San Diego County wants to preserve cheap apartment rentals. Here is how it might work

San Diego County officials gave their initial approval on Tuesday for a pilot program to keep an eye on the rapidly declining stock of cheaper and older apartments in the area – and to develop a plan to purchase them.

Lawmakers have said there is a need to preserve cheaper units, called natural affordable housing, or NOAH, as rents continue to rise. The county’s unanimously approved program has yet to come back to the board for a second vote amid concerns about the company allegedly partnering with the county.

Supervisor Nora Vargas proposed the program and said it would be run by Ethos, which she said was a minority-owned company. However, his proposal, given to other supervisors, did not include information about the company, such as how long it had been in business or where it is located.

His office told the San Diego Union-Tribune on Wednesday that Ethos was founded in 2021 by senior management at Santa Monica-based Watt Investment Partners.

Several county supervisors said on Tuesday evening that they liked the idea behind the project, but worried that there was no information about the company on the board’s agenda or searchable in line.

“I have nothing against Ethos. I don’t know anything about them, ”said supervisor Jim Desmond.

This sentiment was echoed by supervisor Joel Anderson, who said he found nothing about the company and was concerned that the contract would be awarded to a single entity and not multiple companies to bid on.

“It’s really important that Ethos is a real business and not a startup in someone’s garage,” he said.

Vargas said she had already been approached by the company and had no issues with Ethos being properly vetted by county staff. There is no set date for the pilot program to return to the board for a vote, which could include options to go with another company.

The program follows New York-based private equity giant Blackstone, which bought 5,800 units in May from the Conrad Prebys Foundation. Almost all of the 66 residential complexes could be classified under the NOAH distinction and have caused an uproar among affordable housing advocates.

The deal, valued at over $ 1 billion, was one of the largest deals in San Diego County history. Blackstone said he plans to make housing affordable for residents who earn 80% or less of the area’s median income (about $ 67,900 for an individual), but that hasn’t done much to calm the worries.

The county’s program, called the Housing Preservation and Anti-Displacement Pilot Program, would identify where the cheapest homes are and offer a subsidy to buy them and keep rents low for 55 years.

He said Ethos, or any company the county chooses, should design a program to take advantage of public tax benefits to buy the units, renovate them and keep them for people earning 80% or less of the median income of the region. The company would also be required to partner with a local non-profit organization and make improvements to properties during the first five years of ownership.

Many details will need to be worked out at a later date, as the supervisors vote on Tuesday only started the process. Vargas’ initial proposal said the selected company should be reviewed by an independent third party for financial feasibility and referred to supervisors for a final vote.

Stephen Russell, president of the San Diego Housing Federation, said the decision to preserve older units is a way to cut costs instead of building new ones.

For example, real estate tracker CoStar said the average cost per apartment in San Diego County was around $ 370,000 in early August. But the cost of building a new subsidized unit can be much higher than that, often exceeding $ 500,000.

“Anything you build new will be more expensive because it reflects wages and the cost of contemporary land, materials, etc.,” Russell said. “There is no doubt that we have lost a lot of natural affordable housing and there is an urgent need to preserve more housing.

Despite this, he said he was also concerned that the pilot program was limited to one company and surprised that it was not launched into a competitive bidding process.

“He is proposing a pilot project with an individual entity so that it is not part of an open, transparent or competitive process,” said Russell. “Competition, as we know, is at the heart of getting your best value for money. “

For now, the county’s program is limited to District 1, which includes Chula Vista, Imperial Beach, National City, Coronado, and Logan Heights. The pilot program report said it could be expanded to other parts of the county in the future.

The average rent in San Diego County was $ 2,075 per month in early August, an increase of about 9% in one year, according to real estate tracker CoStar. This is the largest annual increase in his records dating back to 2000.