Tall & Urban News

Downtown San Diego Skyscraper to Provide Affordable Housing Units

Courthouse Commons is eyeing an April 2020 groundbreaking and summer 2023 opening.
Courthouse Commons is eyeing an April 2020 groundbreaking and summer 2023 opening.
05 August 2019 | San Diego, United States

The former courthouse in San Diego’s civic core will be demolished and replaced with a 37-story apartment and office complex. Due to the developer’s preferred financing method, low-income earners will be eligible for discounted rents in the building, which will offer sweeping views and high-end amenities.

On 30 July 2019, the developers behind the Courthouse Commons project at 220 W. Broadway received the city’s needed preliminary approval to seek up to US$235 million in low-interest housing bonds. The bonds, which will be used to finance most of the residential portion of the US$369 million mixed-use complex, require Vancouver, Wash.-based Holland Partner Group to rent 86 of the 431 apartment units at 50 percent of San Diego’s median income for 55 years.

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The City Council, acting as San Diego’s Housing Authority, voted unanimously to take the steps required to induce the bonds. The action allows the developer to move forward with applications to the state for the award, although permits still need to be secured and the council will get to weigh in again before the bonds are issued. The bonds do not represent a debt to the commission or the city, and there is no public subsidy.

Holland is able to provide discounted rent for a portion of tenants because of the financial incentives associated with the housing bonds, which include lower interest rates and tax credits.

Councilman Chris Ward, who is the representative for downtown, applauded the developer’s decision to set aside 20 percent of units for low earners, which is a requirement of the housing bonds. However, council members Mark Kersey and Scott Sherman bristled at Holland’s cost per unit, which is US$574,710, and said that most developers could not afford to construct subsidized units at similar rates.

As it stands, Holland is eyeing an April 2020 groundbreaking and summer 2023 opening.

The old San Diego County Courthouse, which is a neighbor to other government buildings, has been empty since the summer of 2017. The 1.25-acre (0.51-hectare) site is bounded by Broadway, Union, Front, and C streets. Holland won a bid from the county to redevelop the property. It expects to spend US$18.5 million to acquire the land from the county, according to an accounting statement Holland submitted to the San Diego Housing Commission. The co-owner of the project is Japanese builder Sekisui House North America.

“Holland is able to provide discounted rent for a portion of tenants because of the financial incentives associated with the housing bonds.”

Courthouse Commons will stand 445 feet (136 meters) tall and consist of 37 stories, with the bottom eight floors designated for 235,000 square feet (21,832 square meters) of office space and 17,000 square feet (1,579 square meters) of retail space.

The project’s subsidized offering includes 21 studios that will rent for US$898 per month, 32 one-bedroom units at US$958, 26 two-bedroom units at US$1,146, and seven three-bedroom units at US$1,320,  based on current estimates. To qualify for the units, a four-person household would be limited to earning US$53,500 per year, according to federal guidelines.

The remaining 345 apartments will be rented at market rate. In the second quarter, the average asking rent for downtown San Diego was US$2,388 per month, according to real estate tracker CoStar. The building’s amenities include a rooftop lounge with a pool and spa, outdoor terraces, dog run, and fitness center. The developer will also create a shared amenity deck on the eighth floor that can be used by both residential and office tenants.

“It’s a class-A property,” said Colin Miller, vice president of multifamily housing finance for the Housing Commission. “A family could live in this downtown development and be close to job opportunities.”

The seemingly exorbitant cost per unit represents a confluence of factors, Miller said. The developer will pay high labor rates, and prices for steel and plastics have risen because of tariffs, he said.

The bond inducement comes amid the city’s larger conversation around whether developers should be forced to build units for low-income workers or pay higher fees when they opt for market-rate-only projects. Holland, however, has shown a propensity for seeking the federal housing bonds. It used multifamily housing revenue bonds in 2017 to finance the construction of Park & Market, which is being built in East Village and includes 85 subsidized units.

The bonds require that the subsidized units are included in the same building as the market-rate units. That means there is no distinction in the types of units rented to tenants of varying income levels.

Last week, a proposed East Village apartment complex that called for housing low-income renters in a separate building was not approved amid segregation concerns.

For more on this story, go to The San Diego Union-Tribune.