structures predominantly reside outside “lower income and ethnically diverse neighborhoods” because it costs thousands of dollars to get the designation. The preservation work has to be done upfront in San Diego and the owner needs to make a case that the property is worth saving, often by hiring a consultant or historian.
Instead, Coons proposed the city waive fees for low-income applicants and funnel low-interest loans or grants to those properties needing repairs.
“One of the best ways to provide affordable housing is to help people stay in their already affordable homes,” he said.
Preserving truly historic properties is a laudable goal. Allowing the process to be weaponized to block or delay affordable housing is something that should lead us to consider some simple reforms. For owners looking to save their historic properties, rather than offering a blanket tax break, we should look to offer tax credits or rebates for work done to restore or preserve the property. This relieves the burden on the homeowners without overly reducing the tax base with most benefit going to our wealthiest residents. For historic properties that a neighborhood wants to save, we need to avoid creating abandoned properties that simply rot once development has been blocked. This should be handled through creation of a neighborhood non-profit to own and maintain the property and preserve it, ideally putting it to good use. These are a couple of ideas to start a process that preserves those properties that are deserving without burdening the community at large with unneeded subsidies or abandoned property.
What you describe in the first part of your post is exactly how the Mills Act works. And you can’t get Mills Act benefits on an abandoned property. There is no “blanket tax break”: it is tied to work that needs to be done to preserve or restore the historical nature of the building.
These days, whenever I hear or read the term “weaponized”, I know I’m reading someone’s propaganda. It has become a favorite of parties who want to overturn any given process, policy or standard used by any government entity they want abolished. Thus, opponents of federal, state or local government agencies claim that something has been “weaponized” when they don’t like it and want it to go away. This is the kind of bogus terminology interest groups (in this case pro-developer YIMBYs) use against existing current government policies or procedures when they don’t have any rational arguments they can put forward on behalf of their cause. So whenever I hear or read someone claiming that something has been “weaponized”, I dismiss their claims and arguments as bogus.
Good point.
“Marcela Escobar-Eck, a landscape architect, planner and former city official” who left city employment to help set up a company that specializes in overturning city policies and rules that limit developers from getting property upzoned and developing whatever they want, wherever they want. She is a hired gun of the building industry and an active leader of local YIMBY interest groups. That should be pointed out whenever she is quoted in a news story like this.
To see that Marcela Escobar-Eck is roaming city hall and working for this mayor just solidly confirms that Gloria is deeply within the pockets of the development community. This woman’s history is a long sordid story of being a development shill while in, and now out of, city government. It is incredibly discouraging to see her name come up like this.
The Gloria regime and its policies of search and destroy remind me of the bombing of Dresden.
So is this the American way of doing business? Tax break coming soon!!!