Consider the Condo

Almost a decade ago, when I worked in a high-rise office building downtown, some coworkers and I stood at a corner window and counted the mega-sized cranes that dotted the scenery.

“One, two, three, four,” we counted.

“There’s one back there. I can see its lights just came on.”

“There’s one up on the hill.”

“There are three behind us.”

Fourteen cranes (fourteen!) in all we counted that night. And as the year wore on, more cranes cropped up across the skyline — offices, a ballpark, hotels — all being constructed as fast as possible to catch rising prices and cash in on the real-estate bubble. San Diego was definitely one of the boom towns of the construction era.

Coinciding with and fueling much of this redevelopment was a trend of people moving from the suburbs back in to urban centers. Owners of large, suburban houses were looking to downsize and re-enter the city, where they could be closer to hospitals, nightlife, and work.

What all of this means: the face of San Diego has changed.

Unless you live there, I’ll bet downtown looks different than how you picture it in your head. San Diego isn’t a “little city” anymore. We still have a cap on how tall our buildings can reach — 500 feet above sea level is the maximum height allowable by law because of airport restrictions involving low-flying planes — but the number of really tall buildings downtown has increased.

Let’s drive around town and you’ll see how it’s changed. We can find the old face of San Diego and compare it to how we look today, which is more fun than citing market opinions and abstract analyses and charts and graphs; I’m getting a headache just thinking about that stuff.

So…onward!

Southbound Pacific Highway bends around sight-obscuring fences off to the right, these enclosing the military-industrial area of the Marine Corps Recruit Depot. Once over a small rise, below us is downtown San Diego and its outcrop of skyscrapers, some brand new, some you might not even recognize.

My, hasn’t downtown San Diego grown up? When my coworkers and I counted cranes from our office window so many years ago, the west end of Broadway, alongside the bay, was a low flat area of empty lots and short buildings, most four or five stories tall. Now, passing the airport and approaching Embarcadero Marina Park, you can see the first of the buildings we’re searching for, the new face of San Diego: high-rise condominium towers.

When you get close enough to see details more clearly, you can start counting floors. By the time I’m abreast of the Grande Towers on Pacific Highway, a point at which I am forced to pay more attention to the road than the buildings, I’ve counted 32 floors on one tower, and I haven’t even made it to the top floors, the penthouses.

I maneuver my car onto Broadway and get out to look around. This is the section of San Diego that most resembles my idea of what a city should look like. From countless TV shows, movies, and photographs, I’ve imagined skyscrapers, train tracks, wide boulevards for racing cabs, people in suits with briefcases rushing down broad sidewalks. And this is it! Right here at the farthest end of West Broadway is One America Plaza, San Diego’s tallest superstructure. (You can pick it out of a photograph by its top, which resembles the tip of a Philips head screwdriver.) The building is 500 feet tall, the maximum height allowed. Seemingly carved from the bottom floors of One America Plaza is the trolley station, with its winding tracks and little red trolley cars hustling about.

Looking north half a block, across Kettner from One America Plaza is the Santa Fe Amtrak Station, a low, stucco, Spanish-revival construct with a blue-and-silver Surfliner train huffing along its tracks. Up the street from Santa Fe Station are the digital cascading letters of the Museum of Contemporary Art.

Ringed almost entirely around this lovely, rushing metropolitan area are the condo towers built in the past decade. You can pick out them out easily; like other downtown buildings they are sleek and tall, but the condos have little balconies punched out of their sides. The balconies dot the buildings’ exteriors like slots in a piece of paper torn from a spiral binder.

Continuing on up Broadway, we move away from the newly constructed condos at the west end of the city and into the heart of downtown. The buildings here are older and grimier, and so are the shops that occupy them; dusty, brick-walled discount Chinese restaurants and wig stores. This is a neighborhood of neon “Open” signs and hand-painted prices on the windows.

