Julie Nakashima
Lusk panel explores San Diego's efforts to meet demands of growth, quality of life
San Diego has been hailed nationwide as a redevelopment success story, particularly for revitalizing its downtown.
However, as panelists at a recent University of Southern California Lusk Center for Real Estatecolor> program noted, the city faces many of the same problems dogging other California cities
Speaking at "The Rebirth of San Diego: Redevelopment, the Economy & Real Estate," panel members cited such issues as a dwindling land supply, a severe housing shortage and increasing traffic as contributing to the challenges facing the city. The event, which was held June 3 at the Lodge at Torrey Pines in La Jolla, drew 200 attendees.
Stan Ross, chairman of the board of the Lusk Centercolor>, noted that San Diego has laid a strong foundation for an economic turnaround. The region fits several national trends, Ross said.
For starters, San Diego has a growing population - the county is projected to hit 3 million people this year, he said. The San Diego metropolitan area is the 17th largest in the country.
"As a single county," Ross said, "you all know that San Diego has the fourth-largest population of all counties in the United States. You're looking at growth of something like 27,000 people in the current year and a lot of in-migration still coming in."
Hispanics are projected to make up one-third of San Diego's population by 2020, Ross added.
"Clearly, the minority implications in this growth are significant," he said.
In terms of age, echo boomers - those aged 21-37 - are the largest demographic group in San Diego. They are a group to watch, Ross said, because they're the ones "making the car payments" and spending money.
Another trend that San Diego shares with the rest of Southern California is its attractiveness to investors. Pension funds finally have concluded that real estate is an acceptable asset class, and San Diego is a preferred place to invest.
Ross who sits on the board of directors of the Irvine Co. in Newport Beach, made note of the large number of bidders for the Symphony Towers office building in downtown San Diego.
"We were just amazed at what went on," Ross said.
Future Challenges
Moderator Burl East, managing principal of La Jolla-based merchant bank Silver Portal Capital, asked what the city's biggest challenges would be, given such growth.
Peter J. Hall, president of the San Diego City Centre Development Corp., the agency responsible for planning redevelopment of 1,500 acres of downtown San Diego, believes it's land. The city is running out of land, he said.
"We've got to look back to our future," Hall said.
Planners must support more intensive development in the first ring around cities to accommodate growth.
"We've got to start thinking vertical versus horizontal," he added.
A second challenge is politics. Hall said that community planning groups have become a serious impediment to the region's ability to accommodate its growing population.
"We've moved from a form of democracy to anarchy when it comes to land use planning," Hall said.
Anthony Pauker, managing director of for-sale housing developer the Olson Co., said the greatest challenge is going to be housing. The company is building 300 for-sale housing units in San Diego.
Pauker acknowledged that he is less concerned about the housing shortage's effect on upper-income people, who may forgo a second or third move-up home, or the bottom sector who have resigned themselves to the fact that they'll be stuck in the rental market forever.
"What really concerns me is the middle, those people who have been priced out of the housing market," Pauker said.
These are people in their 20s or early 30s who have the ability to move, he explained.
"They are more locationally flexible [about] where they can be. And they're being shut out of our housing market, simply by price," Pauker said.
According to Pauker, under current government zoning, San Diego still will have a shortfall over the next 30 years of 65,000 units.
"What that's done to prices is really quite staggering." Pauker said.
San Diego's median price for a new home is now $469,000, nearly double the $242,000 median price in 1996.
"If you want to buy an older house in National City, you have a choice of 16 units," he said. "If you want to buy a house in Santee, expect to pay at least $310,000. Those are two of our communities [that] are generally considered to be the most affordable."
The run-up in housing prices not only keeps people from moving here but also hurts San Diego employers and universities trying to attract talent, Pauker said.
Part and parcel with the housing challenge is the region's educational system, which is highly dichotomous, with both top-ranked schools as well as extremely weak performers.
Quality of Life
James Reynolds, director of San Diego developer Oliver McMillan, agreed that the county needs to do a better job of planning. But at the same time, he said that the quality of life in San Diego will always be good, even with a projected growth of 50,000 additional people per year.
"San Diego isn't like Orange County or L.A.," Reynolds said. "It's separated by valleys and canyons, and so the density will never look like an Orange County or an L.A., which is a very good thing."
Still, he cited traffic as an issue San Diego has not adequately planned for, and which the region is going to have to resolve.
"So all of you have said, basically, there's no solution other than vertical construction and putting people where the existing infrastructures are in place," East interjected.
He pointed out that not everyone wants to live downtown - some people still want a house with a backyard.
"While urban housing is very viable in a macro sense, at a micro level it breaks down, and you end up with suburbanization," East said. "But we don't have room for suburbanization."
The good news is that densification isn't bad, said Stuart A. Gabriel, director of the Lusk Center.
"Densification, firstly, gets you into the domain of affordable housing, which is right away very vital and critical," Gabriel said.
California's car-driven culture could take a cue from the world's major cities, he said. New York, San Francisco, London and Paris are all very dense cities.
"These are cities that rely upon public transportation and solve the issues that relate to where people work and where they live in a way that's entirely different from our suburbanized Western cities - cities that are organized around the private automobile," Gabriel said. "That model, which was invented in post-war Los Angeles and subsidized by the federal government through the building of freeways and ripping out of rail lines, doesn't work.
"That model is not sustainable anywhere, in my opinion."
Redevelopment Model
The discussion also touched on San Diego redevelopment success, led by the nonprofit Centre City Development Corp. According to Reynolds, the agency understood how to get redevelopment moving.
"The city has thrived since that time," Reynolds said.
Now San Diego is reaching critical mass with new housing and a new San Diego Padres ballpark, now under construction.
"What we started out 27 years ago to do was to try to bring back the nonwork-hour life to a city," Hall said.
In 1998, the city put out a request for proposals to stimulate downtown with housing.
"We had already set up the goal. It wasn't about jobs and it wasn't about transit and it wasn't about ballparks," Hall said. "It was about people - people being on the street to create a community because that's what we all wanted."
The city also has learned not to underestimate the power of water. It took developers from other areas, such as Cleveland's Forest City and Vancouver, British Columbia's Bosa Development, to help the city get that focus.
Today, downtown San Diego has 10,000 housing units in the pipeline, with more than 4,000 under construction. One in every four housing sales in San Diego has been in downtown, Hall noted.
"What we hoped to start was a bonfire under our city for housing. It has become a range fire," he said.
An audience member commented that San Diego is the only city in Southern California that has a downtown, contrasting San Diego with Los Angeles. Reiterating the speakers, he noted that San Diego has two demographic groups that will seek high density: young people and senior citizens.
Hall pointed out that San Diego's rebirth didn't happen overnight. It began 27 years ago.
"It's a slow process. Perseverance is the only virtue we've had," Hall said.
But San Diego's demographic profile is significant, Hall agreed. Twenty years ago, homebuilders built for the 60 percent of the buying public represented by a mom and pop with 2.3 kids. Today, the percentage of households represented by that profile is 40 percent and getting smaller.
The homebuyers in downtown San Diego today represent a wide spectrum, Hall said.
"If you look at the data of the demographics of our downtown, I've got to tell you, it couldn't be better," Hall said. One of the largest populations, much like in San Francisco, is young people who are cohabitating.
The new residents in downtown San Diego want to live there, he contended.
"It really is what America is all about," Hall said. "It's diversity of age and everything else. That bodes well for this state because I think those kids grow up with a different perspective than most of us have, having grown up in a suburb."