Are master-planned communities a development of the past?

Sales of homes increased faster in Otay Ranch last year than almost any other master-plan community in the nation, according to a recently released report. (K.C. Alfred / San Diego Union-Tribune)

Sales increased faster in Otay Ranch last year than almost any other master-plan community in the nation, said a recently released annual report.

The massive residential development, the largest in San Diego County, is close to the U.S.-Mexico border and has seemingly emerged as one of the top spots for new homes in the region after years of delays and substantial price decreases during the recession.

Master-planned communities are a relic of San Diego County’s past when a surplus of land stretched population areas east, north and south. Otay Ranch is likely the last truly large master-plan community, making it a focus for new home building.

Otay Ranch reached the No. 14 spot in the John Burns Real Estate Consulting report, which ranks the top 50 communities in terms of total sales. In 2017, 563 homes sold in the development, up from 159 the year before — representing a 254 percent increase.

The only other community to see a faster sales increase in the Top 50 report was Wallis Ranch, a community about an hour outside of San Francisco, which sold 55 homes in 2016 and then 279 in 2017.

Other Southern California communities making the list, include Irvine Ranch in Orange County (No. 2 with 1,814 sales, down 9 percent from 2016), The Great Park Neighborhoods also in Orange County (No. 9 with 830 sales, up 55 percent) and Ontario Ranch in San Bernardino County (No. 11 with 712 sales, up 50 percent).

At 25,000 acres, Otay Ranch is nearly the size of San Francisco. Planning for the site began in the 1980s. More than 10,000 homes have been built since then with about 18,000 more to come. The development is located in one of the only large areas in San Diego County that is zoned for new housing. It is roughly three miles from the border in some spots.

Peter Reeb, a principal with the consulting group, said Otay Ranch is the most diverse master-plan in the county because of a range home types and prices.

“There’s everything from relatively high density — 20 units per acre townhomes — to small lot single-family detached homes,” he said. “If you’re looking for a new home, there is a very high concentration of variety.”

Other big residential communities in San Diego County, albeit on a smaller scale than Otay Ranch, that are still building are Pacific Highlands Ranch, Del Sur and Civita in Mission Valley.

“San Diego is running out of land,” Reeb said. “We don’t have wide swaths of land available to do the old style master-plan communities. So, now you are getting communities that have 200 to 400 houses.”

Otay Ranch has made John Burns’ Top 50 list a few times over the years. It was No. 21 in 2011, No. 9 in 2012, off the list in 2013, No. 41 in 2014 and was off the list for a few years until 2017.

Master-plans on the decline for years

Much of the history of San Diego County housing has been one of master-plans, including Rancho Bernardo, Scripps Ranch, Carmel Valley, Tierrasanta, 4S Ranch, Mira Mesa and Rancho Peñasquitos.

Master-plans are typically undeveloped areas that are transformed into new communities that include a mix of residential, commercial and places to work. The area is built out in phases and are designed with the hope that residents can live and work in the area.

Real estate consultant Gary London said from the 1970s to 1990s the bulk of new housing came in the form of master-plan communities — mainly up the Interstate 15 and Interstate 5 corridors.

He said a lot of the talk these days is about building dense developments that can accommodate a lot of people, but that is only a recent shift in thinking.

“The way most San Diegans still find themselves housed today are new master-plan communities,” London said, “where to accommodate our growth we built out instead of up.”

He said the difference now is San Diego County is running out of land and voters don’t like new housing projects. A recent example was the proposed Lilac Hills Ranch project that would have included more than 1,700 homes in what is mostly farmland in Valley Center. The plan was soundly defeated by voters in November.

The first big master-plan community in San Diego County outside of downtown was Rancho Bernardo, now the northernmost residential community in the city of San Diego.

The community went from mainly rugged ranchland to 2,000 people in about a year, said the Rancho Bernardo Historical Society. According to the most-recent San Diego Association of Governments data, there was an estimated 50,268 people living there in 2016.

Otay Ranch’s time in the sun?

Almost since its inception, Otay Ranch has been faced with a series of challenges that delayed it from taking off.

Developers began work on the 25,000-acre site, mostly used as ranchland for cattle, in 1984 as a mix of residential, commercial and industrial development. After its purchase by Irvine-based Baldwin Co. for $150 million, a political fight broke out between San Diego County and Chula Vista for control. Most of the territory became part of the city and Baldwin eventually sold off parts of the site to other developers.

Just as the development was really growing, the Great Recession rocked prices in the two ZIP codes covering Otay Ranch, which experienced some of the most loan defaults in the nation by May 2012.

Melissa Hazlett, a vice president with Baldwin & Sons, said when she started with the developer roughly eight years ago, it was offering $50,000 to $75,000 in incentives (closing costs, custom improvements) to get people to buy.

Yet as the number of homes for sale in the county diminished in the last few years, and construction slowed, Otay Ranch emerged as one of the few spots for new homes in the region.

“I really believe what happened last year was a lack of inventory (countywide),” Hazlett said of the increase in sales. “Everybody was talking about the shortage and how it’s only going to get worse.”

Hazlett said their buyers tend to be sophisticated and well-read on home prices and coming interest rate increases. She said even higher taxes in Otay Ranch, because of Mello-Roos fees to pay for infrastructure, don’t seem to be bothering buyers.

Lack of land zoned for housing in San Diego County and lack of political will to build in undeveloped areas make it unlikely the region will ever get another community on the scale of Otay Ranch, said Alan Nevin, director of economic and market research at Xpera Group.

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Helga Bowen