How homes get built in San Diego (Step 1) – The hunt for property

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October 17, 2016 by Omar Passons

Development Cycle Step #1

Development Cycle Step #1

If you haven’t read the overview piece, stop and do that HERE, first.  *pausing to allow reading time* Okay, welcome back.  This is the first in a series on the life cycle of building homes in the City of San Diego.  My goal is simple: help every day San Diegans (and staff of elected and appointed officials) make better, more informed decisions about housing by sharing key information about the process. This post takes on the interesting task of figuring out where to put a project.

First, a quick note. I really dislike technical jargon words that make concepts needlessly hard to explain. As a result, this series is written in a plain, conversational style on purpose. This means I sometimes sacrifice technical precision for making the basic point easy to understand. I mention this because some readers have a very deep knowledge of the technical nuances and while I appreciate their input this is written for those who don’t eat, sleep, and breathe this stuff.  Also, I try to inject a little humor when I write so things don’t get boring. Some things are hard to explain without getting a little bit into technical details, but generally I’ll try to make even those ideas as straightforward as possible.

For this entire series, picture in your mind’s eye one of the apartment or condo complexes in Little Italy or Banker’s Hill, not the really tall towers downtown. Something more like this

Significant local architect rob Quigley designed this building in Little Italy

Significant local architect rob Quigley designed this building in Little Italy

or this from a trip I took to Portland along Division, along a street not unlike 30th Street or even Mission Blvd in terms of appropriate scale

The Division area of Portland

The Division area of Portland

rather than this tall building. Each represents “density” but the trick is putting the right version in the right place. Having this conversation about towers where they work and smaller mid-rises where appropriate is an important thing for us to do.

The Icon in San Diego is a very tall building that is right for downtown, probably less so in many other parts of the city

The Icon in San Diego is a very tall building that is right for downtown, probably less so in many other parts of the city

Finding a property – why does it matter?

A developer – another name for a person or company that builds homes – can’t just pick any place to build.  The first step is a complicated one that involves feel, research, spending time in a community – not just driving through it – and more than a bit of luck.  The reason this is the first step in the process has a lot to do with two important concepts that I’ll come back to several times throughout this series: the buyers and the banks.  The buyers make up a very important part of that magical term we all hear about, “the market.”  If a developer is going to build homes, she’ll want to be as sure as possible people will want to buy or rent the homes once completed.  Willing buyers are an important part of the market, but they are just one component. I’ll cover the market in more detail in a few separate posts.  In addition to buyers, a developer needs to care about banks (or other sources of money to do a project). Banks are less likely to lend in places that are risky either because there aren’t many qualified buyers or because the rules for building homes in certain areas make building successful projects uncertain. One particularly ugly example of policies that made investment all but impossible lasted from 1934 to 1968 – it was called redlining. *I beg you to read that last link when you have time. It will very likely surprise you*  These factors – buyers and banks – are a big part of why developers spend considerable time deciding in which communities to build homes.

Finding a property – what actually happens?

An example of a lot in the North Park community that is appropriate for more homes

An example of a lot in the North Park community that is appropriate for more homes. It’s going to be this project

Have you ever wondered how or why a given property turned from a vacant lot or a dilapidated building into shiny new homes or remodeled apartments?  Several years ago a friend and I looked at buying a property with the idea of building homes on it.  It was easier for me because I was looking within North Park, the community I’ve lived in for years and where I have been involved in the planning process for years.  If you know the North Park community you’ll remember the Ten’s Strip Club that used to be on El Cajon Blvd near the I-805. I remember being interviewed about that property by a reporter long before I thought about building there – someone had been murdered inside and it occurred to me that perhaps the neighborhood was ready for a change and it had outgrown these type of property uses.

The above story is illustrative of a few key considerations when searching for a property that may not be obvious to the casual observer.  Merely driving through a community that seems to have potential is not enough for a developer to decide if a property is a good bet. She can’t learn if there’s been crime or community distaste for a location based on a casual scan from the car or even from walking around.  Most communities in San Diego have local groups – Community Planning Groups – recognized by the City as valuable sources of community advice about how a community ought to develop.  I’ll get much more detailed about these groups and the inherent strengths and weaknesses in another post, but for now just understand that part of finding a property is finding people who understand the appetite and climate for building homes in that particular area.  Other factors include access to major transit lines, freeways, and pedestrian and bicycle infrastructure. The importance of non-auto transportation infrastructure varies wildly in San Diego – mattering much more in urban communities relatively close to downtown than in truly suburban places like 4S Ranch or Rancho Penasquitos. These suburban communities actually present an interesting case for a developer, who must think not solely about what today’s residents want, but what the people buying for the next 10-20 years will be willing to buy.  Given San Diego’s large number of tech jobs in the northern part of the city and the explosion of young workers, the next wave of buyers may actually want more transit and bike options in those communities.  Good developers don’t guess, they ask.

Finding a property – The Key Takeaways

To recap, finding a property is part art, part science, requiring multiple trips at varying times of day and night, attending Community Planning Group and other neighborhood meetings, talking to community activists, reading neighborhood newspapers, and even organizing focus groups of potential residents.  All of this prep work takes time and money – costs the develop bears as part of her investment well before any money is made. In fairness, not all developers take this methodical and community-involved approach to building.  There are corners to cut and some developers do cut them.  But just like no person wants to be stereotyped because they share a characteristic with another person, the same is true of developers. Some are committed to putting in the effort and working with communities, some aren’t. Some key factors in the hunt for property are:

  • A deep investigation of the physical environment of the property;
  • Consideration of the climate for building homes;
  • Spending time “on the ground” understanding the community needs;
  • Evaluating what trends might cause a neighborhood to be likely on an upswing; and
  • A bit of feel and intuition about what makes a potential property a good bet

But in any case, this helps explain how the building process gets started.

Go to Step 2 (pt I): What can you do with your property

Return to Understanding How homes get built in San Diego – An Overview

 

 

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