San Diego Wants to Combat Its Housing Shortage by Converting Empty Storefronts - Voice of San Diego

Land Use UNVEILING THE UNSEEN

San Diego Wants to Combat Its Housing Shortage by Converting Empty Storefronts

San Diego isn't building enough homes, at the same time that it's built way too much retail space. The City Council is considering a plan to solve both issues at once, by letting people live in those empty storefronts.
for lease commercial space east village
For-lease commercial space at the corner of 14th and Market Street in the East Village. / Photo by Kinsee Morlan

City officials have big ideas about solving San Diego’s housing crisis.

Next month, the City Council is scheduled to make changes to San Diego’s development regulations. Mayor Kevin Faulconer and a few Council members have pitched ways to tweak the rules to encourage more homebuilding.

Councilmembers David Alvarez and Scott Sherman are proposing temporarily relaxing a rule requiring developers to build ground-floor retail space in new projects. They want to couple it with rewriting the city’s live-work rules to open up who can live in the converted commercial spaces. They’re two of a series of proposals in the duo’s plan aimed at combating the city’s housing shortage.

Urbanists, developers and real estate brokers say doing away with the commercial requirement and expanding the city’s live-work rules could quickly create more housing – especially for artists, artisans, website developers and other San Diegans who want to live where they work.

“People are working and living differently, and we need to adapt for that and allow for that creativity to exist in our living spaces,” Alvarez said.

In parts of Barrio Logan, downtown, North Park and other busy corridors, developers are required to build ground-floor commercial space in new buildings.

The requirement is meant to foster blocks that are busy around the clock in walkable, urban neighborhoods. Businesses help sidewalks stay busy, and pedestrian traffic can help cut crime and otherwise make a city feel vibrant and safe.

But when ground-floor commercial space stays vacant for years, it becomes a problem.

“This notion of having commercial ground floor on every residential project is sort of like the planner and urban designer unicorn,” said Marcela Escobar-Eck, a development consultant who’s successfully lobbied the city to relax commercial ground-floor rules for a few of her clients. “But the bottom line is, if you don’t have the people there to sustain it, and the boots on the ground to support those businesses, the project fails miserably.”

For-lease signs hang in empty commercial spaces throughout downtown and in the quickly developing East Village. Many blame the vacancies on the so-called “retail Armageddon” caused by more and more people shopping online instead of in brick-and-mortar stores.

Commercial space is also expensive, and many small business owners can’t afford the investment it takes to build out an empty ground-floor unit with the amenities they need.

Alvarez and Sherman’s proposal would temporarily relax the rule requiring developers to build ground-floor commercial space, allowing them to instead build housing, offices or combination live-work spaces. After 10 years, the units would convert back to commercial space.

The proposal is based on an existing permit that allows developers of downtown projects to temporarily convert ground-floor commercial.

Three projects in downtown and the East Village – including the IDEA1 building at Park Boulevard and E Street and the Pinnacle tower at the northwest corner of 15th and J streets – have successfully applied for the permit and temporarily converted some ground-floor commercial space into housing.

To wave the requirement, developers must submit a study showing the market won’t support more retail or restaurant space. They also have to build the ground floor with high ceilings and other features that make it easy to convert it back to commercial space.

Alvarez and Sherman’s plan would keep the market study and the 10-year requirement but expand the option to projects outside of downtown.

The idea is that once more housing has been built, there will be enough people to support the ground-floor businesses.

The change wouldn’t be limited to new buildings; developers could flip existing, empty retail space into housing or other uses.

At the same time, the Council would change zoning rules to allow live-work space in more neighborhoods, and rewrite the city’s live-work ordinance to be more flexible.

If the City Council approves the changes in March, Alvarez envisions at least some of the city’s empty commercial space transforming into homes for artists and other creative professionals who want to live in and run a small gallery or shop in the front of the space. A hairdresser, for example, could live in part of a converted commercial unit and use the rest of the square footage as a salon.

Alvarez said relaxing the commercial requirements will work best if the city changes its live-work ordinance, too. Right now, only artists and artisans can inhabit live-work units. The rules also say only the resident can work in the attached workspace. Alvarez said it’s time to loosen some of that language.

“I want to give people the flexibility,” he said.

Russ Haley, vice president of CityMark Development, said Alvarez and Sherman’s plan will likely result in more housing.

“The commercial component is so stringent that we just have to pass on a lot of deals that really, rightfully, we should be building right now,” he said.

Haley said in one of CityMark’s mixed-use projects at the corner of Park Boulevard and University Avenue in Hillcrest, the commercial space sat vacant for so long during the economic downtown of 2008 that his development company eventually decided to move its offices there instead.

But Haley said the requirement to return the ground-floor to commercial space after 10 years could make it hard for banks to fund new projects.

“I think that could be difficult from a financing standpoint,” he said.

Lloyd Russell, a local architect and developer, said he supports Sherman and Alvarez’s plan. He said ground-floor apartments don’t have the same privacy of other apartments higher up, and he thinks that will mean more reasonable rents for the ground-floor units.

“They should be naturally more affordable,” he said.

But Russell said the 10-year cap is an important component of the plan. He said once San Diego grows, ground-floor spaces should convert back to commercial use. Otherwise, the city will just be promoting the growth of denser suburbs that require people to drive to get groceries or meet other shopping needs. That extra driving doesn’t help the city meet the goals laid out in its Climate Action Plan, which seeks to drastically reduce carbon emissions.

“It certainly is a tough time for retail right now, but more density will make it better,” he said.

Russell has some questions about the plan, though. He wonders how, exactly, the city will enforce the 10-year limit. What happens when people are living in the ground-floor spaces and are required to move out when the temporary permit expires.

Nate Benedetto, one of the owners of a San Diego commercial real estate firm that focuses on renting out restaurants and retail space, said Alvarez and Sherman’s plan couldn’t come at a better time. He said having lots of vacant commercial spaces languishing on the market isn’t good for anyone.

“The scary part is what’s to come,” he said. “With the East Village developing, there’s a few 100,000 square feet of retail space hitting the market in the next few years, and you already have the current crop of restaurants there struggling. … We’re going to have to get creative to figure out what to do with all this commercial space.”

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