When the San Diego City Council approved the $1.2 billion Ballpark Village project for the parking lots east of Petco Park, it required developers JMI Inc. and Lennar Urban Development to build 35,000 square feet of below market rate condominiums on site and 153 units of affordable rental housing on several blocks nearby.

The decision followed an eventful several weeks during which project approval was on the line pending resolution of several issues, including whether the subsidized housing should be built on or off site.

The council’s political compromise for a little of each does little to address the much larger problem: how to provide affordable housing to segments of the community that have trouble paying for it. The answer is to broaden the geographic horizon.

Inherent Economic Challenges

The concept of requiring developers to provide on site, lower priced for-sale units in their otherwise “market rate” project sounds good. Politicians and public agencies like to get credit for this inclusionary housing. But it is best described as a form of income redistribution under the guise of providing housing, one that is a relatively ineffective way to either redistribute wealth or to provide enough housing to matter.

Aside from simple appreciation based on cost of living, and the tax advantages of ownership, the new “owners” of these units at Ballpark Village will rightfully be restricted from achieving windfall profits when they sell their homes, enabling those units to stay in the below market rate inventory. But if these restricted gains prevent them from moving up the housing ladder, what truly has been gained?

Who pays for inclusionary for-sale housing? That’s easy: the other home buyers in the project. The builders simply raise the prices of market rate units, further exasperating the affordability problem Downtown.

The inclusionary solution also fails to provide the most units. The Ballpark Village developers addressed this by proposing dramatically more rental units nearby, about 150 compared to 25 to 35 onsite.

The problem is in the concept of “nearby.”

Current Centre City Development Corp. policy requires any off-site solution to stay within the redevelopment area. This is an ill-conceived concept. The redevelopment area is, in essence, a political boundary. It has nothing to do with the actual market area. Few would argue that more affordable housing does need to be available to people who work Downtown but cannot afford to live nearby. These employment categories include public safety, hotel, restaurant, retail and administrative workers, all of which exist Downtown in abundance. (Conversely, when it was affordable in the pre-ballpark days, few wanted to live Downtown.)

The good news is housing can be made available in a myriad of options and geographical locales that service the Downtown market. Within a few miles lie the edge markets of Barrio Logan, Logan and Sherman Heights, Southeast San Diego, North and South Parks, La Mesa, National City and western Chula Vista. All are accessible to Downtown via the Trolley, and each deserves more redevelopment attention. Some of these communities are experiencing new development. All can accommodate in-fill development, more affordably provided and in greater numbers, than Downtown.

The ‘Parks’

North Park and South Park, the areas surrounding Balboa Park to the northeast, east, and southeast, have seen significant transition in recent years. Segments of North Park, along University Avenue, are a designated redevelopment area. New construction and reinvestment is developing a vibrant streetscape and local identity. In the first quarter of 2005, the parks were home to two new projects and several conversion projects. The average price for new construction was $531,688 with a unit size of 1,277 square feet ($433 per square foot). The average price for a conversion unit was $281,123 with a unit size of 747 square feet ($376 per square foot).

Logan Heights/Sherman Heights

Logan Heights and Sherman Heights generally are defined as east of Interstate 5, south of Highway 94 and west of Interstate 15. The housing stock in the area varies in age, quality, type and sales price. Residents are served by a variety of retail centers. Attached resale units achieve a median price of $275,000 and a median size of 1,248 square feet ($215 per square foot). Detached units in Logan Heights achieve a median price of $282,500 with a median size of 959 square feet ($311 per square foot).

Barrio Logan

Barrio Logan and the surrounding area have an estimated population of 51,508 in 12,297 households (4.03 persons per household). The median annual household income is $26,219; the median age 26.1. The majority of households (75.2 percent) earn less that $45,000 per year. Significant new rental housing has been added to the stock, and the area may soon see its first large condominium project.

Southeast San Diego

Southeast San Diego is defined as the area south of Highway 94, north of East Division Street, east of Interstate 15 and Interstate 5 and west of Interstate 805. Southeast San Diego has traditionally been an affordable location for home buyers, with many older single-family detached homes. The median attached unit was $232,000 and 1,056 square feet ($236 per square foot). Detached homes had a median price of $295,000 and a median size of 1,017 square feet ($284 per square foot).

Beyond The Border

Cities outside of the political boundaries of the city of San Diego also are good candidates for affordable in-fill housing. They include:

• La Mesa: Situated directly east of San Diego city limits, many areas of La Mesa have easy access to the San Diego Trolley and public transit. The shopping is excellent. La Mesa offers a small-town feel including street-level retail shops and historic railway cars on display in the revitalized Downtown La Mesa district.
  
  
• Chula Vista: While the majority of the city’s new housing stock is located in the master planned communities to the east, the city is aggressively working on revitalizing and redefining its downtown. The rewritten General Plan includes zoning for higher density residential uses, mixed-use structures and pedestrian friendly streetscapes.
  
  
• National City: About five miles south of Downtown San Diego, it is a relatively inexpensive place to live with a large rental housing stock. Perhaps the most ambitious redevelopment program outside of Downtown San Diego is now taking place in National City, which will transform National City Boulevard from 12th Street to I-5, adding thousands of new units over time. The city also is active in the development of a number of public works projects. Recently completed projects include the National City Adult School, a new Chamber of Commerce and police station, as well as restoration of the historically significant Brick Row rowhomes and Santa Fe Rail Depot.

A True, Affordable Solution

Downtown is the focal point of the urban area. Yet, each of these edge communities could benefit from some of the redevelopment attention that has been more or less exclusively reserved for Downtown. And with already less expensive land and housing than Downtown, much more affordable housing could be provided.

Policymakers should consider providing low- and moderate-income housing to an expanded edge market outside of the technical redevelopment area. It would require the cooperation of cities and developers, but a greater redevelopment and revitalization program would ensue. Most importantly, many more persons in need of affordable housing could be assisted.

Gary H. London is president of The London Group Realty Advisors Inc., providing real estate consulting and economic analysis. Check him out on the Web at www.londongroup.com or e-mail him at glondon@sandiegometro.com.