Building Up California

A high-rise condo boom in San Diego may show the way out of a statewide housing and sprawl problem

During the past four years, developers built 13,000 residential units in downtown San Diego, with another 9,000 under construction or permitted and ready to build. At the beginning of last year, Vancouver's Bosa was the biggest developer in the city's central area, with 1,553 units either completed or approved for construction. Intergulf Development Group, also headquartered in Vancouver, had 630 units. Toronto-based Intracorp was third, with 521 units.

Some San Diego civic boosters, anxious to defend $300 million in public investment in a downtown ballpark, contended it was the new Padres stadium that catalyzed the boom. Journalists followed suit, with even The Economist, a London-based magazine that's usually astute on development issues, saying the stadium "revitalized" San Diego. But Rask says, "That's nonsense. The boom was on its way before discussion of building a ballpark started."

Something much more significant than a ballpark lured people downtown: Once-frontier-minded westerners seemed to have grown a yen for urban life. And San Diegans were right about one thing -- their new high-rise downtown is a charming place to live. San Diego entertainment districts such as the Gaslamp, Marina, and Little Italy neighborhoods are packed in the evening. The new mélange of high-rises and old downtown buildings is visually interesting, exciting even (despite the catty remarks some of the new buildings earned from several of my architect companions). People are moving in from the suburbs because "downtown is where all the party action is," says Alan Nevin, director of economic research at San Diego-based MarketPoint Realty Advisors.

Vancouver's kinder, gentler mini-Manhattan didn't transplant identically to San Diego, a Sunbelt bastion of conservative Republican politics and, therefore, a city averse to government intervention (except, it seems, when it comes to giving money to professional sports team owners).

With hotel tax revenue as backing, the City of San Diego provided $209 million in financing toward the stadium project. Central City Development provided $76.4 million, using the promise of increased taxes in the built-up downtown area to finance bonds, a technique known as tax-increment financing. This money could have been dedicated to parks or other amenities; instead, it went to the ballpark. "They're determined to get some parks out of this plan, the people working on the city's plans. But their money is locked up. It's paying off ballpark bonds," says Rask.

If the stadium did not cause the downtown San Diego boom, the redevelopment corporation that encouraged the ballpark and condo towers now must grapple with problems born of a growth explosion the city wasn't prepared for. Ideally, a dense downtown with lots of apartments would solve transportation problems by putting housing next to jobs. But in San Diego, the forest of new condo towers may leave little space for people to actually work.

"When land was dirt cheap there, nobody was building offices before the housing boom. It was just a function that there was no demand for office space. The concern now is when office comes back, there is no place to build," Rask says. "San Diego is really pretty skeptical about planning. They feel the property owners know better than planners what's good for them. If the market is saying there's no demand for office development, that gets a pretty sympathetic ear down there."

With little open land left for office buildings that might support new downtown jobs, San Diego may find that its new high-rise dwellers wind up commuting to suburban office parks, creating worse freeway tangle than existed before the condos were built. "To get people from concentrated housing to scattered jobs is really nasty," Rask adds.

Viewing San Diego's high-rise spurt in the context of California's overall housing and transportation problems, it's hard to argue that it's terribly relevant -- yet. The downtown redevelopment zone represents a speck of land in the vast San Diego urban area, and it accounts for a small fraction of the region's housing. Downtown may have 9,000 new dwellings on the drawing boards, but developers have taken out 150,000 permits to build tract homes in southern Riverside County, where half the households include a commuter to San Diego, says Marney Cox, chief economist of San Diego Area Governments, an intergovernmental agency dealing with transit and other planning.

Successful apartment towers downtown are no match for California developers' insatiable urge to build outward. They're driven to the fringe in part by the unusual tax incentives created by 1978's Proposition 13. Commercial centers that generate sales tax revenue are now far more lucrative for municipalities than are housing tracts, which, thanks to Prop. 13, supply a tax revenue stream that will grow only slowly, if at all, over time. So communities struggle to attract auto malls and box stores, shunning new houses and apartments and pushing sprawl to the next community. The San Diego Area Governments agency is working to redistribute sales tax money among municipalities, to erase the incentive to shun housing. But the regional agency has limited pull with other counties.

"That's the big challenge," Cox says. "How do we get counties to work together?"

The aforementioned caveats notwithstanding, downtown is where the party and real estate action meet in San Diego. At a Starbucks in San Diego's Marina District, for example, a pomaded condominium broker leans toward a thirtysomething man and woman, his knees nearly touching theirs, and offers a confidence.

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