Downtown San Diego has been dubbed a laboratory for urban design, reflected in the condos and town homes comprising residential niches throughout downtown. With their minimalist shapes, Mediterranean color scheme, and names like “Les Lofts” and “Neuhaus Ateliers,” downtown residential units are, well, sexy. And, as anyone who's priced a downtown condo knows, rather expensive, too.
Centre City Development Corporation (CCDC), the machine driving downtown San Diego's redevelopment, predicts that by the completion of the redevelopment process, some 50,000 people will call the downtown area home. It is, in fact, a stated objective of CCDC to make the downtown area livable and, as its July 2002 Housing Guide states, “[meet] the needs of an economically and socially balanced population.”
It's a conundrum then-the units, for the most part, have a look and feel that's attractive to 20- and 30-somethings seeking to break away from the rent cycle. And downtown areas have typically been living spaces for that demographic while the older generations migrate out to the suburbs.
Recognizing that, CCDC established its Downtown First-Time Homebuyer Program “to make home ownership attainable by more San Diegans,” according to the Housing Guide. To qualify, a prospective buyer must make 120 percent or less of the San Diego County area median income (AMI), which currently stands at roughly $47,100. In other words, a single person would have to earn $50,500 or less annually to qualify; a couple, $57,700 or less; a family of four, $72,100 or less. The buyer must also come up with at least a 3-percent down payment as well as qualify for a substantial loan from a participating mortgage lender. Once that loan is approved, the buyer would then receive a second loan of up to $75,000, interest-free, from CCDC to put toward the purchase of the home.
Two other caveats: the property must be located downtown. And, say, for that couple making $57,700 or less, if the condo they want costs more than $247,200 there's little, if any, chance the participating mortgage lender will approve the loan.
What, then, is the probability of finding something that will work within the limitations of the CCDC program? Given that a recent list of available downtown properties started at $249,000 for a 672-square-foot, one-bedroom condo, the chances are slim to none.
For that reason the CCDC Downtown First-Time Homebuyer Program has not, in its nine-month existence, helped anyone. To put it simply, no one's been able to get a loan from a mortgage lender substantial enough for even the cheapest downtown property.
CCDC Senior Project Manager Dale Royal acknowledged that so far the program is more an ideal than a reality. He pointed out, though, that there are reportedly three prospective buyers who have been pre-approved for loans for condos at Union Square, a development located in East Village at 14th Street and Broadway near Central Police Headquarters. Set to open in 2003, prices start in the low $200,000s. But, said Royal, “until those loans close, which should be in the next month or two, we haven't had anybody purchase a home through the program.”
Increasing the income requirements for a family making, say, $75,000 would help, said Royal, but state redevelopment law sets 120 percent AMI as the maximum income level. “Of course we've talked about increasing the loan amount,” he added, “but I don't think that would be politically popular or feasible at this time.”
The best chance the CCDC program has, he said, is for developers to set aside units that would be affordable for first-time buyers.
Joe Purvis volunteers at CCDC's downtown information center and said that on the days he's there, he'll count 15 to 20 people who'll come in to ask about the First-Time Homebuyer Program. When they do, he tells them the truth: unless you have an equity partner-someone providing you with some substantial cash to defray the amount of the first loan-there's little point in even applying for the program. He suggests that first-time buyers in need of assistance look further outside the city.
“There's flaws to the program because you need your own capital,” he said. He added that he'd like to see changes to the program, such as allowing the applicant to put the $75,000 loan towards the first down payment rather than the second down payment.
In addition to volunteering for CCDC, Purvis, 26, along with Drew Burks, 29, have found a way to make the most of the downtown housing boom. In July, the two partnered with Homebuyer Agents, a buyer-side real estate group, and now represent downtown San Diego. In the six months they've been in business, they've done $9 million in escrow, Purvis said.
Burks described their average client as middle-aged with grown children and the ability to pay cash. He said that most downtown homebuyers are doing it for the investment value rather than simply a place to live. “As someone put it to me the other day, if you're in the stock market, if you go to the bathroom you can lose $3 million because the stocks can go up and down. But real estate, over time, it's going up and it's going to continue to go up. Are things going to be a little overpriced? Possibly. Everything's timing.”
Both Purvis and Burks, who rent in Pacific Beach and University Town Center, respectively, have each put a $5,000 “hold” on two-bedroom condos at a development called La Vida, which is expected to open in 2004. Burks said that if they were to back out on the hold, the next person would have to pay $20,000 to reserve the same unit.
“Most of the condos downtown are sold sight unseen,” said Purvis. “Properties are sold out before they even start groundbreaking.”
Both want more affordable housing downtown. “I know that Joe and I have met with two or three developers who have gone to CCDC and the city to discuss building mixed-use property... low- to moderate-income residential and then higher-income residential with commercial [next door]. But the problem is that people who could afford a million-dollar condo don't want to subsidize a mid-rise tower with people they feel...”
“Bring their property value down,” Purvis finished.
“If the right developer did it,” Burks continued, “and the right people supported the property, you could make it so that no one's property depreciated. That's the problem the developers run into-the people they can sell the high-end to go, ‘Wait a minute, we don't want these $200,000 to $300,000 condos right next to us.' So that's kind of where I think there's an obstacle.”