How Midway Rising plans to breach 30-foot height limit

A recent court order directing the reinstatement of the 30-foot height limit in San Diego’s Midway District would seem to stop short a development team’s plan to remake the city’s sports arena site with thousands of apartments and a replacement venue in buildings that tower over the restriction.

But the ruling’s net effect on the megaproject may only amount to a short-term, bureaucratic delay. That’s because the Midway Rising team believes it has something more powerful on its side: California’s density bonus law.

“Midway Rising is moving forward as planned under state density bonus law that encourages affordable housing development,” said Jeff Meyer, a spokesperson for the development team. “We have full confidence in this transformative redevelopment and look forward to working with our local and state partners to bring the vision put forward in the Midway Community Plan to life.”

The team expects the project will be considered by the City Council in early 2026, he said.

The posture of strength suggests that the city and the development team, tied together by an exclusive negotiation agreement, have not labored in vain.

In September 2022, San Diego City Council members selected Midway Rising to lease and redevelop its real estate at 3220, 3240, 3250 and 3500 Sports Arena Blvd. The team is composed of market-rate housing developer Zephyr, affordable housing builder Chelsea Investment Corp., and sports-and-entertainment venue operator Legends. The Kroenke Group, a subsidiary of billionaire Stan Kroenke’s real estate firm, is the entity’s lead investor and limited partner.

More than three years later, the parties are nearing the culminating milestone — a long-term ground lease and development deal.

Proposed terms of the real estate deal remain under wraps. The development plan, or what’s known as the Midway Rising Specific Plan, is awaiting its final stamp of approval.

The land-use plan for the 49.2-acre property calls for 4,254 total residential units, a 16,000-seat replacement arena, 130,000 square feet of commercial space, 8.1 acres of parks, and another 6.4 acres of plazas and public space. It also memorializes the team’s commitment to build 2,000 residential units for households earning 80% or less of the area median income, or what’s considered affordable housing.

The proposal includes 105-foot-tall residential buildings and a 165-foot-tall entertainment center. The specific plan is also written to allow for buildings as tall as 250 feet on 10% of the site.

The heights were seemingly made possible by the November 2022 passage of Measure C, which removed the entirety of the Midway District from the city’s Coastal Height Limit Overlay Zone, or coastal zone for short. The local coastal zone, established by a 1972 voter initiative, is distinct from the California Coastal Act of 1976, which protects at the state level land along the coast of California.

But, in October, a state appellate court said the ballot measure was illegally put before voters and ordered reinstatement of the 30-foot height limit in the Midway District. This week, San Diego petitioned the state Supreme Court to review the case.

In the interim, Midway Rising is leaning on its aforementioned specific plan, which identifies the state’s density bonus law as a mechanism for implementing the project.

“The specific plan’s commitment to build 2,000 affordable homes restricted at 80% area median income or lower qualifies the Midway Rising community village for density bonus,” the document states. “Due to the unified and integrated nature of the Midway Rising community village project, the benefits of state density bonus law may be eligible to be applied throughout the entire project area to all use categories, contingent upon the execution of a long-term ground lease agreement that ensures the provision of the project’s 2,000 affordable homes.”

The density bonus law, or California Government Code section 65915, was established in 1979. It exists to bulldoze the regulatory obstacles blocking developers from constructing residential units reserved for low-income families.

Under the law, which has been expanded and amended over the years, housing developments with at least 5% of units deed-restricted for very low-income households, or those making 50% or less of the area median income, are entitled to build 20% more units than what’s normally allowed by local zoning laws. The bonus varies and is based on the percentage of units that are set aside for households at specific income levels.

The law also grants affordable housing developers with one or more incentives — such as the relaxing of zoning code requirements or the approval of mixed-use zoning — that reduce the cost of the project. It also requires cities to grant waivers from development standards that would otherwise render a project impossible.

