A Wealthy Family's 100-Year-Old Company Is Blocking A Permanent Housing Project For Homeless People

By Will Huntsberry, the Voice of San Diego

July 10, 2023

San Diego has rewarded family-owned H.G. Fenton Company handsomely over the past 117 years. Recently, Fenton had an opportunity to return the generosity.

Henry G. Fenton, the patriarch, began his working life as a poor, seven-year-old ranch hand in the San Pasqual Valley. He amassed a fortune by taking on large contracts for public improvements, related to streets, jetties and even the Tijuana Racetrack. Fenton bought many thousands of acres of land and, after his death, the company became a powerhouse in Southern California development.

Now, in the midst of a dire homeless crisis, city leaders came to Fenton looking for a little help. They needed Fenton’s seal of approval to buy a motel to permanently house homeless people. Fenton not only declined. Company leaders threatened to fight the project with the full weight of their company, a lawyer for the San Diego Housing Commission said.

Here’s how the story goes: Mayor Todd Gloria and other city leaders have recently been trying to buy up extended-stay motels with money from a state program called Homekey. The motel rooms will be converted to permanent residences for homeless people.

They had their eyes on an Extended Stay America with 140 rooms on Mission Valley Road – right in the epicenter of Fenton-owned properties.

The area is called Mission Valley Heights and it is part of the historic “backbone” of Fenton’s land empire, according to a 1987 Union-Tribune article. The land was once quarries and ranches, but Fenton developed it into commercial property.

In the 1990’s, Fenton created a covenant for Mission Valley Heights – binding in the way the rules of a homeowner’s association might be – restricting future development. The covenant banned subsidized housing.

The covenant, or agreement, can only be changed with Fenton’s approval and a vote by 51 percent of the property owners. Since Fenton still owns more than 51 percent of the properties, it is the sole decider on covenant matters.

City leaders asked Fenton “on multiple occasions” if it might consider changing the covenant, according to Dave Rolland, a spokesman for the mayor.

Walter Spath, a lawyer for the Housing Commission, said Fenton unequivocally declined.

“The response was, ‘Absolutely not and we’re gonna do whatever we can to stop it,'” said Spath. “They have deep pockets. And we have every reason to believe they were not bluffing.”

Company representatives declined to comment on this story. Henry Hunte II, a fourth-generation Fenton heir, did not return a voice message.

The deadline to secure properties with Homekey money is weeks away. The city still has its eyes on two more properties. But, no matter how many they secure, Fenton’s denial will have cost the city beds in its ongoing struggle to alleviate the homeless crisis playing out on city’s streets.

A new and untested state law was designed specifically to stop companies like Fenton from using restrictive covenants to block subsidized housing projects.

Restrictive covenants, the law notes, have “historically been used to perpetuate discrimination.” The law allows property owners to overturn any covenant that prohibits subsidized housing.

It’s also, according to its text, incredibly easy to use.

Any property owner that wants a qualifying covenant gone need only file paperwork with the County Recorder that modifies the covenant. It must then be approved by a county lawyer.

But it’s not really that simple, according to Spath, the Housing Commission lawyer.

First off, Spath thinks the law is “constitutionally suspect.”

“As a legal matter, [the covenant] is considered a private contract,” Spath said. “The thing that jumped out to me is the contract clause of the Constitution. The government can’t interfere in a private contract.”

But aren’t contracts that don’t comply with the law not binding, I asked Spath.

Yes, that’s true, he said. Race-based provisions, for instance, have definitively been stricken down by courts. Spath wasn’t so sure the same would happen in this case.

“You just go provide a one-pager to the county and [the party] doesn’t even get a notice to appear,” Spath said. “It violates due process.”

Richard Bloom, a former assembly member and current Los Angeles Superior Court judge, wrote the law in 2021. Bloom did not respond to a request for comment.

Beyond constitutionality, Spath said there were logistical problems. Fenton planned to fight any move by the city to overturn the covenant and state deadlines to receive the money were just weeks away.

“Without cutting a deal with Fenton, we wouldn’t have been able to get legal certainty and meet the state deadlines,” Spath said.

Mary Jo Wiggins, a law professor at the University of San Diego who specializes in land use, said that, indeed, there would have been many complicating factors – from constitutionality to time table – had the city decided to challenge Fenton’s development rules.

Fenton spends substantial time lobbying the mayor’s office, public disclosures with the City Clerk’s office show. Fenton lobbyists also raised and contributed thousands of dollars to support Gloria’s mayoral campaign.

I asked Rolland, Mayor Gloria’s spokesman, if this might have influenced the city’s decision to fight or not fight Fenton.

Fenton “refused to use its voting power to change the covenant to allow a purchase. The city has no legal leverage to compel Fenton to change their mind within a limited time,” he wrote.

Ironically, the Extended Stay America on Mission Valley Road has been housing homeless people, through various funding programs, for more than a year. Yet, Fenton, as far as Spath knew, had made no move to enforce the covenant.

In a court battle, that fact would have tipped in the city’s favor.

The argument would be, “You shouldn’t be able to enforce because you ignored the covenant as practical matter,” Spath said. “In court, that would have been an argument in our favor. But the problem is you’re still in court.”

Henry Fenton, the patriarch, considered himself a master of maximizing value – even when it came to people.

The ranch on which Fenton worked employed considerable Native American laborers, according to an account by Fenton himself. The ranch’s owner “certainly ruled them with an iron hand,” Fenton wrote.

Fenton wrote of one man named Morales, “a powerful full-blooded Indian weighing about two hundred ten pounds,” who’d been kind to Fenton as a boy. The ranch’s owner – who Fenton called “Uncle Bill” – kept Morales in debt “buying groceries for him and his wife,” Fenton wrote.

When Fenton went into business for himself, he occasionally hired out Morales. “I think I could get more work out of him than could Uncle Bill,” he wrote.

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