At 8th and Broadway, you can see where waves of gentrification have crashed and receded, leaving a high-water mark. Across the intersection, on the southeast corner, stands a wall graffitied with street art: what looks to be a cartoon Wookie and some inscrutable writing. I step out of the vehicle into sunlight that peeks around the concrete roofs of downtown. I squint at the ballpark in the haze. Circling the stadium, like ever-vigilant, Brobdingnagian baseball fans waiting for a pop foul, are the omnipresent condo towers. And there are boarded-up and fenced-in construction areas all over town.

For perspective, let’s leave downtown proper for a while, get out of the lowlands and head for higher ground to see if we can find the old face of San Diego.

To reach the east side of Balboa Park, you must first get lost in Golden Hill. Nineteenth Street, Broadway, C Street, the 5 South, the 94 East, and G Street all meet up at what seems a malcontent civil engineer’s cruel prank on us citizens. After scouting around outside the vehicle, calculating the direction of the sun and checking a compass, I finally crawl my car up verdantly lined Pershing Drive. At the top of Pershing, I find the corner I’m looking for: 28th and Upas.

North Park is a lovely little neighborhood, and here at 28th and Upas there isn’t much traffic. To the south and west is Morley Field Sports Complex, a park with playgrounds, archery ranges, tennis courts, baseball diamonds, and swimming pools. To the north, some residents tend to gardens in their front yards. This neighborhood is made up mostly of single-family houses with lawns and backyards, and quite a few of the houses display brass plaques with the names of the original owners: these are historical homes. It’s quiet, cozy, maybe even sleepy.

That’s a contrast to the frenetic pace and the high-rises of downtown, but there’s one aspect that makes these two locales similar: this too is the site of a previous residential expansion. Just like the hulking towers downtown, there was a housing boom here, not in the last decade but a hundred years ago. At one point, this was the changing face of San Diego.

In the early 1900s, speculators and developers bought up lots here and subdivided them. By 1910, construction crews began erecting houses, most in the then-contemporary style of the Craftsman bungalow. Previously, San Diego was an outpost town of the Old West, with a mission, a presidio, a lighthouse, and a pier. Houses were mainly adobe ranches, or the Victorian-style homes you still see around Banker’s Hill, Golden Hill, and Old Town. Some San Diego residences were wooden shacks built in the 1800s. The shacks housed the poor, the Victorians sheltered the well-to-do.

The Craftsman bungalow was a new architectural direction. Victorian-style houses were large, usually two stories meant for the wealthy landowners around town. Victorian decoration included a lot of carved wood, stained glass, fancy chimneys, and fish-scaled shingles around the exterior. Craftsman style is very different, the dwellings normally a single story. Pillars at the front of a porch, and exposed rafters and support beams, make for clean lines across the structure’s face. These then-modern houses were a rejection of the fancy embellishments of Victorian homes, and developers who built them marketed them to an expanding middle class.

It was a time of innovation and new technology. The conveyor-powered assembly line gained traction in Chicago slaughterhouses and Detroit car companies. Automobiles were replacing horses and carriages. In 1914, World War I broke out, and this led to marvels such as airplane battles in the skies and mechanized tanks on the ground. Craftsman houses were a reflection of these new times.

You can see parallels with the colossal condominium towers downtown. New technology, economic forces shifting money around, a movement of people into different areas, advancing modern architectural techniques and philosophies — they had back then what we have now: the changing face of San Diego.

But that might be where the comparison ends. The 1930s saw the popularization of the phrase “the American Dream.” The ethos encompassed working for a better life, enjoying more recreation, and this often meant home ownership. Those little houses on flat lots with lawns were the embodiment of that yearning. When working-class people dreamed of homeownership, it was for one of these bungalows.

I walk west to Pershing Avenue then north for one block, until I’m standing in front of number 3612. It’s a beautiful little green California bungalow. Dangly branches from two thin willow trees shade its front. The yard is elevated from the sidewalk and held in by a short wall. Concrete steps invite you up to the porch, which is supported by two squat and sturdy Craftsman-style pillars; the shortened ends of the half-hip roof set it apart from the other houses on this street and give it a bit of quirk. Public record printouts tell me that this house has three bedrooms and two baths, so it’s big enough for a small family to live in. It’s near nice schools and on a bright street.

