Michael Smolens: San Diego developer seeks to fill gap in middle-income housing

Many years ago, Robert Ito was focused on helping people get better jobs.

Then he turned to getting them into better homes.

A housing developer for decades, the San Diego native more recently has been launching projects specifically targeted for middle-income residents.

Figuring out how to fill the gap in the housing market between subsidized rentals and high-end homes has long been a goal of government officials, socially conscious organizations and some developers.

Ito has teamed up with former City Manager Jack McGrory, head of the real estate investment company La Jolla MJ Management, on a handful of housing developments in and around the Encanto area in southeastern San Diego where Ito grew up. The total of about 90 homes are not for rent.

“Homeownership is our priority,” Ito said.

This is a for-profit enterprise that does not rely on government subsidies, according to McGrory. Nevertheless, 75 percent of the homes are reserved for people earning 100 percent to 150 percent of the median household income, Ito and McGrory said.

In 2022, the median household income was just over $80,000 for Encanto, according to City-Data.com and $100,000 for San Diego.

Further, the business puts 25 percent of its profits into assistance for homebuyers. Some of the buyers also qualify for other grants and low-cost loans through programs such as HERO financing targeted for military personnel, law enforcement and other first responders, and people in the health care and education communities.

Ito said $480,000 has been spent, or is dedicated, for that use. The money can go to buy down mortgage rates or help with down payments and closing costs.

The Hilltop Crossing project, which has 47 townhomes and single-family homes, is near completion and has 30 units in escrow. McGrory and Ito said 29 of them are first-time homebuyers, most of whom are from Encanto and the surrounding area.

“One of our goals was to really focus on people in the neighborhood,” Ito said.

He said many of the new and soon-to-be homeowners are BIPOC, an acronym for Black, Indigenous and other people of color. Only income, not race or ethnic background, are taken into consideration in the home sales, however.

McGrory said a lot of subsidized rental housing for lower-income residents has been located in southeastern San Diego. Community leaders and planning groups wanted to focus on home ownership, which is often viewed as a path toward building wealth.

“Ownership brings a more balanced community,” McGrory said. “Things are going to be much healthier.”

This isn’t a charity. They stressed the business is profitable after the homebuyer assistance contributions.

“You can make money down there and build this middle class,” said Ito, a principal of the urban development firm Ito Girard & Associates with Roxanne Mariko Girard, who is president of the company.

Among the investors in the Encanto-area projects are Mission Driven Finance and Alliance Healthcare Foundation. Alliance is a nonprofit, but Mission Driven is not. Yet both funds practice “impact investing” — a philosophy of using capital for social and environmental improvement, while getting a financial return.

Ito said the two funds have invested $1.2 million in the development projects.

On its website, Mission Driven showcases Hilltop Crossing and another nearby Ito-Girard and McGrory project, the 24-unit Creekside Pointe.

“This is really a key to providing middle-income housing — to get private investors to play,” said Louie Nguyen, chief investment officer for Mission Driven.

Mission Driven notes, as others have, that housing for middle-income people is particularly challenging in California due to the high cost of land and construction.

“San Diego’s attainable housing market consists mainly of rental units and offers little assistance to single-family homebuyers,” according to the fund’s website.

The Hilltop homes typically have three or four bedrooms, two baths, two-car garages, electric vehicle outlets and solar panels. They range in price from $636,000 through the mid-$700,000s, according to Ito.

That’s lower than the $950,000 median single-family home price for San Diego in March, according to Realtor.Com. In Encanto, Redfin said the median home price was $754,000 in March.

McGrory said not tapping public funding for the developments means fewer requirements, such as prevailing wage mandates.

“That really helps with the cost,” he said. So does finding land at a good price, he added.

Ito has deep roots and history, good and bad, where he is building houses. He comes from a farming family that goes back a few generations in the region.

His father served during World War II with the U.S. Army’s legendary 442 Infantry Regiment, composed almost entirely of second-generation American soldiers of Japanese ancestry. The rest of the family was shipped off to an internment camp in Poston, Ariz., during the war.

According to a family history, Ito’s father returned a highly decorated combat veteran, yet was refused a haircut from a local barber.

The family persevered and Robert Ito became a successful businessman focused on social good, initially creating a job-training nonprofit called Occupational Training Services. He moved onto housing and eventually partnered with Girard.

At the end of his emails, Ito adds quotes that impart a bit of wisdom.

“If you want to go fast, go alone. If you want to go far, go together,” read one this week.

He and McGrory had teamed up on more traditional affordable housing projects before.

“Then Robert came to me and said ‘Why don’t we start building homes and see if we can sell them?’”

McGrory admitted, “We were skeptical it could work.”

That was then. Ito and McGrory said they have more projects in the pipeline.