Too late for a cap?

A few weeks ago, it looked like a tentative settlement between the city of San Diego and an attorney suing the city over how it reviews and approves condo-conversion projects was on the verge of crumbling. Details of the settlement had been hammered out in March between attorney Cory Briggs, who filed the lawsuit on behalf of affordable-housing advocates, and Mayor Jerry Sanders' office. Among other things, the settlement capped at 1,000 the number of units that could be approved for conversion each year.

On June 12, the City Council was scheduled to approve or reject the settlement. At that meeting, Jim Waring, the mayor's chief deputy in charge of land-use, suggested a slight tweak to the language: For administrative reasons, the cap should be on applications to convert, not final approval, he argued.

For Briggs and his clients, the modification was unacceptable.

"Converters time the market; they'll put their application in and wait until the market is favorable," Theresa Quiroz, a supporter of the cap, told the City Council at the June 12 meeting.

So, though the city would accept applications from interested condo converters until the sum of those projects' units hit 1,000, without a cap on approvals-approval bei ng the final step needed before work can begin on a building-converters could sit on their applications for years. "So when costs go back up, many more [than 1,000 units' worth] could be built in a one-year period," Briggs said.

Briggs has argued-with the backing of City Attorney Mike Aguirre-that the way the city permits condo conversions violates the California Environmental Quality Act (CEQA). Briggs and Aguirre (whose support of Briggs made it difficult for the city to defend itself) argued that CEQA required the city to assess the cumulative impact conversions were having, not only on the renters being displaced but also on the community-impacts like increased traffic and decreased parking. San Diego has been referred to as "ground zero" for condo conversions; currently there's roughly an 18-month supply of unsold units on the market, according to MarketPointe Realty Advisers.

The 1,000-unit cap was a compromise: Briggs' clients wanted a moratorium on conversions, then proposed a 500-unit cap. Negotiations went on for 18 months until the mayor's office agreed to 1,000. In the meantime, Briggs' lawsuits were holding up roughly 300 conversion projects whose final approval he had appealed.

Several other cities in California have limited the number of apartments that can be converted to condos annually. San Francisco, for example, allows only 200 converted units each year, and Santa Monica allows conversions only when the apartment-vacancy rate exceeds 5 percent for at least three months. Other cities require one new rental unit for each converted apartment taken off the rental market.

Last week, Waring agreed to stick with the settlement's original language and even added an additional cap: The city would accept applications to convert up to 900 units each year and approve the conversion of up to 1,000 units each year.

Briggs called it a victory for the community, though he pointed out that the settlement still needs City Council approval before he officially drops his lawsuits (there are four in all, each covering a different group of conversion projects). Another item in the settlement is that tenants of an apartment building that's being converted to condos will be surveyed to determine how conversions affect renters. The results of the survey will be compiled into an annual report.

When asked why he agreed to settle with Briggs, Waring said that "at the end of the day, we determined [the cap] was not statistically significant."

In other words, he said, "the number of units... impacted by the cap is relatively small."

According to numbers provided by the city's Development Services Department, since 2002, owners of 675 apartment buildings, comprising 19,617 dwelling units, are somewhere in the conversion process. Those projects, both Briggs and Waring noted, won't be subject to the cap. A number of conversions that are right now being rented out as apartments until the market heats up also won't be subject to the cap. Waring pointed out, too, that the City Council passed an ordinance last year that imposed parking-space requirements on conversion projects, effectively ensuring that a number of older apartment buildings would never become condos because the parking requirement would make the conversion too costly.

"A relatively small percentage of the remaining potential inventory is the only subset subject to this cap," Waring said.

So, what did Briggs and his clients achieve if, as Waring put it, the cap's effect is "statistically insignificant"?

Waring declined to answer that question.

"It's a shame that after nearly two years of talking about this issue, the city's leaders still don't understand the significance of stopping condo conversions," Briggs said. "We know that we can't stop what's already in the pipeline; we're concerned about the next wave.

"This idea of a cap, we put out in December 2005," Briggs said. "If the city had actually engaged us on the issue, instead of pretending that it didn't exist, we might have had a cap in place a year ago or even more and then the [projects] currently in the pipeline, we would be doing something about them, but the city has done this kicking and screaming because the development interests tell the leaders what to do."

Condo conversions have been championed as an entry-level homeownership opportunity, affordable in a region where the median home price hit well over half a million.

But, according to a recent report from MarketPointe, folks buying converted condos are paying far more per square foot than someone purchasing a brand-new single-family home. At the end of last year, condo conversions were going for $299 per square foot, the MarketPointe study notes, while a new single-family detached home was selling for $280 per square foot. For single-family homes, that per-square-foot cost remained pretty consistent throughout the housing boom while condos got as high as $338 per square foot.

Write to kellyd@sdcitybeat.com and editor@sdcitybeat.com.