I’ve picked this particular house because it’s well recorded in North Park history: 3612 Pershing was built in 1923 and sold for $2000. In today’s money, adjusting for inflation, that’s just under $25,000. Any family could afford that.

That’s quite different from today’s condo market. The cheapest condo I found in San Diego was listed for $75,000. It’s a studio in a graffitied and litter-strewn converted apartment building on a rundown street in City Heights. It’d be cramped for a single person. A family of four could squeeze in only if they didn’t mind bunk beds, stepping on each others’ heads, and an unswerving bathroom schedule.

A relatively comfortable three-bedroom condo (comparable to 3612 Pershing) in a new-construction tower is almost impossible to find; most condominiums in these luxury high-rises range from studios to two bedrooms. I did find one, a three-bedroom condo in a newly created skyscraper listed at $720,000. Only an elite few could manage it.

That’s the difference between San Diego’s expansion of 100 years ago, the one that brought us the Craftsman bungalow, and the condo launch of the last decade: affordability for the average worker.

The Housing Crisis Before the Housing Crisis

So how did this expensive explosion happen? (Let me warn you. This part of the article might get a bit…dry. It’s mostly facts and figures from the painfully boring San Diego Association of Governments, or SANDAG. I’ll try to keep it light, but if you want to skip the gristle and get to the meat then skim ahead to the section titled “The Upshot.” If, however, you have a penchant for numbers and percentages and rezoning facts, read on, friend!)

In 2004, the San Diego Association of Governments released a redundantly titled text called “SANDAG Regional Comprehensive Plan for the San Diego Region.” In it are nebulous plans to confront several aspects of urban living that make for an unpleasant city, including air quality, water quality, public transportation, and most importantly for our purposes here: housing. In the housing section it states:

“Unfortunately, the San Diego region is in the midst of a housing crisis. The costs of renting or owning a home have risen dramatically during the past ten years. In fact, our region is regularly ranked as one of the top ten areas with the highest priced and least affordable housing in the nation.”

Remember that in 2004, when this memo came out, if you intended to buy a refrigerator box under a bridge and live in it, it might run you half a million dollars. (I won’t even mention the price of a nice three-bedroom in a secure neighborhood.) Also remember that in 2004 San Diego’s population was increasing, most of all in its city center, because of reverse suburban flight. The association had it right: this was a housing crisis.

The “Regional Plan for the Region” continues:

“A core value of the Regional Comprehensive Plan is to provide more housing choices — more apartments, condominiums, and single-family homes in all price ranges. These homes need to be affordable to persons of all income levels, and accessible to persons of all ages and abilities.”

That seems noble, affordable housing for everyone — doesn’t it? The plan goes on to state that these new urban developments should be close to jobs and public transit to cut down on commute times, pollution, and to conserve open spaces (also noble causes). To do this, the Regional Plan for the Region calls for rezoning of areas to include “higher density multifamily housing” and to give incentives to developers for building those higher density multifamily dwellings instead of building, for example, offices, shopping malls, or single-family homes. In short, San Diego needed affordable condos, and it was going to rezone and pay to get them.

There is, however, a fatal flaw. In 2008, the association thought they should check up on their 2004 Regional Comprehensive Plan for the San Diego Region and see how things had progressed in that four-year span. What comes next is this dismal, surprisingly candid evaluation:

“Housing production in the very low-, low-, and moderate-income categories did not keep pace with above-moderate housing production: 58 percent of the above-moderate income housing goal…has been met, while less than ten percent of the very low-, low-, and moderate-income housing goal has been met.”

In fact, the total number of housing units permitted (2004–2008) was 28,861. The number of those permits that were for spendy (“above-moderate”) housing was 25,714. Some quick math shows that the Association released permits to build only 3147 affordable-level (“very low-, low-, and moderate”) houses. So that’s 89 percent spendy housing and only 11 percent affordable housing.

