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National City Keeps Lowering the Bar to Building, But Developers Are Unmoved

National City has increased the density developers can build to and sped up the time it takes to get a building permit. But even combining those regulatory incentives with the area’s low land costs, bayfront views and proximity to downtown San Diego, the freeway and the trolley hasn’t made a difference.

National City is trying to make it as easy as possible to build downtown, but developers are still hesitant.

The city increased the density developers can build to and sped up the time it takes to get a building permit. But even combining those regulatory incentives with the area’s low land costs, bayfront views and proximity to downtown San Diego, the freeway and the trolley hasn’t made a difference.

Ten years ago National City adopted a blueprint for its downtown that made way for 5,500 new housing units. Only about 300 have been built so far.

The recession was part of the problem. A bigger one is that with National City’s relatively low rents, developers can make more money building in other parts of the county.

Many developers still consider building in National City a risky proposition, said David Allen of Trestle Development.

The city made it cheaper to build in National City by making it easier to get permits, but the majority of development costs still come from construction – a cost that’s pretty much fixed no matter where you build.

“As a city, you can’t just wave a regulatory wand and make things happen,” Allen said.

Now National City is trying to up the incentives for new development even more.

The city is updating its downtown plan, and the biggest change will be lowering parking costs for new development. The city could reduce parking requirements if developers provide other amenities instead, and might form a special district to reinvest parking funds in pedestrian and bicycle infrastructure and shared parking garages to cut costs.

National City first adopted the plan for its downtown in 2005. It started processing projects, but then the recession hit.

“The window closed,” said Raymond Pe, a senior planner in the city. “It was a very narrow window. A dozen or more projects received entitlements, but then weren’t able to realize them.”

Only two of those projects eventually broke ground.

Nancy Estolano, a business owner who owns property in downtown National City, said she’s been having trouble selling and leasing her properties. One property took her months to rent out and she still hasn’t been able to sell another that could be developed into a high-rise.

“Nothing is here to support the rents for high-rises,” Estolano said. “It’s been the reason people haven’t gone forward and bought my property, even though it’s unlimited height and is a pretty large parcel.”

Part of the problem, she said, is that there are vacant lots everywhere. If a developer built something on her property, “there are two empty buildings across the street.”

Downtown and other urban areas of San Diego also allow for higher densities. So, Allen said, if the cost to build similarly sized buildings is comparable to National City, developers will opt for the place where you can charge much higher rents.

“Certainly when you get into rents and what can be charged, those are things we’re challenged with,” Brad Raulston, National City’s deputy city manager, said at a City Council and Planning Commission meeting. “It’s always partly perception.”

According to a survey by the San Diego County Apartment Association, the average rent for a two-bedroom apartment in National City is $1,209. In downtown San Diego, the average two-bedroom apartment goes for $2,479.

Allen compared National City to southeastern San Diego, which updated its community plan for density and streamlined the environmental review process if a developer stuck to the plan. There’s no building boom there yet, either.

The average rent in Encanto is $1,052, according to the apartment association.

“The first step is ‘Do people want to live there?’” Allen said. “I think National City ultimately needs a stronger rental market. What needs to happen is rents need to go up.”

The city’s other option is to get more directly involved, by subsidizing the development it wants. Allen said a public-private partnership using city-owned land could spur other private projects.

Imperial Beach did something similar and is now undergoing its own development wave. Imperial Beach used its own funds to help with a catalyst project there in 2014.

National City doesn’t have the money to subsidize development downtown, Raulston said, but it is considering using a few parcels of city-owned land as a catalyst project.

Though the city can’t change the market on its own, Allen said, it is doing things that are in its power. By laying the groundwork through its downtown plan and its streamlined processing, the city will be in a good place once the market calls for more development and its downtown could change rapidly.

Jacob Schwartz of Urban Housing Partners, a developer who has done work in the city, lauded the city’s planning department for its expedient processing, at a Nov. 1 joint City Council and Planning Commission meeting.

“As developers, one of the unique advantages to National City is the quick processing time,” Schwartz said. “That’s a huge flag to fly.”

National City has reason to be optimistic that its time will soon come. Raulston said the city is processing a few other projects that if built would add another 600 to 700 units downtown, and KIRE Homes recently purchased vacant land for a 31-unit apartment in a different part of the city.

“That’s an indicator that we’re getting close,” Allen said.

Schwartz, too, was excited about the city’s prospects.

“We’re calling it the east East Village now in National City,” he said.

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