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.
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.