The Amazon debacle didn't have to end this way for New York. A different outcome, however, necessitates a different approach.
My thoughts on Amazon eschewing Long Island City:
I understand the concerns of many regarding the “giveaway” of too many incentives to well-funded corporations. That said, each case must be looked at as to the specific benefits, potential downsides and overall ROI. In this case, I believe it's a huge loss for NYC and the region (and my home, Long Island, although I was concerned that without new approaches to land use and infrastructure, many communities on LI would not have leveraged the opportunity in a manner to expand their tax base, induce economic development and achieve outcomes such as attainably priced housing and reduction of tax burden).
NYC is a unique case, because it has such an economy of scale. From the sheer size of its overall workforce, to expansive supportive infrastructure, to governmental mechanisms (and yes, we can argue their efficacy and efficiency). If the same incentive package were provided in a smaller market, one that did not have such substantive existing infrastructure - financially strained and physically challenged as it may be - I don't believe such incentives would have resulted in such a positive ROI. But NYC is a unique animal.
In the end, this is a loss of a tremendous new engine of growth for one of the few areas of NYC – and the nation - that could not only absorb the growth, but harness it into positive transformation of place and improved economic and social outcomes for millions of residents. Had Amazon moved forward, new revenues could have been directed to attain community priorities such as affordable housing, improved connectivity and transportation systems, better designed and more well-funded infrastructure.
POINT OF EMPHASIS: I preach integration all the time. Of land use, public policy (i.e. affordable housing), infrastructure, finance. If this were not such a top down initiative to "get Amazon and win" but rather a co-creative effort where the State, the City, the surrounding counties and their respective COMMUNITIES determined what outcomes they all would desire and require to be supportive, I believe we would have seen a far different result.
It would look something like this:
1. Amazon needs a location that helps drive their bottom line. They are a business, after all, and we are a capitalist society (mostly).
In the end, some combination of incentives; ability to attract their targeted workforce through items such as quality of place, mobility and housing needs; provision needed infrastructure; and ongoing tax liabilities and cost of business would all figure into the equation. NYC would never have been their lowest cost option, but there is still a greater return on investment for Amazon to have relocated to LIC, even with the higher costs associated with NYC and the state’s regulatory environment, because of those aforementioned needs.
Especially in light of all those attributes NYC brings to the table that simply don’t exist elsewhere, Amazon’s bottom line and profitability would be reliant on far more than the incentive package itself. In my opinion, a more thought-out and comprehensive approach to finding a way to boost Amazon’s bottom line (with considerations to affected communities taken into consideration, as discussed below) could have gotten Amazon what they needed as a business in terms of bottom line ROI, and provided a package that was not only amenable, but desired by, a far greater range of constituents.
Takeaway: Amazon needed a place where they could maximize their ROI and result in greater long term profitability. Nothing wrong with that, they are a business after all, and we are still a (mostly) capitalist society. There are tools and levers in addition to the incentive package that could have achieved these goals, had the process been conducted in a more thoughtful and engaging manner.
2. Local communities have a range of desired needs and outcomes, and Amazon COULD have been leveraged to help obtain those objectives.
Perhaps instead of an incentive package that was viewed to line Amazon’s pockets, there were joint investments in infrastructure to ensure the new growth would both not be a burden to existing and future residents and workers in the region, but actually have improved quality of life through enhancements to transit that are considered in tandem with land use policy and issues such as affordable housing. Perhaps employer housing programs could have been employed while setting aside a portion of future revenues to preserve and expand attainable and affordable housing both in those local communities and throughout the region. Job and career training, investments in education that align with providing necessary work skills.
The list could go on and on. An investment of this size holds the capability to transform so many lives – all the while providing corporate ROI and corporate stewardship that too often are viewed as mutually exclusive. They are not. Determine desired community outcomes and work backward to align those outcomes with the new revenue and economic growth opportunities, all the while remaining sensitive to the need for Amazon to meet their bottom line needs as a business.
