The City and a local historical architectural preservation group are squabbling over whether historic housing stock supports or restricts, increasing the housing supply in San Diego.
Since 1969, the nonprofit Save Our Heritage Organisation has led the way as a powerful catalyst for historical preservation by raising awareness and appreciation of San Diego’s architectural and cultural heritage.
Recently, SOHO’s president, David Goldberg, contended in a newsletter that: “As the push continues to lower San Diego housing costs by increasing housing supply, two points stand out. Preservation of existing and historic housing stock is part of the solution, not part of the problem. Secondly, the focus on simply increasing the total housing supply is grossly misplaced. Protecting and increasing the aggregate supply of ‘affordable’ housing is what’s necessary.”
Added Goldberg: “Developers want to build more profitable market-rate housing, not affordable housing. When existing and historic housing is demolished, their replacements almost always cost more than what had been there before.”
In reply, the City Planning Department noted “historically designated resources and districts comprise a relatively small portion of the City’s developed land, with just under 1,500 individually designated historical properties and 30 local and National Register historical districts containing just under 2,700 contributing properties. It is also important to understand that a historic designation alone does not prohibit the development of additional homes or affordable homes on a site.”
City planning noted that designated historical resources can be adaptively reused for affordable housing, including adding new homes, including Accessory Dwelling Unit (ADU) homes. The City said affordable ADU bonus homes can also be constructed on designated historical properties and within designated historical districts with a simple building permit “if the new construction is designed to preserve the important historic features and characteristics of the property, as required by City regulations and any district design guidelines.”
“The City’s historical regulations also currently provide for the use of development incentives to facilitate the rehabilitation and reuse of historic properties, which can provide relief for applicants who want to add homes to historically designated properties and historic districts,” added the City’s Planning Department. “With that being said, the City’s current regulations do require a review of all permit applications impacting properties with buildings 45 years or older, which can cause frustrating delays for the 85%-90% of those permit applications that are ultimately found not to be historic. For the 10%-15% that are identified as potential historic resources, a majority of those projects are approved at the staff level because they do not have a significant impact on the potential resource.”
Bruce Coons, SOHO’s executive director, concurred with his colleague Goldberg’s assessment that historically designated homes are not contributing to the region’s ongoing affordable housing crisis. “Naturally occurring historically eligible buildings, we’re losing those at a huge rate,” Coons said adding he recently testified before a City Council committee arguing that “we need to expand historical designation to help protect that and make it easier for these homes to be designated. Once they’re designated, they’re eligible for the Mills Act, which makes housing more affordable because it reduces the property taxes.”
“We don’t utilize the Mills Act enough and don’t utilize historical designation in lower-income areas enough to help maximize the preservation of naturally occurring affordable housing,” concluded Coons. He added, “The development industry wants as few constraints, and costs, as possible to make the maximum profit. They’re only building market-rate housing, and the City has been letting them off on all the infrastructure fees. If they (developers) can sell an unlimited number of market-rate units, why would they build anything else?”
The City Planning Department acknowledged that it needs to find additional ways to improve the regulations and guidance around how historical designation can be accomplished to provide a clearer pathway for those interested in adding homes to properties with historical resources.
THE MILLS ACT
The Mills Act provides an important monetary incentive designed to encourage the preservation, maintenance, and restoration of designated historic properties. It provides for potential property tax savings on a property that is subject to a historical property contract. Mills Act properties are to be valued using the rental income and expense that could be expected from that property rather than using comparable sales to establish the assessed value. This generally results in a much lower assessment especially when the property has been recently purchased.
To qualify for the Mills Act, a property must meet qualifying criteria such as significant architecture, association with a historically significant event or person, or location in a historic district. Once designated as a historical site, the owner can then apply for a voluntary contract with that city. The term of the contract is a self-renewing, 10-year agreement. However, either the property owner or the city can file for non-renewal. As the contract follows the property and not the owner, the contract will transfer uninterrupted on the sale of the property. Currently, there are approximately 1,200 properties under contract with the various cities that receive this property tax benefit.
