Building Up California

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

It's mid-April, and I'm in San Diego with a group of San Francisco planners, architects, developers, and policy wonks, looking at a possible California future that's unfolding just north of the Mexican border. A 5-year-old boom in downtown condominium construction and the wildly enthusiastic public response to it are forcing builders, planners, and local boosters up and down the coast to rethink western Americans' supposedly limitless love affair with suburbs and cars.

The early stages of the San Diego experiment portend great things for a state that has become uncharacteristically pessimistic, thanks in part to unchecked urban creep. The bamboolike growth of suburbia that once made California possibilities seem endless is now the state's greatest burden. Living closer to one another would lessen that burden in many ways, and the revitalization of downtown San Diego provides a hint about how greater urban density can be achieved. The San Diego experience unveils a glimpse of a possible future in which Californians embrace the dense urban life most of the rest of the world enjoys, while it destroys old myths about California's supposedly inviolable car culture. But the redevelopment of San Diego's city center also has spawned plenty of caveats, highlighting the real cultural and political problems that keep Californians from regaining their economic footing.

As the state becomes an ever more massive swath of interlocked freeways, the dysfunctional tangle of governmental entities connected by those arteries becomes increasingly troublesome, not just in terms of transit and development, but in terms of the overall prospects for California. Twenty-six years after the passage of Proposition 13, that measure's built-in tax incentives urge on the construction of sprawling office and commercial parks and, at the same time, push housing construction constantly into the next county, extending commutes and ruining commuters' quality of life. Those incentives have infected California for more than two decades, and they have produced their logical end result: near-gridlock from Oregon to Mexico.

A mini-Manhattan sprouting at the edge of San Diego Bay offers hope as medicine for what ails California. But a three-day trip to the state's southernmost city suggests a complete cure is still far off.

For a century and a half, California has been America's laboratory of the future, a place where the rest of the country has looked for new cultural, political, technological, and business ideas. We achieved our stature based on a real openness to new people and their new notions. Now, though, housing is so scarce in many areas of the state that employers in economic heartlands such as Silicon Valley are moving jobs elsewhere. Commute distances grow by the year; much of San Diego's work force, for example, drives to the city from southern Riverside County, 100 miles to the north. Outsiders only make things worse, whether they come from Tulsa or Guanajuato. The widespread idea that immigration is an environmental threat stems from this perceived connection between gridlock and growth.

The renaissance of downtown San Diego provides a compelling contranarrative.

The story begins nearly 20 years ago and a half-continent to the north, where officials in Vancouver, British Columbia, pondered what to do about their own version of West Coast sprawl. The city was desperate for new housing in an urban area that had spread 100 miles. Vancouver officials beckoned developers to fallow industrial yards near downtown. Supported by capital flowing out of Hong Kong in the years before its transfer from British to Chinese control, developers were able, within 10 years, to build a miniversion of an Asian city — only nicer. Thanks to careful civic planning, developers were forced to provide land and/or money for ample parks, bikeways, and community centers.

Nat Bosa, an Italian immigrant who entered the building trade 30 years ago as a laborer, was among those who foresaw that Canadians would pay good money to live in such a place. “My prediction in 1990 was, in 10 years, it will be fashionable to live in downtown Vancouver, and in 15, it will be a great place to live,” he says. “People now love it.”

As prime, cheap land began to disappear from central Vancouver, Bosa and other Canadian developers looked south to San Diego and saw another abandoned, decrepit downtown. Like Vancouver, San Diego had a beautiful bay to the west, and a hundred miles of traffic-choked sprawl to the east. As in Vancouver, San Diego city officials were anxious to do something about a housing shortage, and to revitalize a decayed downtown. “I felt it was just a fabulous place, with a great climate. I thought it was ready for what I call urbanization,” Bosa says. “It was lacking on one big thing — more people.”

When San Diego's Center City Development Corp., which runs the downtown redevelopment area, asked for proposals to build on downtown land in 1997, Bosa and other Canadian developers were at the front of the line. Center City Development had set in place clear, simple, consistent permitting rules to encourage development in the area. But it didn't expect anything like the frenzied response from Canadian developers.

“Outside people came in to invest, and they saw an opportunity locals didn't see,” says Walter Rask, who for eight years was chief planner for San Diego's downtown redevelopment district, before entering the private urban-design field in San Francisco last year. San Diego officials, he says, “had no clue that there was this market here. It took outsiders to reveal that. What it showed was that there was a huge market for downtown living.”

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. [page]

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.

“What I do is, I tell a developer I've got 40 people who are committed, and that way he can go ahead with a project. You're No. 41 on my list. But I'd be willing to bring you in, if you're willing to make a commitment,” the broker says, while producing a sheet of paper from his leather satchel, then scooting it toward the couple. “This is privileged information. This price list hasn't been released to the public.”

The couple look at the list, then at each other. Will the building accommodate two Great Danes, the woman asks. An SUV? The broker nods, smiles, and yanks his lure.

“I bought my unit two years ago for $494,000,” he says. “Last week someone offered me a million two.”

Across the street, Jeanette Kagan, a saleswoman for Bosa Development, is selling units in a hole in the ground that next year will become a 39-story, 222-unit building called the Grande Santa Fe Place. There are only nine units left, the cheapest a 10th-floor two-bedroom for $1.824 million. [page]

“Plenty of people who want to move in there right now would love to sell their $2 million homes and move into a $2 million condo,” says condo king Nat Bosa. “But there's not enough to sell them.”

Two blocks away from the Marina District Starbucks, ex-Marine Barry Finnegan flogs condos at Associated Realtors. The cheapest two-bedroom he can find downtown is a $519,000, 920-square-foot unit, he says, about the size of an airport bathroom. The seller recently bought the apartment as an investment and is reselling it before the unit is completed. More than 20 percent of the new downtown units are flipped by speculators upon completion, he says.

“If you had come two or three years ago, I could have got you new construction downtown for $350,000,” he says.

With the best downtown San Diego sites spoken for and the units in his next building, a 43-story tower a couple of blocks from the Grande, selling at a brisk clip, Bosa is taking his Vancouver-style developments up the coast.

He's bought a parcel of land near San Francisco's downtown ballpark, designated for condominiums, designed for living sans cars. “You'll get out of your unit and get on the trolley,” Bosa effuses during one of his frequent hops from his home in Vancouver to his condo in San Diego's Marina District. “This car orientation is going to have to stop.”

Just to the north of San Diego, in Irvine, Bosa has begun construction on two 18-story condominium buildings that will provide a total of 232 apartments; he says these are the first-ever condo towers in Orange County, an area known for its endless landscape of cul-de-sacs and strip malls. “We're 80 percent sold just coming out of the ground,” Bosa says. “You're talking about a very little blip in terms of demand. If you go in there and do what we're doing times 10, everybody would do great. Once you get it started, one friend talks to the next and asks, 'How is it?'

“It's a beginning.”

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