City Heights Slated For 'Opportunity Zone' Development, But Some Residents Fear Gentrification

May 29, 2019 at 10:42 AM PDT

Speaker 1: 00:00 Speaker 2: 00:19 Speaker 3: 00:39 Speaker 2: 00:50 Speaker 3: 00:58 Speaker 2: 01:09 Speaker 3: 01:18 Speaker 2: 01:27 Speaker 3: 01:36 Speaker 2: 01:45 Speaker 4: 02:12 Speaker 2: 02:34 Speaker 3: 02:54 Speaker 2: 03:15 Speaker 3: 03:38 Speaker 2: 03:47 Speaker 3: 03:57 Speaker 2: 04:11 Speaker 2: 05:12 Speaker 1: 06:08 Speaker 2: 06:14 Speaker 1: 07:16 Speaker 2: 07:24 Speaker 1: 08:14 Speaker 2: 08:30 Speaker 1: 09:22 Speaker 2: 09:35 Speaker 1: 10:37 Speaker 2: 10:42 The federal government has launched an opportunity zone program. It's designed to give tax breaks to investors who want to build in economically distressed areas. San Diego has 35 census tracks designated as opportunity zones. KPBS reporter Priya Sridhar says that includes city heights. This is city heights. It was designated and opportunities zone by the US Department of Treasury because of its poverty business activity and geographic diversity opportunities. Own Investors get a tax discount after five or seven years and ultimately pay no taxes on capital gains after 10 years. Really simple example, you have $1 million that you've made in the stock market. You take that $1 million and you rolled into one of these funds rather than paying taxes next year, you don't pay taxes until 2027 Steve Glickman is a former Obama administration, economic adviser and architect of the opportunities zone program. In the meantime, you can take that million dollars and invest in something new like in an affordable housing project and whatever profits you make on that project, as long as you've held your, your investment for 10 years or more now tax free. But the policy is purposely written broadly. There is no restriction on what investors can develop and that's something critics of the program say worry them. An accepted definition of gentrification is outside capital and um, um, more affluent people moving in from outside of the area into an area. Eric Tilke Meyer from the city Heights Development Corporation says he worries longtime city heights. Residents will get priced out of their neighborhood. You know, you'll look at the legislation as designed to bring outside capital into um, under invested communities. So it's a perfect recipe for gentrification and displacement. A recent study by Zillow economic research says home sales in areas that received opportunities. Zone designations increased 20% year over year compared to single digit growth in areas that met opportunities, zone qualifications, but didn't receive the designation. The gentrification concern is on the city of San Diego's radar to Louie. So Heda is with the Economic Development Department of the city of San Diego. Gentrification is a real issue. Um, and then also this placement and sometimes both of them go hand in hand. We have to think about those issues. Um, say the set up policies that incentivizes and promotes the ones that are doing the potential positive outcomes such as increasing jobs, um, creating affordable housing and the housing. Yeah. The city currently has no way of tracking opportunity investors and online portal. We'll show investors federal and state incentives to help them invest in economically distressed communities in a positive way. Sasha feather Lucas says, opportunities. Zones can be transformative, but the investments must be handled carefully. It also has the ability to be done wrong and when a paper goes into economically distressed areas, there's a process to it and you have to really involve the community and give, uh, in order for the community to be supportive. And a lot of these areas aren't ready to be built. He's the cofounder of cold place accompany that activates under utilized real estate and opportunities zones. Right now they're converting a 7,000 square foot lot in city heights. This property is zoned for ten one bedroom, 600 square foot apartments. But because the cost to build is so high, he says he'd have to rent the units for $1,800 a month. And so if I were to build those units, yeah, I don't, I don't know who would live there, uh, who can afford to live in them based on the cost of living. Glickman the author of the Opportunity Zone Program says rising housing prices is a tradeoff for investment cities might never have had otherwise. For most places, their biggest trigger for displacement is too little investment, not too much. It's the fact that people have to leave to find jobs and to build businesses and to, you know, find a kind of a vibrant place to live in. Well, it might be too early to tell. Most stakeholders and community leaders are hoping the program will help stimulate the economy of distressed neighborhoods in San Diego like city heights. Joining me is KPBS reporter Prius Razor. I'm Priya. Welcome. Thank you. There are no guidelines about what kind of opportunity zone investments are good for the area. That's right. We'll actually, previous administrations had apparently tried to implement programs very similar to opportunities zones, but the difference with those programs, according to Steve Glickman who is the architect of this program, is that they did try to create several restrictions or requirements about what investors could develop in these communities and those programs actually failed. And so he on purpose actually made this program very broad, but that's something that uh, many of the people in city heights as you heard in the story and uh, including Eric [inaudible] Meyer, um, is worried that that's going to cause gentrification, which is gonna Cause displacement of the people who are actually living in city heights. If there aren't actual restrictions on what they can develop in. Could the city of San Diego set up some of its own guidelines for opportunities zones that are within the city limits or isn't that possible with a federal program? So we