The Upshot

San Diego rezoned itself to allow for more condos, and it tried to lure developers into building lower-income housing. Developers passed on the low-income incentives and built spendy condo towers instead.

What we had, metaphorically, were ten open places to live, 20 people who wanted to buy a house or condo, and only one person who could afford to do so. What the rest of us could do then was rent. San Diego is pretty determined to keep lower-income people as renters while expanding the opportunities for home ownership to the rich. Of the housing developments downtown that can be called “affordable” housing, all are apartment buildings for rent, not to own.

Certain state, county, and even city laws state that municipalities must offer affordable “housing,” not affordable homeownership. SANDAG’s noble quest for “more housing choices — more apartments, condominiums, and single-family homes in all price ranges,” got translated to the Centre City Development Corporation as “more apartments for the average, and more houses and condos for the affluent.”

Enter the Centre City Development Corporation

The Centre City Development Corporation is a nonprofit that plans and implements projects around downtown. Without wading through too much financial information, I’ll just tell you that this outfit makes money when property taxes go up. Since property taxes are fixed at one percent by Proposition 13, the Centre City Development Corporation has to wait for the property value to increase to get more taxes on it. It’s called “tax increment.”

A quick example: a home’s initial tax value is calculated at the time development is finished and the first owner is ready to buy. Property taxes are roughly one percent of the home’s value. The home’s value is then increased every year by two percent for inflation and the one percent is taken off the new value. (Stay with me, I’m about to simplify it.) That means that if you buy a place, it is initially assessed at a certain value — let’s say $100,000 — and you pay one percent of that in property taxes. Which in this example is a nice round $1000. If you stay in your home, you don’t add any other structures to the land, or have it reassessed, next year your home will be valued at $102,000 and your tax will be $1020. The increment (what the Centre City Development Corporation is paid from) is $20.

Now, if you sell the property, it’s a totally different animal. The property taxes are then based on the price of the home when sold. Say that over ten years, your humble home initially worth $100,000 doubled in price and you sold it for $200,000. The buyer — the new owner — is now on the hook for $2000 in property tax. The increment (again, the development corporation’s bread and butter) for that year is $1000.

In short, it’s much better to draw a budget from a $1000 increment than a $20 increment. Because it absolutely has to (by law) build low-income housing, the rules are skirted by renovating old pay-by-the-week hotels and developing low-cost apartments for rent — but not condos or houses for sale. Better to get the increment on a flipped luxury condo than to let your average San Diegan buy a condo and stay there for the next 30 years, letting that increment creep up slowly. The more money they get from the increment, the more they have for next year’s development projects, and so on and so on.

Yes, the Centre City Development Corporation is a nonprofit, and that increment money goes back into projects downtown. But I ask you this: how much more development does downtown need? Consider that the increment money could be doing other things, such as repairing roads, buying books for schools, or (I don’t know) actually funding development projects for affordable condos that a regular person could buy in neighborhoods throughout San Diego. Instead, there are planned projects for even more expensive condominium towers and rumors on the wind of an expanded convention center, as well as a new stadium for the Chargers.

Consider also that last October, Mayor Sanders, state assemblyman Nathan Fletcher, and then-interim CEO of the Centre City Development Corporation, Fred Maas, rammed through the state budget bill a “trailer” bill that lifted their $3 billion budget cap to $9 billion. As reported here in the Reader by Matt Potter (“News, Under the Radar,” January 12, 2011), Nathan Fletcher may have tangential links to the Blackstone Group, which owns offices around downtown and, among other properties, The Hilton San Diego Bayfront. The Hilton certainly won’t make any money on affordable condos, but a new Chargers Stadium and expanded convention center? Ah, now that’s something they can sink their teeth into.

