San Diego Business Journal

Where your life's work meets ours. That's the slogan of Paradise Walk, an innovative pairing of a builder, the Olson Co., and a major employer, Paradise Valley Hospital in National City, to provide employee housing. On Nov. 15, the $36 million development broke ground on a 4.5-acre site at Eighth Street and Arcadia Place, part of the hospital's 54-acre campus. The project will feature 96 townhomes, with prices expected to range from the mid-$300,000s to the low $400,000s.

The units, all about three-tenths of a mile from the main hospital, will range from 1,315 to 1,656 square feet, with two-, three- and four-bedroom floor plans. Grading of the development has started, and the first homes are expected to be completed by the summer of 2006, with a final closeout in mid-2007.

Employees will be able to buy a townhome in the development for about $50,000 under market rate for 60 days before the units are offered to the public. The employees must agree to stay in the home, as the owner-occupant, for at least two years. After that, they are free to sell the unit. But if it's sold before 10 years, the owners must pay the difference between the market value and the subsidized amount they originally paid, according to Tony Pauker, regional president of the Seal Beach-based Olson Co.

"To the best of my knowledge, we are the only one doing work-force housing in a situation like this," said Pauker. "It is very unique. Hopefully, as affordability continues to be eroded in the county, and employers are having trouble attracting a work force, others may consider it. I think it will work for large life science and computer companies, universities and public institutions that are having problems attracting or retaining employees because of housing costs."

William R. Shrader, senior vice president with Burnham Real Estate's Urban Retail Group, calls the Paradise Walk concept "intriguing."

"It's definitely something that is going to be considered," he said. "We're seeing it now with urban mixed-use projects, like Chula Vista, National City, San Marcos and Carlsbad, where we wouldn't expect to see that. As we run out of land, and keep having people move to San Diego, we will definitely see these projects continue, and become the norm, not the exception."

Growing Pains

San Diego State University may be among the trendsetters. According to its master plan, San Diego State is expected to have 40 percent more students in 2025, with a corresponding need for teachers, who will in turn need housing.

"It's one of our challenges , recruiting faculty in this environment, which is very expensive," said university spokesman Jason Foster. "Faculty salaries are not the highest to begin with, so recruiting is a challenge."

San Diego State is considering developing the university's Adobe Falls land , about 33 acres north of Interstate 8, across from the campus, where up to 540 units of faculty and graduate student housing could be built.

"We've had that land for decades," said Foster. "We realized that if we can build faculty housing on land we own, we could provide that housing to the faculty at substantially reduced prices."

While the university's board of trustees gave the master plan its blessings in September, environmental impact reviews still will be needed for any individual projects, said Foster, and that could take two more years. "We also need to do a marketing study to ensure that if we build it, we would have sufficient interest to occupy it," said Foster. "We envision a mix of rental and for-sale housing. It will be a useful tool to recruit and retain talented faculty."

And not a moment too soon, according to Tony Fulton, San Diego State's architect, who played a major role in creating the master plan.

"Now, the average salary for incoming assistant professors is in the $60,000s," he said. "It's difficult to recruit to San Diego, with the pricing of housing what it is here.

"We search and search and search, and a lot of them reject our offers to go to other institutions, where the conditions are better," said Fulton. "We can't land enough good faculty."

Land Poor

Erik Bruvold, the vice president of public policy for the San Diego Regional Economic Development Corp., charged with helping to retain and attract business to the region, sees the scarcity of land as one impediment to following Paradise Valley Hospital's example.

"Land is one of the challenges," he said. "We don't have a lot of private sector companies that own the land where they do business. Many of them lease space they occupy, and that's more and more of a trend."

Alan Soderblom, the president and chief executive officer of Paradise Valley Hospital, said that being land-rich does have an advantage in structuring this type of deal.

"We have land as an asset here," he said. "No other employer has idle land that they can make choices about. We've been here for 100 years, and we see ourselves staying in this location. Other employers may move to where they're getting cheaper rent, or they move out of California. We are here for the long term. It was easy for us to do this kind of project."

But Duane Roth, the executive director of Connect, which fosters emerging high-tech businesses in the region, doesn't agree that a lack of land is necessarily a deterrent to work-force housing , not if employers think vertically. San Francisco, Boston and New York understand that concept, he said.

"What these other regions have done that we haven't, is they have a lot more dense communities," said Roth. "I think we can be as creative as other regions have been. The difference is, they started with industries being built vertically and adapted to that. We started with very flat buildings. Downtown is the first indication of change."

