San Diego could potentially deny the 239-foot-tall, mixed-use tower proposed for 970 Turquoise St. in Pacific Beach that has not only outraged community members but catalyzed elected leaders to seek reforms to state housing laws. Last week, the city of San Diego received a technical assistance letter from California’s Department of Housing and Community Development, or HCD, that gives the municipality a little wiggle room during the staff-level approval process. The letter, which makes the case for either approval or denial, states that the city can reject the height-limit-busting project on very specific grounds related to the application of State Density Bonus Law. “The (State Density Bonus Law) permits the city to approve the requested incentive and associated waiver or to deny the requested incentive and associated waiver by making a written finding, based on substantial evidence, that the incentive does not result in identifiable and actual cost reductions to provide for affordable housing,” Shannan West, HCD’s housing accountability unit chief, wrote in the letter. In other words, the city must be able to prove that some or all of the developer’s requested bonuses, waivers and incentives — collectively allowing the Turquoise tower to stretch well beyond the neighborhood’s 30-foot height limit — are not necessary to create the project’s 10 affordable housing units. “We have options,” said Christopher Ackerman-Avila, senior policy adviser to San Diego Mayor Todd Gloria. “Obviously the city will have a burden of proof for accepting or denying the incentives or waivers, but first we have the ability to request information from the applicant.” The developer behind the project, upstart real estate investment and development firm Kalonymus LLC, is interpreting the HCD letter differently. “The letter confirms what we have consistently maintained: The project fully complies with state law,” Matt Awbrey, a spokesperson for Kalonymus, told the Union-Tribune. “With the state’s thorough technical review and the information Kalonymus has already provided to the city, it’s clear there are no legitimate grounds for the city to deny this project. We remain committed to working collaboratively with the city to deliver this much-needed housing for the community.” Kalonymus is seeking to build a 239-foot-tall skyscraper with 22 stories and a rooftop deck. The project, known as 970 Turquoise, calls for 139 hotel rooms and 74 apartments atop ground-floor shops on a 0.67-acre site. The site is just blocks from the beach, where San Diego’s Coastal Height Limit Overlay Zone prevents buildings over 30 feet tall. The local coastal zone was established by a 1972 voter initiative and is distinct from the California Coastal Act of 1976. The $185 million Turquoise project, which is said to require no public subsidies, is invoking State Density Bonus Law to bypass the neighborhood height limit, boost its residential unit count and maximize commercial density. State Density Bonus Law has been expanded over the years to create incentives for developers to build income-restricted housing units. Under the law, housing developments that deed-restrict a percentage of residential units for very-low, low- or middle-income families are eligible for density bonuses, as well as waivers to bypass local regulations. Kalonymus is leaning on available bonuses to build the hotel and residential units, as the base zone allows for just 31 residential units. The Turquoise project is setting aside 15 percent of the 31 residential units, or five units, for very-low-income households. The developers are also setting aside 15 percent of the 31 residential units, or five units, for moderate-income households. As such, the project is eligible for two 50-percent bonuses, one for each of the subsidized unit types. The project is also eligible for an 11-unit, local density bonus because it includes three-bedroom units. The project’s 139 hotel rooms are possible through a floor area ratio, or FAR, incentive that would maximize the commercial density on the site. The developer has said it intends to rent the hotel rooms as market-rate apartments. Although seemingly legal and in keeping with pro-housing policies, a group of local, state and federal leaders have publicly objected to the proposed tower, with some arguing that well-intended policies meant to boost low-income housing are being exploited. Leaders opposed to the project include Gloria; San Diego City Councilmember Joe LaCava; state Sen. Toni Atkins, D-San Diego; state Assemblymember Tasha Boerner, D-Encinitas; and state Sen. Catherine Blakespear, D-Encinitas. Community members have also been loud in their objection to the Turquoise project, which they have protested with signs reading, “Erase the pencil tower from PB.” A recently formed group called Neighbors for a Better California, run by Pacific Beach Planning Group Chair Marcella Bothwell, has characterized the project as the poster child of unintended consequences. The state housing department letter delivered Thursday confirms the project’s eligibility for the controversial density bonuses — but it stopped short of requiring the city to approve them. The deciding factor will be whether the bonuses support the economic feasibility of lower-income housing, as the state law intends. “The city could conclude that the requested incentive in this case directly facilitates the affordable housing, in which case (State Density Bonus Law) compels the city to approve the requested incentive and associated waiver. On the other hand, the city might conclude that the project does not need the requested incentive to cover the cost of ‘provid[ing] for affordable housing costs,’” the letter states, citing the applicable government code. San Diego is latching onto the language. The city will now ask Kalonymus to demonstrate that the intention of each individual bonus or incentive is not just to reduce the cost of the project but is specifically geared for affordable housing, said Ackerman-Avila, the mayor’s policy adviser. And the city’s determination will likely be nuanced. “It very well might be that they do need a FAR bonus, but the FAR bonus is 0.5 instead of 2.3,” he said. “Or that they do need the height-limit waiver for 30-foot and 60-foot (restrictions), but they would be all right with a 90-foot building.” HCD’s letter may also throw cold water on the developer’s plan to rent the hotel rooms as apartments. “The visitor accommodation use is deemed a commercial use in the city’s municipal code. In addition, the project has already maximized the number of housing units allowed on the site on top of the 31 units allowed under the base density,” the letter states. “There would be no legal way for the visitor accommodation units to be added to the project as housing units.” The language, Ackerman-Avila said, precludes the developer from renting the hotel rooms as apartments. Any final decision on the project could still be years away. The developer has 2.5 years to work through city staff comments before the building permit expires, Ackerman-Avila said. Related Articles Business | Former port commissioner seeking more than $1M in damages for agency’s ‘unlawful retaliation’ Business | This Coronado resort hotel is planning a $220M makeover. So what’s in it for locals? Business | Port buys Coronado Cays lease for $3M, kills controversial RV resort project Business | Balboa Park’s Botanical Building reopens after $26.5M restoration Business | San Diego abandons plan for new City Hall Separately, the HCD letter lays the foundation for pitching statewide reform, the mayor’s policy adviser said. “While the (State Density Bonus Law) contains no explicit requirement for a minimum percentage of residential floor area in a mixed-use development, an interpretation that a project with the minimum of five residential units is essentially entitled to a theoretically infinite amount of non-residential floor area could result in an absurd outcome that does not further the fundamental purpose of the (State Density Bonus Law),” the letter states. Ackerman-Avila said he has been assisting Blakespear’s office in drafting a state bill that would bring State Density Bonus Law into alignment with the Housing Accountability Act, clarifying that a mixed-use project must have at least two-thirds of its square footage designated for residential use. “The core intent of the state’s density bonus law, which I support, is to increase the supply of affordable housing throughout California. It’s not to be exploited to build luxury hotels or do the bare minimum when it comes to building housing. I want our state’s housing laws to be both implemented with the original intent and consistency,” Blakespear said in a statement. “As the (HCD) letter notes, it is ‘absurd’ that a developer could benefit from the density bonus law and essentially build an unlimited amount of non-residential floor area by providing as little as five residential units.” Kalonymus is a self-described boutique firm that specializes in multifamily, mixed-use and opportunistic investments. The firm was started five years ago by Max Zeff. Zeff previously worked at multifamily housing developer Carmel Partners, which was founded by his dad, Ron Zeff, in 1996. The Turquoise project architect is Carrier Johnson + Culture.