San Diego’s elected leaders agreed Wednesday that the city should move toward securing a formal agreement with local developer Chelsea Investment Corp. to build more than 400 units of affordable housing on an East Village block once destined for a luxury hotel.
Members of the City Council’s Economic Development and Intergovernmental Relations Committee were briefed on the progress made so far on a plan to redevelop a nearly full square block at Seventh Avenue and Market Street with a three-building complex of rental units, all affordable to low-income households.
While the council agreed nearly a year ago to begin talks with Chelsea about redeveloping the city-owned parcel following an aborted plan to bring a Ritz-Carlton hotel to downtown San Diego, negotiations have now advanced to the point where the city and the developer are ready to refine plans for the project and work out financial terms.
The four-member committee recommended that the City Council enter into exclusive negotiations with Chelsea for six months, which would allow the developer to conduct detailed inspections and analysis of the Seventh and Market site while at the same time firming up development and financing plans. Still to be determined is a purchase price for the publicly owned site, which will require a new appraisal.
Chelsea, which has extensive experience in low-income housing development and is part of the Midway Rising team chosen to redevelop the city’s sports arena real estate, has not yet disclosed the cost of the Seventh and Market project.
Councilmember Jennifer Campbell wondered how Chelsea would be able to tackle this development, given its obligations with Midway Rising, which calls for 2,000 affordable units, and still another project planned in her district.
“Yes, we have 10 to 12 projects under construction throughout California, and we definitely have the capacity and are super excited about being downtown with another great project,” said Chelsea Chief Development Officer Jim Anderson. “We’ll move as quickly as possible to get the project fully financed and move it forward. Other projects will probably be staggered over the next 10 years.”
Chelsea was among four developers who responded last year to a formal solicitation by the city after years of delays by San Diego-based Cisterra to transform the site into a Ritz-Carlton hotel, Ritz-branded condos, a gourmet grocer, offices and housing. Developers’ responses were guided by the state Surplus Land Act, which is designed to encourage the construction of housing affordable to lower-income households. At the very least, Chelsea and others that bid on the site were required to set aside 25 percent of their proposed units as affordable.
The Chelsea proposal goes well beyond that, as well as what was envisioned in Cisterra’s original project proposal, which complied with regulations at the time requiring that at least 15 percent of the housing units proposed be affordable to low-income households. Its Seventh & Market development called for 218 housing units, 34 of which were to be affordable.
Councilmember Kent Lee asked whether the city’s solicitation last year had allowed for the potential to create a denser, mixed-used development on the site that could provide a sizable number of affordable units while still allowing for other uses and amenities within a taller structure.
Christina Bibler, the city’s director of Economic Development, said that the city had indicated an interest in a mixed-use option, but nearly all the developers submitting proposals opted for 100 percent affordable housing, a key criteria in evaluating the submissions.
“Obviously, the financial environment right now is very challenging, so I’m probably not surprised that there aren’t more (developers) itching for a much more ambitious project,” Lee said. “And I’d even note for Chelsea that I can only imagine a more challenging environment now, given that we’re seeing a reduction in state funds toward housing programs, tax credits and more, and the potential of even less funds from the city standpoint, so I’m glad to see this has the opportunity to move forward. I don’t imagine it’s going to be easy piecing together all the puzzle pieces to make this possible so having an extremely experienced developer such as Chelsea navigate that does give me a lot of confidence.”
The current project design calls for a mix of studios and one-, two- and three-bedroom units housed within a complex of three eight-story buildings, with each catering to a different demographic — low-income families, seniors and the workforce population. The rentals would be affordable to households earning from 30 percent to 80 percent of the area median income in San Diego County, which is $119,500 for a family of four.