The younger generation understands that when it comes to housing, bigger is not always better, said Roth, and a small condo or apartment in the city, with all the perks that can bring, "can be very exciting, as it is in Boston and New York City," he said.

"Given the transportation costs and gas prices, I think we should do everything we can to put people in proximity to where they are going to be working," Roth added.

Elizabeth C. Morris, the president and CEO of the San Diego Housing Commission, agreed.

"We've been wanting to get more work-force housing going, but it's been slow in coming on-line," she said. "It can cost employers money. But if an employer owns the land, it shows a great deal of promise. In terms of smart growth, it's a painless way for employers to help employees. Employers recognize this as a big issue regarding retention and recruitment."

Even without available land, Morris said that employers still have options, anywhere from shared equity loans to home-buyer education programs.

"An old warehouse can be converted into a residential structure," she said. "Employers have assets, and they can be the foundation for housing."

Market Forces

The Olson Co., which partners with governmental agencies and private landowners, specializes in urban housing, neighborhood revitalization and affordable housing. Its current developments in San Diego County include Estrella Walk in National City and Legacy Walk in Southcrest.

"We know the market very well in terms of what buyers are looking for," said Pauker. "The hospital has done an excellent job of marketing to the hospital employees, who have a huge interest in this. We anticipate that it will be very well received."

Owned and operated by the Roseville-based Adventist Health, with a projected operating budget in 2005 of $140 million, Paradise Valley Hospital, the largest employer in National City, has more than 1,400 employees, with only 10 percent of them living within city limits. By teaming up with Olson, who paid $6 million for the land, the hospital hopes to turn that around.

"Maybe we could have made more money and sold at market and taken the profits, or be the actual developer and build it ourselves," said Soderblom, "but this was a good opportunity for our employees, and they are important to us. Some have been here for 40 years."

Minerva Vazquez, a nurse in Paradise Valley Hospital's emergency room since 2002, is planning to buy a unit.

"It think it's a wonderful idea," she said "People will be able to walk everywhere, to work, school, church, the bank, the grocery store. It brings families together. This is a small, close community. This is a great break for us."

Jonathan Samaniego, a buyer in the hospital's materials management division, also hopes to buy a home there.

"I feel excited for most of the employees," he said. "It's a really good opportunity for all of us who work in the hospital. This will cut commute time, and we'll be more available to the company and the community."

Mike Nagy, housing policy coordinator for the San Diego Regional Chamber of Commerce, said that work-force housing is "absolutely needed."

"Housing is the number one priority of the chamber," he said. "To be competitive with other regions around the country, housing is a primary element, and this means having a housing market that appeals to those workers.

"We are concerned that we are not going to be able to attract workers outside the area, because housing is too expensive," said Nagy. "If workers are forced to live outside the county, and have to commute, there will be more wear and tear on the road, more gas used. We are looking at a great burden, not only on business, but on employees' personal life as well."

Nagy should know.

"I am a poster child for what's going on," he said. "I commute three hours a day from Temecula. If there was enough product out there, I would consider moving down here. It takes a lot out of my day. I'm up at 4 a.m., and home at 8 p.m. It's a long day. I can be at the office 10 hours. Imagine attaching three hours to that.

"Somebody entering the work force, the first year, it's maybe exciting," said Nagy. "After awhile, you face a tough morning traffic and late-night traffic. It's a drain on you. You start considering options, and start looking for a job in Temecula, or out of the region or state altogether."

Sherm Harmer, co-founder of the San Diego-based Urban Housing Partners, Inc., a real estate development firm specializing in urban mixed-use projects, is a partner in SmartCorner. The $160 million development in Downtown's East Village, which has incorporated its own trolley stop, is giving Downtown workers first crack at buying the studios, one- and two-bedroom condos in the project.

"We want to reconnect jobs and rooftops, and it's been very successful," said Harmer, who chairs the chamber's housing committee. "It's a good precedent for other builders because it offers homes first to those who are within walking distance of their work."

Will this preference for urbanites pose any legal problems?

"I checked with our attorney, and was told that suburbanites are not a protected class," said Harmer. "We can do whatever we want, and this has enormous social benefits. I know other builders in Mission Valley and elsewhere who are considering doing the same for people working within walking distance to their projects. It's the kind of smart policies we need to deal with infrastructure and traffic issues. I live Downtown, and I have reduced my travel time from 4,000 miles a month to 400 over the last two years."