An otherwise routine loan morphed into a flashpoint of contention between a council member, Pacific Beach community members and two affordable housing developers.
That’s because the money, to be doled out by the city of San Diego to the nonprofit developers of the proposed Rose Creek Village project, was the last thing standing in the way of a mid-rise residential building that promises to skirt a voter-enacted law that keeps building heights at 30 feet or less in coastal neighborhoods.
On Tuesday, San Diego City Councilmember Joe LaCava, who represents the Pacific Beach community, sought to kill the loan — and, by association, the project. The developers, he said, were initially dishonest with community members about the project’s planned height. What’s more, taxpayer funds should not be used to override the will of voters, he said.
In the end, council members voted 6-2 to loan $4 million to San Diego Community Housing Corporation and National Community Renaissance of California (National CORE) to help fund their Rose Creek Village project at 2662 Garnet Ave. Council members, acting separately as the city’s Housing Authority, also voted 6-2 to approve a $2 million project loan from the San Diego Housing Commission.
The actions complete the Rose Creek project’s financing puzzle. They make possible a five-story, roughly 60-foot-tall building on a 0.4-acre lot, where 59 of the 60 units will be deed restricted for very low-income and extremely low-income and families. The project includes 18 units for homeless veterans, a community room, nine parking spaces and private offices for supportive services.
With the loan approvals, the developers expect to start construction in February and open the height-limit-busting project by the end of 2026.
“Having dedicated many years into affordable housing, I can confidently say that opportunities like this are very rare. This is what a transformative project looks like. This will be San Diego’s first 100 percent affordable Low-Income Housing Tax Credit project in a beach community,” Ted Miyahara, the executive director of San Diego Community Housing Corporation, told council members. “And by this project moving forward, we would essentially double the housing stock that would be affordable in PB.”
San Diego’s coastal zone, officially referred to as the Coastal Height Limit Overlay Zone, was established by a 1972 voter initiative, Proposition D, and prevents buildings over 30 feet west of Interstate 5. The local law includes carve-outs for downtown, National City and parts of Mission Bay. The entirety of the Midway-Pacific Highway Community Plan area no longer falls within the protected zone thanks to a 2022 voter-approved ballot measure that survived legal challenges.
The local coastal law is distinct from the California Coastal Act of 1976, which protects at the state-level land up and down the coast of California.
A few blocks west of Interstate 5, the Rose Creek Village project along Garnet falls within the city’s coastal zone but outside the state’s more narrow boundaries.
In November 2021, the developers presented an early version of their affordable housing project to the community planning group. At the time, they left out specifics around the proposed building height. Shortly thereafter, the development team sought clearance from California’s Department of Housing and Community Development, or HCD, to breach the lot’s 30-foot height restriction.
In June 2022, the Rose Creek project received the all-clear from HCD. The agency said the local, voter-enacted limitation is void because it conflicts with State Density Bonus Law. The state law, established in 1979, exists as an incentive for developers to build on-site affordable units, and it requires cities to grant waivers and incentives for projects with units deed-restricted for low-income households.
The state Legislature preempts local initiatives, HCD said in its letter.
Community members pressed the council not to sidestep the local ordinance.
“Ted and John (Seymour with National CORE) think the citizens initiative or a vote of the people doesn’t apply to them because they’re doing a good thing,” Marcella Bothwell, chair of the Pacific Beach Community Planning Group, said during the council meeting’s public comment period. “Council members, we have process for a reason. If we don’t follow process, we disenfranchise the people and promote division and unnecessary anger. I implore you to do the right thing and … get a new vote of the people regarding the breaking of the 30-foot height limit.”
Tuesday, council members were asked to approve a $4 million loan with a 55-year term and a 3 percent interest rate — not to weigh in on the merits of the project itself. The state’s opinion letter means the project can be approved at a staff level.
Late last year, city staff selected the project as one of several affordable housing projects to receive funding in the third wave of the city’s Bridge to Home program.
The developers will use the city loan for property acquisition costs and to close the gap between a total project cost of $36.1 million and other amassed funding sources.
The Housing Commission, which is the city’s public housing agency, also picked the Rose Creek Village project to receive a $2 million loan for acquisition and construction costs. The Housing Commission loan has a 4 percent interest rate and a 55-year term.
Without the loans from the public agencies, the project is infeasible, the developers said.
“We’ve explored all the funding opportunities that are out there, and we got them. There are no other sources,” Miyahara told council members.
LaCava tried to block the project with a failed motion to reject the city’s loan. He characterized the project as a “bait and switch” because he said community members were initially led to believe the project would be three stories.
“I cannot and will not support using taxpayer dollars to fund projects that are dishonest with the communities, that are dishonest with public agencies and projects that bypass voter-adopted ballot measures,” he said.
The developers said their actions were mischaracterized by the council member and community members. They informed the planning group in November 2021 that they would seek to maximize density on the site, Miyahara said.
Councilmember Raul Campillo sided with LaCava, but the remaining council members voted to approve both the city and Housing Commission loans.
“I understand and appreciate the action taken by voters in the ’70s. And the action in front of us is the loan agreement,” Council President Sean Elo-Rivera said. “I see a loan agreement that will help 59 affordable homes be built, 18 of which will be available for veterans and other people at risk of experiencing homelessness.”
Although Rose Creek Village appears to be the first project to lean on the state’s authority to tower over the local coastal zone restriction, it likely won’t be the last. Last year, the State Density Bonus Law was updated to clarify that it supersedes local voter initiatives.
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