News Summary
San Diego city leaders are advancing a major initiative to convert the 101 Ash St. office tower into affordable housing, approving a $250 million proposal for low-income families. The plan includes creating 247 residential units and several commercial spaces, while addressing past ownership issues including asbestos contamination. Funding will rely on federal housing tax credits, with the potential to house around 800 individuals. Councilmembers express optimism but stress the need for thorough oversight as the project moves forward.
San Diego city leaders are moving forward with a significant initiative to transform the decrepit office tower at 101 Ash St. into affordable housing, approving a $250 million proposal designed to benefit low-income families. The Land Use and Housing Committee voted unanimously to endorse a 60-year ground lease with housing developers MRK Partners and Create Dev LLC, paving the way for the full City Council to review the transaction at the end of July.
Under the terms of the agreement, the city will provide a loan equivalent to the building’s value, estimated at $45.6 million, without requiring cash contributions for the project. Notably, payments on this loan are not anticipated to start until year 15.
The proposed development aims to create 247 residential units designated for families earning between 30% to 80% of the area median income. In addition to housing, the project will include three manager units, 25,000 square feet of retail space, and a 4,000-square-foot child care center.
While councilmembers expressed optimism about the initiative, they emphasized the necessity of reviewing specific deal terms before final approval. The vacant 21-story structure, which was completed in 1967, previously housed Sempra Energy until 2015. The city acquired the tower through a 20-year lease-to-own arrangement in 2017; however, ownership has been fraught with challenges, primarily due to asbestos contamination issues.
To address these complications, the city bought out the previous lease for $86 million in 2022. Currently, the city incurs annual expenditures of approximately $2.55 million for maintenance and security of the uninhabitable building.
The developers estimate that the overall cost to convert the building will exceed $1 million per unit. Key expenses in this endeavor are projected to include $40.1 million for asbestos abatement and demolition, alongside $67 million for remodeling, with additional overhead costs related to labor and interest charges.
Funding for the project will rely on securing federal low-income housing and historic tax credits, with projected revenues from these tax credits estimated to reach $114.7 million. Following refinancing after year 15 of the project, potential payments from the initiative to the city are expected to represent 50% of rental proceeds, after deducting expenses.
Councilmember Kent Lee remarked on the initiative as an opportunity to convert a “dark chapter” in San Diego’s history into much-needed affordable housing. However, some critics, including former city attorney Michael Aguirre, have raised concerns about proceeding without a thorough examination of all transaction documents, particularly with regard to the implications of a long-term lease given the building’s assessed economic life.
The project stands to house approximately 800 individuals through the creation of affordable units, which would play a substantial role in addressing the city’s ongoing housing crisis. San Diego’s leadership remains attentive to the development’s potential but acknowledges the importance of prudent oversight as they proceed with the initiative.
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Additional Resources
- San Diego Union Tribune: 101 Ash Street Affordable Housing Initiative
- CBS 8: Offloading 101 Ash
- County News Center: Affordable Homes in Mission Valley
- Google Search: San Diego affordable housing
- Encyclopedia Britannica: Housing
