San Diego Repeals Footnote 7: Encanto Zoning Change

What Happened: Unanimous Vote Eliminates Discriminatory Zoning Rule

On January 28, 2025, the San Diego City Council made history with a unanimous 8-0 vote to repeal Footnote 7, a zoning regulation that had quietly allowed developers to build single-family homes on lots as small as 5,000 square feet in southeast San Diego neighborhoods—while requiring 20,000 square feet in wealthier areas throughout the rest of the city.

Councilmember Henry Foster III, who represents District 4 covering much of southeast San Diego, didn't mince words about the equity issue at stake. "The lack of transparency and engagement in policy-making affecting neighborhoods, especially those historically discriminated against like District 4, is unacceptable," Foster stated during the meeting.

The footnote's removal marks a significant victory for community activists who spent months researching obscure zoning documents to uncover what they called "modern-day redlining." But the change also creates immediate uncertainty for property owners in six affected neighborhoods: Encanto, Emerald Hills, Chollas Valley, Alta Vista, Broadway Heights, and Lincoln Park.

With the amendment taking effect 30 days after mayoral signature, homeowners now face critical decisions about their properties' future. Two major development projects—including a 130-home D.R. Horton development on Old Memory Lane and a 23-home Klauber Avenue project—now hang in the balance, potentially impacting neighboring property values and community character for years to come.

The Mystery of Footnote 7: How a 'Shocking' Rule Went Unnoticed for Years

Footnote 7 wasn't discovered through public hearings or community meetings. It was found through painstaking detective work by concerned residents combing through hundreds of pages of municipal code.

Rob Campbell, a community advocate, found the footnote while reviewing the city's counter-appeal to a development proposal. "He noticed a small number seven in the R-S-1-2 zoning column and scrolled through several pages to locate the corresponding footnote," according to KPBS reporting. What he discovered stunned the community.

The footnote, passed in 2019 as part of a larger city code update, reduced minimum lot sizes from 20,000 square feet to 5,000 square feet—but only in the city-designated Encanto and Southeastern Planning Areas. This meant developers could build approximately four times as many housing units on the same land compared to neighborhoods in La Jolla, Pacific Beach, or Point Loma. This discriminatory approach sparked ongoing zoning debates throughout the city.

Even more disturbing to residents: nobody seemed to know who created it or why. Mike Hansen, the planning director at the time, said in an email that "I didn't give direction for it to be included and don't know who drafted it." The footnote appeared as Item 335 on the December 17, 2019 City Council agenda, buried among hundreds of technical zoning changes.

Community activist Andrea Hetheru called the discovery "shocking. And that is the entire point." She compared the discriminatory impact to historical injustices: "20,000 means 5,000...A dollar means a quarter, because we said so."

Which Neighborhoods Are Affected and Why It Matters

The six neighborhoods impacted by Footnote 7's removal share a troubling common history: they were all subject to discriminatory redlining practices that prevented Black families from purchasing homes in wealthier San Diego neighborhoods through the 1960s and 1970s.

Today, these communities remain predominantly Black, Latino, and lower-income compared to coastal and northern San Diego neighborhoods. Between 2022 and 2023, the Southeast/Encanto & Skyline area had a median household income of $82,718—well below the county median. The state officially designates Chollas View and Encanto as "low resource" areas with higher poverty rates and lower employment levels.

Current property values in these neighborhoods reflect their working-class character:

• Encanto: Median home price of approximately $758,000 (as of September 2025), up 8.2% year-over-year
• Emerald Hills: Median sale price of $790,000 over the last 12 months, up 8% from the previous year
• Chollas Valley: Similar price ranges to Encanto, with homes generally between $700,000-$800,000

These neighborhoods have seen steady appreciation, but the removal of Footnote 7 introduces new uncertainty. Will the restriction on denser development increase property values by preserving neighborhood character? Or will it decrease values by limiting development potential for owners with larger parcels?

The answer depends on individual circumstances—and that uncertainty is precisely what's creating motivated sellers.

D.R. Horton's 130-Home Project: The Biggest Development at Risk

The highest-profile casualty of Footnote 7's removal is D.R. Horton's ambitious development on the former radio tower site along Old Memory Lane in Emerald Hills.

D.R. Horton, America's largest homebuilder, purchased land that residents had long hoped would become a public park offering "sweeping downtown and ocean views." Instead, the company planned 130 private single-family homes using the 5,000 square foot lot minimum allowed under Footnote 7.

On November 20, 2025, the Planning Commission voted unanimously to approve the project. But the January 28 City Council vote to eliminate Footnote 7 now places the entire development in legal limbo.

Without Footnote 7, the same property would be restricted to roughly one-quarter of the approved units under the citywide 20,000 square foot minimum. Community advocates note the project represents "roughly 400% the density allowed in the same zoning white-neighborhood just to the north in La Jolla."

The 30-day implementation window creates a critical question: will D.R. Horton's project be grandfathered in because the Planning Commission approved it before Footnote 7's repeal became effective? Or will the company need to redesign with far fewer homes?