don't really know just yet. This program was implemented in 2017 so it's still a relatively new program. The only numbers that we have right now that the city got where that 300 opera opportunities owned funds had been opened up with the IRS and nationally. So we don't even know how many of those are here in San Diego, if any are actually here in San Diego at all. Uh, but there are people in city heights who actually are working right now to put together a proposal that they're going to present to city council that will create some further restrictions on what kind of uh, developments those investors can develop in their neighborhoods. So we'll have to kind of watch and see if city council is receptive to that kind of proposal. What kinds of opportunities on investments and development woods, city heights officials like to see come into the area. So it's pretty interesting. I got a chance to talk to Sasha Fava, Lucas who you also heard from in the story. He's the Co founder of that organization place, which has been investing in sort of these opportunities zone like areas across San Diego for several years. And he does a lot of research looking into what people within a certain zip code are googling and what they're looking for. And he actually gave me a chart, which I have right here, which actually says exactly what he thinks the people in city heights are looking for. And it seems like the, at the top of the list, our direct selling establishment, east shopping and mail order houses, home furnishing stores, shoe stores, office supplies store. So very interesting at the bottom of the list now our bars, liquor stores, um, vending machine operators. And then he even has more data that shows what city heights residents think they have too much of which are apparently gasoline stations of restaurants and eating places. So it seems like people here are really looking for a very specific kind of retailer in their community. Does city heights have a community plan that's designates where they'd like to see new housing units or new businesses crop up? Yeah. So it seems like previously there had been a lot of focus on the El Cahone boulevard and you know, we've heard of the business association there. And so a lot of people in city heights feel really proud of the way the El Cajon boulevard has developed and it's really flourished. So now they're really looking at the area between freeway eight oh five and 15 down university and they're hoping that the, what they want to see for that area is a mixed use area. So both housing and businesses, they think this is a great area to focus on because it's a major transit area. Obviously being between those two freeways and also the University Avenue Transit Center, they also would love to see more development on the Fairmont avenue corridor. You know, they said that there are a lot of these wide sidewalks and tree lined streets in city heights, just not enough businesses along those streets to kind of compliment that, you know, because city heights is one of the really shrinking number of neighborhoods with affordable housing, it's already seen some gentrification. People from other areas are coming in to snap up some of the houses. Is that already raising home prices in the area? Yeah. So one of the most recent reports from Zillow that I was able to find said that the home prices in the nine two one zero five zip code, which is the city heights sip code, we're actually appreciating at the second highest rate in San Diego. Um, so they are growing. They were expected to grow between 2017 and 2018 by 6.5%. So as I mentioned in the story, there was that Zillow study that looked at opportunities and year over year home sales and saw that the ones that got the opportunity zone designation, the home sales there were rising 20%, whereas the communities that met all the opportunities own requirements but didn't actually receive the designation. Uh, those home sales year over year, we're only increasing at 8%. So as of right now it seems like city heights is falling into that category, but it'll be interesting to see if the home prices skyrocket now that they have officially gotten this designation. Let me ask you about this development. You mentioned in the story code place. Uh, they're converting a lot in city heights, but what it's zoned for will be too expensive for the people in the neighborhood. What do they plan to do to get around that? Yeah, that's something interesting that I hadn't really given too much thought to. So, uh, I actually found out just recently that they're going to sell that property that I talked about in the story because they don't want to turn it into housing. They really want to focus on small businesses and they really want it to be an organic process. They've invested a lot in barrio Logan and they did the same thing there. Uh, so essentially what they want to do is find people within the community who are looking to create small businesses and get them into sort of a, a space where they can develop their clientele and then move them into storefronts. And you know, Sasha said something very interesting to me. He said, there isn't really a housing shortage in his opinion, there's an affordable housing shortage. And so what he really wants to see in city heights is businesses develop, developing that are organic and from the community that are able to give good paying jobs to the people of city heights so they can then afford to stay in city heights once that housing is developed and they don't have to, uh, you know, import people from other parts of San Diego to live in the new housing that's likely going to be developed in the coming years. I've been speaking with KPBS reported Prius ether. Thank you so much. Thanks. [inaudible].

By KPBS Public Media

City Heights is now home to a federal program that gives tax breaks for building in economically distressed areas, but some residents fear it will lead to increased housing costs.