Takeaway: Work in concert with the affected communities to determine their needs and desires through an engaging, community centric and co-creative process. How could we use the billions in ongoing investment and new revenue creation to meet those goals by harnessing new revenues in concert with policy choices to reach those goals.
3. Regional needs and impacts (and those State-wide) should be considered, much in the same way as those directly affected.
The fact is the size and scope of Amazon’s planned investment would extend far beyond LIC, Queens and NYC. As such, the ‘co-creative’ process described above, used to determine desired outcomes such as better transit, infrastructure and housing policy, should be extended to neighboring counties. However, those communities and municipalities would need be willing to take a fresh look at their policies, as doing business the old way simply won’t produce the necessary results. Finally, the State’s investment in incentives and supportive infrastructure necessitate SOME consideration for those counties and communities that might never be directly affected by Amazon’s now unplanned move. Let’s not forget there are means to provide benefits to communities’ state-wide with such an influx of investment and new talent to NYC.
Now, there must be a balance here between regional needs and those of local communities. That is why I suggest a “carrot” approach whereby local communities determine how (and if) they choose to grow. Those which look to undertake responsible land use, mobility and housing policies get more State dollars. Those which do not are not punished, and can choose their own path, but shouldn’t expect the state nor region to support “the old way” of doing things, including the increasing cost of suburban, low density built environments and infrastructure. It’s about balance: balance between local, regional and state needs on one hand, and balance between retaining and enhancing existing community character, while allowing for and directing growth in a responsible manner that benefits both locals, and the region as a whole.
Takeway: The effects of Amazon would be felt beyond NYC. Take a truly comprehensive and regional approach by providing tools and funding to local municipalities and communities willing to take a fresh look at land use, zoning, housing policy and transportation. Provide carrots to those willing to provide density and mixed-use neighborhoods near transit, to help disperse the direct impact of such a large new center of employment.
ABOUT THE AUTHOR: Brandon A. Palanker is a developer, land use strategist and a revitalizer of downtown and suburban communities. With nearly 20 years experience in mixed-use development, place-based economics, community engagement and public policy, he believes an integrated approach that considers land use, public policy, innovative finance, infrastructure and economic development is necessary to successfully overcome the hurdles often associated with community-driven, transformative redevelopment. Brandon is a renowned public speaker and advisor for public and private sector clients through his consultancy 3BL Strategies and is co-founder of the Downtown Collaborative.
CENTER OF GROUNDBREAKING RESEARCH IN NORTH TEXAS
On January 23rd and 24th in Fort Worth and Dallas, respectively, Chris Leinberger of The George Washington University announced the findings of a two-year research effort that detailed the economic and social benefits of walkable urban development in North Texas. Downtown Collaborative members 3BL Strategies, ASH+LIME, and Project for Public Spaces (PPS) all played a role in the research, with special thanks given by Mr. Leinberger to Brandon Palanker of 3BL for his extensive work with the program over the past two years. The executive summary of the report can be found here with the full report available here.
The WalkUP Wake Up study demonstrates a clear market shift in DFW, from “drivable sub-urban” development to more “walkable urban places” (“WalkUPs”). WalkUPs, characterized by a mix of uses, increased densities and a more compact, walkable environment, produce greater economic output and improved social outcomes as compared with less dense, single use, auto-dependent locations.
The research identified 38 established WalkUPs within the DFW Metro region, representing only .10% of the region’s land mass. However, these places prove to be hubs of economic activity, totaling 12% of the region’s Gross Regional Product (GRP), with job density 112 times greater than the rest of the metro. An additional 17 areas were considered emerging WalkUPs, with 22 considered potential.
The study demonstrates significant price premiums and higher rents for residential and commercial properties that are located within WalkUPs, including a 2+ times premium for for-sale housing. For-sale homes located within ½ miles of a WalkUP (even if they were driveable sub-urban), achieved a 71% price premium when compared to non- WalkUPs locales, with for-rent apartments totaling a 37% premium.