City staff have warned that halting approved projects could violate state law, but the council's vote sends a clear message about the community's priorities. For neighboring property owners, the uncertainty is palpable. Will 130 new homes be built nearby, potentially impacting their views, traffic, and neighborhood character? Or will the project collapse entirely?

That kind of regulatory uncertainty drives homeowners to seek the certainty of cash offers.

The Klauber Avenue Project: 23 Homes vs. Community Opposition

While D.R. Horton's project grabbed headlines for its size, the Klauber Avenue development represents an equally contentious fight over Footnote 7.

Klauber Development Corp. proposed building 23 single-family homes on more than 5 acres at 1362 Klauber Ave. in Encanto. The project includes a privately owned dog park and two private driveways. Without Footnote 7, only 12 homes could have been built on the same property.

The Chollas Valley Community Planning Group successfully appealed the project in November 2024, and the City Council sided with residents citing concerns about "loss of potential park space, lack of public input, and public health and fire safety concerns."

However, in a controversial 6-3 vote on July 15, 2025, the council reversed course and approved the redesigned project. Councilmembers Raul Campillo, Henry Foster III, and Joe LaCava voted against approval, but the project moved forward despite continued community opposition.

The removal of Footnote 7 raises new questions: Can Klauber Development Corp. proceed with all 23 homes, or will the repeal force a reduction to 12 units? The city has indicated that projects deemed complete before the effective date can proceed, but legal challenges could extend the uncertainty for years.

For homeowners near the Klauber site, the regulatory flux creates an impossible planning situation. Selling now to a cash buyer eliminates years of waiting to see how development battles resolve.

ADU Density Bonus Elimination: A Second Layer of Restriction

The January 28 council meeting didn't stop with Footnote 7. In a separate but related vote, councilmembers also moved to eliminate the city's Accessory Dwelling Unit (ADU) density bonus program.

The program had permitted developers to build one market-rate bonus ADU for each restricted low-to-moderate income rental unit created on a property. This provided property owners with additional income potential and helped the city meet affordable housing production goals.

But City Attorney Leslie Fitzgerald issued a stark warning: the council "potentially violated California's Brown Act by not providing prior public notice, creating vulnerability to lawsuits."

Mayor Todd Gloria expressed disappointment, noting the city had been "recognized as a model" for producing affordable housing. A Pacific Beach community group had already filed an amended complaint in September 2024 challenging the ADU bonus program, claiming it "paved the way for unchecked, unbridled development."

The Brown Act violation allegation forced a re-vote on March 4, 2025, where the council confirmed its decision. On June 16, 2025, the council voted 5-4 to officially cap the number of ADUs allowed on single-family lots, eliminating the bonus program in eight single-family zones.

For property owners in southeast San Diego, the ADU elimination represents a double restriction: not only can lots no longer be as small as 5,000 square feet, but owners also can't maximize density through bonus ADUs. This combination potentially reduces property development value significantly.

Property Value Implications: Winners, Losers, and the Uncertain Middle

The removal of Footnote 7 creates three distinct groups of property owners in southeast San Diego neighborhoods:

Group 1: Owners Who Benefit from Density Restrictions

Homeowners who want to preserve neighborhood character and prevent denser development nearby are clear winners. The elimination of 5,000 square foot lots means future projects will have larger yards, more green space, and fewer homes per acre—matching the standards in wealthier San Diego neighborhoods.

Rob Campbell articulated environmental concerns, noting that "paving over what green space we have will increase our air quality" issues in communities already identified as "environmental justice-affected."

For these owners, property values may increase as the neighborhood gains equity with areas like La Jolla and Pacific Beach. Their homes are now in communities with the same development standards as the city's most desirable neighborhoods.

Group 2: Owners Who Lose Development Potential

Property owners with larger parcels who might have subdivided under the 5,000 square foot rule face reduced development options. A 40,000 square foot lot could previously have been subdivided into eight parcels; now it's limited to two.

This group may see land values decline, particularly if they purchased with subdivision plans in mind. The ADU density bonus elimination compounds this loss by removing another income-producing option.

Group 3: The Uncertain Middle—Most Homeowners

The majority of homeowners in Encanto, Emerald Hills, Chollas Valley, Alta Vista, Broadway Heights, and Lincoln Park fall into a third category: they're uncertain how these changes will affect their property values over the next 3-5 years.

Will the D.R. Horton project proceed or collapse? Will legal challenges reverse Footnote 7's repeal? Will the ADU lawsuit succeed? Will property values rise with increased equity or fall with reduced development potential?

This uncertainty itself has market impacts. Traditional buyers with mortgage financing often avoid neighborhoods with ongoing regulatory battles. Appraisers struggle to establish values when development rules are in flux. The sales process becomes longer and more complex.

It's this uncertain middle group that represents the greatest opportunity for cash buyers.