In the case of Midway Rising, the team told the Union-Tribune that it will either provide at least 5% of units for very low-income households or 10% for low-income households — 178 units or 355 units, respectively — of the 3,545 units allowed under the base, residential mixed-use zone established in the specific plan.

The set-aside secures a 20% density bonus, meaning the team can build up to 4,254 units.

As such, Midway Rising can also request, and the city must grant, a waiver to erect buildings taller than 30 feet, because the height limit would stand in the way of the development, according to the team’s interpretation of the density bonus law.

The assumptions are reasonable, said Jeannette Temple, an executive at local land-use consulting firm Atlantis Group.

“(The Coastal Height Limit Overlay Zone) is simply just a development regulation that can be waived,” Temple said.

Temple is an expert in density bonus law. In 2021, she authored a letter, on behalf of an affordable housing builder, to California’s Department of Housing and Community Development, or HCD, that would go on to shatter the legal supremacy of the city’s voter initiative-defined coastal zone. The letter was specific to the now under-construction Rose Creek apartment project in Pacific Beach, but HCD used its response to set a new precedent.

The agency said at the time that the 30-foot height limit is a development standard that conflicts with density bonus law and has no authority over projects that meet the affordability thresholds.

The law, as written, also applies to what it refers to as “housing developments,” which are defined to include mixed-use projects. The language allows the density bonus to be applied across an entire project site, as opposed to being limited to residential use. It suggests, then, that the waivers that the law also grants are afforded similar treatment.

The interpretation would require the city to grant a height limit waiver for Midway Rising’s residential buildings, as well as its entertainment center and other commercial uses.

“I think Midway Rising is saying — and I totally agree with this — that because doing the event venue allows this project to succeed and to pencil, … then (the venue) can take advantage of the waiver of the height limit overlay zone,” Temple said. “Density bonus law is very specific that if commercial (use) is what allows affordable housing to exist, then the commercial is OK.”

What’s more, the legal onus is on the city to justify the denial of a density bonus, incentive or waiver, and its decision must only be based on health and safety, she said.

“The city is not allowed to say that a developer doesn’t need an incentive or waiver if the developer has said that they need an incentive or waiver,” Temple said. “It’s not for the developer to justify it. It’s up to the jurisdiction to deny it.”

There is, however, at least one section of the state law and San Diego’s municipal code that could be read as limiting waivers to residential uses only. The state law defines a density bonus as an increase over allowed “residential density.” And the city’s section on waivers for affordable housing units, 143.0743, states that, “an applicant proposing density bonus shall be entitled to a waiver … for any residential development.”

If the density bonus is what opens the door to a waiver and the bonus is specific to residential units, it could stand to reason that the fruits of the bonus — such as a waiver for height limits — would apply singularly to residential development, as suggested by the city’s code.

“This is why it’s probably going to court,” Temple said, referencing the term “residential” in the city’s municipal code.

The development team believes, however, that the courts have upheld over the years the use of density bonus law benefits for the non-residential components of mixed-use projects. What’s more, the state Legislature this year implicitly acknowledged the sweeping scope of density bonus law, and its associated privileges, with the approval of the amendments spelled out in Senate Bill 92 and Assembly Bill 87.

The bills allow cities to deny incentives or waivers for projects that include hotels and set a maximum limit for commercial square footage based on lot size. Midway Rising does not include a hotel. The project’s total commercial square footage — 380,000 square feet for the arena and 130,000 square feet of shops and restaurants — is well below what is allowed under Senate Bill 92, according to an analysis provided by the team.

The thinking goes, then, that the bills were only necessary because the benefits afforded by density bonus law — concessions, incentives and waivers — are equally available throughout a mixed-use project. In other words, the Legislature could have used the bills to narrow the application of the density bonus law’s benefits to just residential use, but it chose not to.

There’s also this: The city doesn’t want to be a roadblock.

San Diego Mayor Todd Gloria said recently that failure is not an option when it comes to the Midway Rising project.