While the cost of living is higher within these walkable, mixed-use nodes, the research demonstrates improved social equity outcomes due to a decreased cost of housing + transportation and increased access to transit and job centers. As such, the report points out the opportunity for DFW to “do well while doing good” through increased development of existing, emerging and potential WalkUPs, which average between 100 and 500 acres in size.
The study discusses a range of potential policy choices that are recommended to yield more WalkUP development, including an emphasis on zoning that makes mixed-use development and greater densities legal; encourages more development at and near train stations in conjunction with investments in transportation alternatives; and community-driven “crowdsourced planning” initiatives that emphasis conscious social equity strategies to overcome local resistance to the development of more walkable, mixed-use neighborhoods that contain a significant multifamily residential component.
Compared to other leading metros such as Atlanta and Washington D.C., DFW shares the overall trend toward more walkable, mixed-use development, however DFW lags behind these region in terms of the overall market that is dedicated to walkable, urban development. Even so, DFW demonstrates that walkable urban development is currently outpacing drivable suburban in terms of market share, by a factor of 2.6.
According to Brandon Palanker, “This report is, at root, a call to action. Elected officials, civic leaders, and developers, must learn how to undertake place-visioning and place management processes to create and sustain these vibrant neighborhoods that outperform auto-dominated areas from both an economic and social perspective.”
Stay tuned as Phase 2 of the effort is about to commence, led by the Downtown Collaborative in partnership with George Washington University and J Street Companies, a Dallas-based developer led by Shea Byers, a former student of Mr. Leinberger who understands the need to create more walkable urban places throughout the North Texas region.
What’s is this growing Trend?
The interest of airports in urbanism is slowly gaining air lift, and especially since the Great Recession. Airports have begun to realize that they must become more proactive in diversifying their revenue streams and offsetting losses from economic fluctuations and global events that can impact air travel. During the recession, declines in passenger volumes have had significant negative impacts on revenues, including ticket fees, parking fees, rental car facilities, food and concessions, travel centers, and other airport services.
In response, airports have been petitioning the Federal Aviation Administration to allow them to lease commercial land to non-aviation uses. Usually the subject parcels do not have direct or even indirect airfield access, but are well-connected with road networks, major employment centers, and even waterfronts. Many are greenfield sites or have low-impact existing uses related to storage, shipping, and distribution.
Is this a new frontier of Opportunity?
Just imagine the redevelopment of non-aviation commercial land that is located in established urban places and employment centers – it is a great new frontier for urban infill! In the right location, some of these lands could be redeveloped into tightly knit, mixed-use projects with observation decks, aviation museums, restaurants, entertainment venues, and other attractions appealing to resident households, vacationing families, and business travelers. Note: Lease terms for new tenants usually commence with 40 year leases and 5 year options, and can be negotiated for retail, office space, hotels, and other non-residential uses.
Erie Port Authority – Master Plan and Market Analysis
“The market analysis findings are organized by each of three general districts: 1) the West “Liberty Park” district; 2) the Central “Dobbins Landing” district; and 3) the East “Lampe Marina” district. In general, the market analysis recommendations call for entertainment, recreation, dining, and marina developments at Liberty Park and Dobbins Landing. With a few exceptions, the vast majority of retail space in the plan has been strategically concentrated at Dobbins Landing. To optimize the clustering of all new near Dobbins Landing, the vast majority of new entertainment and recreational venues have been intentionally planned for Liberty Park.”
Will Rogers World Airport – New Town Center
“When recruiting retailers on commercial non-aviation lands, development of the Lariat Landing Retail Village must take priority over any freestanding big-box stores. In staging and sequencing the various phases of development, ground-breaking should begin with the retail village to ensure that the pedestrian-friendly shopping environment is well-established, and to clearly set the stage for the remainder of the project. Marketing time and resources should be dedicated to recruiting brands that are truly unique to the entire region.”