Why Regulatory Uncertainty Creates Motivated Cash Sellers

The Footnote 7 repeal creates several pressure points that motivate homeowners to consider cash offers:

1. Traditional Buyer Hesitancy

Mortgage lenders and their appraisers dislike uncertainty. When neighborhood development rules are in flux and major projects hang in legal limbo, traditional buyers often look elsewhere. This reduces competition and extends listing times for homeowners trying to sell conventionally.

2. The Waiting Game Nobody Wants to Play

How long will it take to know if D.R. Horton's 130-home project proceeds? Will there be lawsuits challenging Footnote 7's removal or its retroactive application? Could take months or years to resolve. Many homeowners can't—or won't—wait that long to make life decisions about relocating, downsizing, or cashing out equity.

3. The 30-Day Window Creates Decision Pressure

The ordinance takes effect 30 days after mayoral signature. Property owners must decide quickly: list now hoping for a buyer before implementation, or wait to see how the new rules shake out? Cash buyers eliminate this timing pressure by offering to close in 7-14 days, giving sellers certainty regardless of the effective date.

4. Community Divisions and Stress

The Footnote 7 controversy divided neighborhoods between residents who wanted equity through density restrictions and those who supported more housing production. Years of contentious community meetings, appeals, and council votes have exhausted many homeowners who just want to move on with their lives.

5. Property Value Uncertainty

Without clear answers about how Footnote 7's removal affects individual property values, some owners prefer to sell at today's known value ($758,000 median in Encanto, $790,000 in Emerald Hills) rather than risk potential declines if density restrictions reduce development potential.

How Cash Buyers Provide Certainty During Regulatory Transitions

Cash home buyers offer several advantages to southeast San Diego homeowners navigating the Footnote 7 transition:

Guaranteed Closings in 7-14 Days

Cash buyers don't need mortgage approvals, which means no lender-required appraisals that might be affected by zoning uncertainty. Offers are binding and closings occur on the seller's timeline—whether that's before or after the ordinance's 30-day effective date.

As-Is Purchases Eliminate Repair Complications

During times of neighborhood transition, homeowners often don't want to invest in repairs or improvements when the neighborhood's future is uncertain. Cash buyers purchase properties as-is, eliminating repair negotiations and inspection contingencies.

Cash Buyers Absorb Regulatory Risk

Professional investors understand zoning transitions and have the resources to wait out legal battles and regulatory uncertainty. They're willing to pay fair market value today in exchange for assuming all future risk about how Footnote 7's removal affects property values.

No Financing Contingencies

Traditional buyers with mortgages include financing contingencies that allow them to walk away if lender requirements aren't met. In neighborhoods with regulatory flux, lenders may deny financing or require additional reviews. Cash buyers eliminate this risk entirely—when they make an offer, it's backed by immediately available funds.

Quick Exit Before Legal Challenges

Legal experts note that lawsuits could challenge Footnote 7's removal or demand retroactive application to pending projects. These legal battles could extend for years. Cash sales allow homeowners to exit before potential court decisions that might affect neighborhood character or property values.

Looking Ahead: What the Next 12-18 Months Will Bring

The Footnote 7 repeal sets in motion several predictable events for southeast San Diego neighborhoods:

Q1 2026 (Now): The ordinance takes effect 30 days after Mayor Gloria's signature. Projects deemed complete before this date likely proceed under old rules; new applications must comply with 20,000 square foot minimums.

Q2 2026: Legal challenges will likely emerge from developers affected by the change, potentially including D.R. Horton. The ADU density bonus lawsuit will continue, possibly setting precedents for the Footnote 7 repeal as well.

Q3-Q4 2026: Property values in affected neighborhoods will begin to clarify as the market digests the new reality. Homes near successful grandfathered projects may see different value impacts than those in areas where projects were halted.

2027: Court decisions will provide clarity on retroactive application questions and the legality of the Brown Act concerns. The market will stabilize as uncertainty resolves.

Homeowners who need to sell during this 12-18 month uncertainty window face the most challenging market conditions. Cash buyers provide the clearest path to a successful sale with guaranteed terms.

What Homeowners in Affected Neighborhoods Should Do Now

If you own property in Encanto, Emerald Hills, Chollas Valley, Alta Vista, Broadway Heights, or Lincoln Park, consider these steps:

1. Understand your property's development potential under both the old and new rules. Large parcels face the biggest changes.
2. Assess your timeline. If you need to sell within 12-18 months, regulatory uncertainty will affect your conventional sale process.
3. Monitor the D.R. Horton and Klauber projects. Their outcomes will signal how aggressively the city applies the new rules.
4. Get multiple offers, including cash offers, to understand your options in this transitional market.
5. Consider your personal priorities. Some owners will gladly wait years for equity; others prefer certainty now.

The Footnote 7 repeal represents historic progress toward housing equity in San Diego. But for individual homeowners facing years of regulatory uncertainty, cash buyers offer a practical path to move forward with confidence and certainty. Contact us today for a free property valuation.