Solana Beach seeks to revamp failed Pearl housing project with new RFP

SOLANA BEACH — City leaders are preparing to revive an affordable housing project in the 500 block of South Sierra Avenue after skyrocketing costs led the former developer to abandon the project at the beginning of the COVID-19 pandemic.

Known as The Pearl, the mixed-use affordable housing development was previously planned to be constructed on a 14,720-square-foot public parking lot owned by the city and contain 10 multi-bedroom units.

While previous developer Hitzke Development Corporation had high hopes for the project, first proposing it to the city in 2009 and receiving approval in 2014, subsequent lawsuits from neighbors delayed its progress for years, with costs of construction and labor rising significantly during that time.

When crucial state and county development grants were pulled due to the higher price tag, Hitzke backed out of its development deal with the city in 2020.

Now, while total funding remains to be identified for the project, city leaders say they want to issue a new request for proposals to find a developer willing to take it on. Mayor Lesa Heebner said it’s essential to get the ball rolling again.

“To me, it’s a priority because we do have to start producing here,” Heebner said of The Pearl during a Solana Beach City Council meeting on May 24. “We have the plans, and we have everything, and we just need a developer.”

Along with requirements under the city’s Housing Element, Solana Beach faces additional affordable housing construction requirements under a settlement agreement from the 1990s after the City Council closed a mobile home park. The controversial move prompted affordable housing advocates to threaten the city with litigation, claiming that low-income units had been eliminated.

Rather than go to trial, the city entered into what became known as the “Pearl settlement,” which, among other things, mandated the replacement of 13 affordable units.

Three of the units have since been provided, with the remaining ten planned to be delivered via The Pearl  — a play on the name of the earlier settlement.

The Pearl became one of the most expensive affordable housing projects in the state in early 2020, as the impacts of the pandemic drove up development costs to over $1 million per unit, according to the Los Angeles Times.

Councilmember Jewel Edson expressed concerns about future developers facing cost issues.

“We know our former developer was unable to pencil the project, so I think it’s a little bit tough. I, too, would like to get something built, but we have to be able to figure out a way to get money from Sacramento or some of the bills they’re talking about,” Edson said.

Heebner agreed that while this would pose a challenge, it is still important to at least get the word out about the project to potential developers.

She noted the city made sure to support the developer in the past, providing $2.1 million in funding and joining in the defense for the project when residents sued. The city and Hitzke prevailed in the courts.

“I think it’s something to get moving on and see if somebody does bite. It couldn’t hurt, right? Let’s just get it done,” Heebner said.

Being a coastal city just over 3.5 miles in size that is nearly developed out already, the production of affordable housing units in Solana Beach comes with a unique set of challenges and a higher price tag. Heebner noted that state requirements do not always align with the reality of developing in these cities.

“[Hitzke] was counting on money from the county, but they said ‘it’s too expensive.’ I said, ‘Yeah, it is more expensive in coastal cities because we have the Coastal Act, where the priority is providing access, not building housing,’” Heebner said.

One example is parking — since the California Coastal Commission requires coastal cities to replace any parking spaces that are eliminated by new development, Hitzke’s plans for the project included a 53-space parking structure containing 31 spaces to replace those in the existing lot, 18 for the residential units and four for neighboring commercial office use.

Before distributing a new RFP, the city will need to update building permit plans and then finalize financing for the project once a developer is identified.

“We’d have to put something together — there’s still some work to be done to get the project to a shovel-ready phase,” said city manager Greg Wade.

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City staff also expressed their wish for the previous developer to retake the reins but acknowledged it might be unrealistic. Hitzke president, Ginger Hitzke, did not respond to requests for comment in time for publication.

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“We wanted to see about getting the former developer, but I don’t know if that’s a realistic possibility,” Wade said.

The City Council’s May 24 discussion of the project was part of a review of the 2022-23 City Council Work Plan, which outlines priorities for capital and community character projects, organizational effectiveness and environmental sustainability. The city set objectives to complete over the coming fiscal year for various projects:

• La Colonia Park: Design and construct tot lots costing between $500,000 and $700,000, resurface and resize the pickleball courts, and determine potential park uses for the newly-purchased property just north of the skate park.
• Glenmont Pocket Park: Complete initial designs with a landscape architect for a community pocket park on a half-acre parcel of the existing Larrick Reservoir.
• Develop long-term guidelines for outdoor dining while also maintaining parking options
• Explore options for a pedestrian crossing at the city’s boundary along North Highway 101 near Harbaugh Trail by coordinating with the city of Encinitas.
• Research potential areas for an enclosed community dog park