Port of San Diego - Redevelopment of Harbor Island
There is a real and tangible need for the City of San Diego and San Diego County to significantly improve the number, variety, and quality of waterfront attractions that are designed to meet the high expectations of global travelers and more effectively compete with destinations like San Francisco, Las Vegas, and Lake Tahoe.
There is also a need for the City of San Diego to significantly improve the mix of waterfront attractions that create high marquee value for the cruise line industry; and to offset declines in cruising activity to Mexico with port-of-calls for cruises destined for Brazil, Chile, the Galapagos Islands, San Francisco, Hawaii, Seattle, and Alaska.
Waterfront amenities and attractions for both year-round residents and visitors represent the best-selling strategies for increasing the market’s competitiveness and ability to compete for cruise ships and international visitors. Reinvestment and development along San Diego’s waterfront will directly benefit the Airport and vice versa.
Everyone is getting On Board!
We all have niches in our fields of expertise, and Sharon Woods is no exception. Her firm (LandUseUSA | Urban Strategies) has collaborated on numerous aviation and port authority projects across the nation. Examples of include WRWA – Will Rogers in Oklahoma City; CVG – Cincinnati/Northern Kentucky; SAN – San Diego; XNA – Northwest Arkansas; and EWPPA – Erie-Western Pennsylvania Port Authority. In 2019, LandUseUSA will continue serving as an on-call subcontractor for CID – Eastern Iowa in Cedar Rapids; DEN – Denver in Colorado; ONT – Ontario in California; and BWI – Marshall in Baltimore.
– Sharon Woods, LandUseUSA | Urban Strategies
So, DFW missed out on landing Amazon’s HQ2. On one hand, it’s certainly a disappointment. HQ2 brings with it significant job creation, an influx of private investment and new business activity both from Amazon proper, and the supportive economy that is surely to follow. On the other hand, we may have just dodged a bullet. Between tax breaks and other incentives, one could well argue – and many have – that landing HQ2 might not be as beneficial to the region’s bottom line as appears at first glance.
As the dust settles, these are my three key takeaways from the process, and how DFW can evolve to be better positioned in the future not only to attract large corporate entities, but to expand our economy from the entrepreneurial one person shop upward. Even better, a place-based approach to economic development will direct future investment toward our region’s bottom line, rather than the current approach of incentive-driven processes that only help the bottom line of big business.
1. DFW is on the precipice of becoming a world class region – but we are not quite there yet. Ten years ago, certainly 20, I don’t believe DFW would have been on the shortlist for HQ2. We simply did not have the economic nor cultural gravitas to compete on the world stage for a business that clearly desires more than just a low cost area to do business (although they are more than willing to accept huge incentive checks). Today, that has changed. Between resurging urban cores in Dallas and Ft Worth, and the numerous downtown revitalizations occurring throughout the Metroplex, DFW now has the ingredients necessary to become a world class center of commerce and culture. We must continue to build great places that that are rooted in arts, innovation, diversity and entrepreneurship.
2. DFW has dozens of great (and emerging) places – but a lack of connectivity and continuity caps our upside. This is, perhaps, our region’s greatest hurdle. From the need for greater fixed-guideway transportation (think: light and commuter rail) coupled with intensive development at and around train stations to the need for last mile connectivity and increased mobility options, DFW is sorely lacking in public transportation options as compared to our peers. We must do a far better job of leveraging the most light rail miles in the nation by allowing dense, mixed-use growth to occur at and around transit stops, while increasing local efforts to improve biking, micromobility (think scooters and evolving technologies), and pedestrian connectivity. When I have to take my own hands to bike (and at times, even walk) from Uptown to Downtown Dallas, two of the new anchors of this new place-based economy, everyone should acknowledge there is work to be done.ositive Triple Bottom Line outcomes. For more information, or to bring Brandon in as a guest speaker, p
3. Invest in Place and there will be less need for tax giveaways. If our economic development strategy is based on incentives, what VALUE does DFW (or our many wonderful neighborhoods and districts) really bring to the table? Do we want to get into a horse race of “the largest tax break wins?” If we attract thousands of new jobs, but erode the financial benefits of that economic activity, are we even better off than not having secured that “growth” in the first place? Finally, by focusing on incentives, we are creating a self-fulfilling prophecy that will attract companies that share a primary goal to find the lowest cost place to do business (which is likely a reflection on the type of jobs they would bring), rather than a business that seeks a robust region that provides a range of benefits. Cost competitiveness is important, but there is a reason that the most sought after locations in the world are often the most expensive – their VALUE OF PLACE simply commands a price premium that employers are happy to pay, because that is where the talented workforce wants to live.
