Issues: Affordable Housing

Condominium conversions:
Problem or solution?

By D. Scott Peters, The Daily Transcript
Friday, June 9, 2006

According to MarketPointe Realty Advisors, a San Diego-based real estate research firm, a study conducted in 2005 found the average price of a newly constructed detached home in San Diego County was $781,000. The average newly constructed attached condominium averaged $490,000. Result: an affordable housing nightmare for the residents of San Diego. The only encouraging news: The average price for a converted condominium was over $100,000 less than a newly built one.

The city of San Diego needs to embrace that gap as the answer to the affordable housing shortage. The lack of any affordable housing solutions is so severe the City Council declared an Affordable Housing Emergency in 2003.

It is truly ironic that policies now being adopted by the Planning Commission and supported by ordinance changes from the City Council and mayor have severely hobbled, if not extinguished the free market's most promising solution to quickly and effectively address the affordability problem.

The single most important factor between impoverished and wealthy citizens is the ownership of real property, especially in a constantly appreciating housing market like San Diego. The equity built up over time is a paramount factor for creating wealth and elevating the poor into the middle class.

Conversions divide the appreciating property value amongst many tenants instead of one landlord. Ideally this growing equity would open up new investment opportunities, or be used by owners to finance their children's continued education -- another paramount factor in allowing upward social mobility of the impoverished.

The issues under debate are generally not critical health and safety issues, but zoning, architectural aesthetics, landscaping and duplicating maintenance protections already overseen by the Department of Real Estate (DRE).

Protections in the form of the DRE, the consumer's freedom of choice in the housing market and, as a last resort, the justice system, provide all the mechanisms required to protect the conversion buying consumer and the displaced renter.

One only has to review recent studies on the most effective methods for producing affordable housing, and conversions of existing buildings are by far the quickest, easiest, cheapest, and most effective avenue to increasing the ownership percentage, affordability and variety of housing options available to San Diegans.

How many council members or planning commissioners have toured recently converted properties, before and after the work, to have a firsthand look at the result? I would bet very few, if any. I can attest the contrast is dramatic, and can transform and redevelop entire communities without a dime from city coffers.

Furthermore, conversions increase tax revenues for these properties by a four-fold multiplier or more. Where is the downside to this affordable housing solution? Is city policy being manipulated based on one workshop, staged with a dozen disgruntled or displaced (but well organized) owners and renters?

Was any study done to determine the opinions of the thousands of new owners also affected, most in a positive way? Our elected officials need to stop now, do the research and get the real story. Read the available articles. Conversions work to everyone's benefit, but most of all, the city government's.

If our elected officials have vision to recognize it, they have been handed nothing short of a miracle solution that will help them: 1.) Increase property ownership, 2.) Generate more revenue without raising taxes, 3.) Redevelop rundown neighborhoods with private money and 4.) Actively assist needy residents in breaking the cycle of poverty.

San Diego was once on the leading edge of the residential conversion trend now spreading throughout the state and the nation. And due to the city's policies, the conversion money is going with it. Our elected officials need to rethink their strategy and embrace the private sector's efficient solution.

1.) Embrace a variety of prices and amenities according to the consumer's purchasing decisions.

2.) Support and streamline the private sector's efforts to create more units.

This may be our last opportunity. If city government makes the wrong decision now, San Diego will be battling these same affordable housing issues as we watch our grown children move out of town, to a place where their families can afford to buy their own homes.
Peters is president of Sterling Land Services Inc. of San Diego.

Back