It’s nothing new. Remember Nancy Graham? She was president of the Centre City Development Corporation from 2005 to 2008, and during her term a developer group called Lennar Corporation was building a major condo project downtown, Breeza. Lennar was also paying Nancy Graham for previous dealings in Florida. The San Diego Ethics Commission gave her a slap on the wrist to the tune of $32,000. Breeza got built, and its condos sell for $300,000 to $1 million.

Let’s Keep Driving

My adventures for the day are almost through, and I’m tired of looking at homes people can’t afford. I get in my car and drive through the scenic streets of North Park, passing thick palm trees that have stood for generations. University Avenue’s cracks and potholes lead me like breadcrumbs past scattershot areas of gentrification. Here’s a newly renovated theater with a Starbucks underneath it. Here’s a wig shop. Here’s a fresh new office building with bright paint, right next to a day-boozer’s bar with a ring of old men smoking outside its door.

Rolling up and down the slopes of North Park, I survey the buildings, looking for signs of renovation, things thrown up in haste to catch a booming market or deterioration left after a subsequent downfall. The marks of quick construction and creeping decay reveal themselves on every block.

I want to visit one of the city’s condo complexes, but it’s not downtown. From University I turn left on Park Avenue. Hillcrest is the border between the delirious condo frenzy of downtown and the peaceful streets and Craftsman bungalows of North Park.

The Egyptian is only six stories tall, but glamorous as an old dame.

The Egyptian is only six stories tall, but glamorous as an old dame.

At the corner of University and Park is a condo building called The Egyptian. It’s only six stories tall, but glamorous as an old dame. This complex was a renovation project built to speculate on the condo market, just like the condos that are everywhere downtown. However, The Egyptian’s contemporary design is combined with a central facade preserved from the original building, the exotically flavored Egyptian Movie Theater, built in 1926, around the same time as North Park’s Craftsman homes. New construction above the theater’s old facade is not megatower high — the design blends and complements the neighborhood.

In The Egyptian is a condo listed for sale. It’s a studio, and when it first sold in 2005, it went for $352,470. Today, the price is $189,000. That’s a decline of almost half. This is an indication that condo sales are nearing “reasonable.” If you think that $189,000 for a studio apartment is still outrageous, I’m with you, but given that San Diego is generally a more expensive place for real estate than most of the country, and considering that the general trend for home prices is still downward, we may be close to a point at which normal people can stretch their budgets and buy a home.

If the city still needs condos, which it does, this building makes me think that it can be done. A multifamily residence doesn’t need to be built to excess. The subsidies that will probably go to the National Football League could go to developers to build homes in tasteful little buildings, with amenities and comfort, for the working class.

The great housing bust has been blamed on speculators, predatory lenders, and people who bought houses they couldn’t afford with money they didn’t have. These are valid accusations. But so far nobody’s blamed local governments who jumped through hoops to zone and rezone, loan money to developers, and push with all their might to stack expensive condos one on top of the other (sky high!) until nobody could afford to buy them. Nobody has accused local governments of encouraging flipping and mega-construction on luxury homes. The Centre City Development Corporation loaned money and green-lighted projects to build for the exclusively wealthy in a decade that reeks of self-preservation and cronyism, while ordinary citizens continued to spend a large portion of their paychecks on rent, never gaining equity, never themselves owning anything.

Now Nathan Fletcher has been tapped as a possible replacement for Mayor Sanders. Fletcher’s already shown San Diego that he’s more interested in continuing to develop downtown than he is in building affordable homes.

Maybe we can all live in the new Chargers Stadium.

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Comments

Wow. Great work. One other thing that local governments have done is offer developers exemptions to a variety of normal code requirements, or relief from normal taxes/fees, if the developers include one or two or a few "low-income" units in a project.

In such projects I've examined, the balance of benefit is very much on the developer's side, to the detriment of the taxpayers and local community. Also, these "low-income" units, rentals or for sale, have not been for very low-income renters or buyers, and have had all kinds of legal problems. There was such a Redevelopment project of units for sale in North Park.