We must invest in both local, place-based initiatives that create vibrant walkable, mixed-use neighborhoods (think sidewalks, activating parks and open space, allowing zoning for multifamily residential within a mixed-use fabric); along with enhancing the connective infrastructure from transit to emerging transportation technologies and last mile mobility that leverages our expansive and diverse region by connecting hubs of economic and social activity.
To achieve these goals, it is essential that we take a new look at what we call “Place Management.” We must think regionally, but recognize that a region is no more than a collection of singular communities, each with its own distinct set of districts, neighborhoods and places.
Much like our region introspectively adjusted our approach back when Boeing eschewed DFW some time ago, we now have the next opportunity to evolve as a region with an emphasis on the value of place and the need for regional and local place management. If we take such an approach, not only will DFW be better positioned for the next big economic development catch, but we might just be able to reel in the big fish without having to write those big checks. Because the real value will not be a check we write, but rather be our neighborhoods, our communities, our places… and a world class region, indeed.
About the Author: Brandon, founder of 3BL Strategies, is an accomplished developer of mixed-use, downtown and transit oriented environments and is a leader in the fields of downtown and suburban revitalization, public engagement and place-based economics.
Anyone who has studied the great Jane Jacobs’ Death and Life of Great American Cities is familiar with her analogy about major projects and chess. I hope the reader will forgive me for any overlap with the guru’s ideas, but the parallels between chess and cities are too compelling to resist.
In the game of chess, some pieces are far more powerful and important than others. And the most powerful of these, able to move as much as she wants in all directions, is the queen. The beginner, having learned the game of chess, makes an apparently-reasonable assumption: Since the queen’s power is so awesome, I should unleash the full force of her destructive wrath upon my hapless opponent as quickly as possible.
Almost always, this results in disaster. In isolation, the queen’s importance is what makes her vulnerable. The lesser pieces attack her until she is trapped—or they are able to control and develop the board while she scatters to protect herself. The queen is most effective when everything else is deployed most effectively first. And most of the moves—most of the energy in the board—should be focused on the other pieces. The novice whips out the queen. The intermediate player focuses on the minor pieces. And the master learns how to play very effectively with his or her pawns.
Cities, too, make this same error. But instead of queens, cities whip out their Silver Bullets, their Very Important Projects. They have seen that convention centers, stadiums, museums, large theaters, casinos, etc. can completely transform a district, often for the better, just as chess players observe the ability of a queen to dominate a game. So it seems reasonable: Don’t worry about those little businesses, or small public spaces, or street trees, or other little details. The pawns, bishops, knights and rooks will sort themselves out. Play the queen as aggressively as possible, and you’ll win the game. But it doesn’t work that way. The queen can’t carry the game all by herself.
Numerous stadiums, museums, and convention centers, engulfed by blocks of desolation, pay tribute to this approach. And anyone who has looked for exciting destinations (or basic conveniences) after leaving such a place know how disappointing the experience can be. Without the backing of the lesser pieces, the queen is dead—or, at least, a liability rather than an asset. And people don’t want to support your billion dollar investment, because it’s not surrounded by the types of amenities they want.