In a strange twist, currently, due to local redev agency/government failure to build low-income housing, and the pending elimination of the redev scam, redevelopment-specializing developers have scoured areas for city-owned parcels (e.g., parking lots) and have made successful overtures to be basically given the right to develop upscale projects with a unit or two of low-income units tucked in.

Agreed about the main premise of the article, although comparing 1924 prices to today is an apples to oranges comparison, because prices don't rise in lockstep. Yes, by comparison, housing in general (not just in San Diego) is many times more expensive today. But prices of practically every other thing, like food or clothing, is considerably cheaper, so things even out considerably.

The main thing I found confusing, though, was your reference to 3612 Pershing. Did you really take the drive to the wilds of North Park? Or did you just look things up on the internet? 3612 Pershing burned to the ground in a rather spectacular fire six months ago. (http://www.signonsandiego.com/news/2010/oct/15/fire-destroys-north-park-home-resident-workers-esc/)

"But prices of practically every other thing, like food or clothing, is considerably cheaper, so things even out considerably."

I wouldn't say that things "even out." Food and clothing may have been more expensive, but the difference between 25 grand and 650 grand would have to be a lot of savings on bananas.

"The main thing I found confusing, though, was your reference to 3612 Pershing. Did you really take the drive to the wilds of North Park? Or did you just look things up on the internet? 3612 Pershing burned to the ground in a rather spectacular fire six months ago."

Darn it, you're right. I did drive through the neighborhoods after doing my pricing research. I had 3612 Pershing written down right next to a few other properties that looked interesting, and I did see that it had burned down (tragically.) I've confused the addresses I had written down. That's a mistake on my part. If I find which property (address) I was REALLY writing about, I'll post it here. Good eye.

A fairly lightweight article, Ollie. What I get out of it is that you can get lost in your own town, that there are fewer highrises under construction now than at some points, and that housing styles change over the years. All stuff that anyone should know. Basically, it seemed most like a promotional piece for the condo project that your co-worker Barbarella is attempting to sell her unit in. I can't imagine why else that development was given such a high profile photo, caption and text. I guess you one-name people have to watch out for each other. Also: not every family could afford a $2000 house then, or there would not have been any $1000 houses. Your pricing translation is flawed. One big reason is that 30 year loans were not available, typically homes were offered at 50% down and the balance in 5 years. And even today, I don't think most of MY friends would have $12,500 in ready cash available. By the way, "Victorian" is an era, not a style. The little shacks built then were as much "Victorian" as the large Colonial Revival and Queen Anne mansions of the time.

"Basically, it seemed most like a promotional piece for the condo project that your co-worker Barbarella is attempting to sell her unit in."

Actually this was written months ago, well before Barb decided to sell. Feature stories are written months in advance and weekly articles are written only a week or two in advance. It's coincidence.

Developers gets to build with fewer parking spaces, no setbacks, more than maximum units per lot as incentives or bonsues for 1 or 2 low-income units, which nobody keeps track of. Did you notice on-street parking when you were driving around? Did you find a parking place?

"Did you notice on-street parking when you were driving around? Did you find a parking place?"

Parking in San Diego could be its own story.

"By the way, "Victorian" is an era, not a style"

The Victorian Era lives on strong in the form of Victorian style. The Victorian style is used to describe any of a number of analogous historical revivals in the United States in the second half of the 19th century Victorian style in British and American architecture is an eclectic mode based on the revival of older styles, often in new combinations. Although the style is named after the reign (1837-1901) of Queen Victoria, it was her husband Prince Albert who was the actual promoter of taste. New materials, such as iron and glass, were often incorporated into the design of buildings during the Victorian period. The Victorian style arose quite naturally in western society. The industrial revolution allowed people to create wealth, and they wanted to spend it on themselves and their homes. More people wanted new products for their homes, and more of them were able to afford to, which is probably why the Victorian style is often noted for being ‘over the top’ in character. Today we might use a more restrained style, but the Victorian style depended on packing in as much as possible.

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