If your city is fortunate enough to have such a large asset, rejoice. If it’s not working, maybe you can make it work. But that’s only possible if you pay most of your attention to the small-to-medium sized details around it; play your other pieces to their full potential. Do everything you can to make sure this resource is surrounded by safe, comfortable sidewalks, that the street is lined with vibrant activity, that empty lots are transformed into vibrant public spaces, that the small businesses are supported as well as they can be, that storefront displays are active and engaging, and so on. And if this seems like common sense, walk around some of the multi-hundred-million or billion-dollar investments your city has made. More often than not, you’ll learn that common sense is not so common.
The world of economic development has been turned on its head. Tried and true strategies to retain and attract job creation and economic growth are being tested as Americans change how – and where – they wish to work.
For decades, economic development was focused on providing incentives while appealing to the c-suite (nice houses, good schools). Infrastructure was important, but was focused almost exclusively on the suburban model – isolated campuses where the car was king. Yes, the workforce played a role, but more often than not the bulk of a company’s employee base was measured in bodies rather than through the lens of highly sought after talent.
Today, talent is king. The ability to retain, cultivate and attract the in-demand knowledge worker has become a key component – and in some cases, the most important aspect – of corporate real estate decisions. We have evolved past focusing primarily on tax breaks and the c-suite to a bottom line approach that measures value not just in terms of cost of doing business, but the economic benefits of place. This includes the tremendous benefits of hiring the best of the best, reduced costs of increased training and the fact that workers in walkable, mixed-use environments are nearly 50% more productive, per capita, than their counterparts in auto-oriented suburbia.
Quality of life has always been a focus of economic development. Today, that has evolved to an emphasis on quality of place. Simply put, those highly sought after young professionals demand a lifestyle unlike predecessor generations. Urban living. Walkability. Mobility. An array of cultural and entertainment offerings. A range of housing options - including rentals, condos, townhomes and single family homes within more compact neighborhoods that provide proximity to a vibrant, downtown-like environment. Mind you, urban does not necessitate “big” – yes, urban can represent the major urban cores such as Manhattan, Boston or San Francisco; but it is also found in suburban mixed-use environments, historic downtowns and smaller cities across the nation.
Yes, real estate is more expensive in these environments, but those additional costs are offset many times over, providing clear economic rationale for companies to move downtown. And let’s not be foolish, as there is still a need for incentives and catering to the executives and decision makers, however the role of HR has become a paramount component of any successful economic development strategy. In addition, by investing in place, rather than giving away the store, inherent value is created for a community that lessens the need for greater incentives over time, as the value of place becomes more central to economic development strategies.
During the current real estate cycle, the numbers are staggering: significant price premiums for walkable urban neighborhoods as compared to those that rely solely on the automobile and suburban sprawl. Those price premiums – which can rise well above 2x cost for walkable urban product as compared to driveable suburban - demonstrate pent up demand for living and working within mixed-use, pedestrian friendly and mobility rich environments. Even more staggering is the shift in market share, where a recent study conducted by Smart Growth America and George Washington University demonstrated that 28 of the nation’s 30 largest markets have seen significant shifts in consumer preference as drive-only locations are flat out losing market share as to more diverse built environments that provide the lifestyle today’s worker demands. In a world of poaching, cities large and small are the benefactors of the flight from auto-oriented suburban locales.
Even as of a few years back, there could be legitimate debate as to “whether or not” a region should examine its built environment to determine whether adjustments must be made. After all, there is – and likely always will be – considerable desire for more traditional suburban locales. However, the evidence has made it clear that for a community or region to be competitive, they must consider the value and quality of place, with a focus on providing walkable, mixed-use and mobility rich environments. In the end, it’s about balance and a full range of offerings. Protect and enhance the bedroom communities that so many love. But complement them with compact, vibrant downtowns and urban neighborhoods.
Economic developers must become placemakers, just as urban planners must recognize that they, too, are in the field of economic development. More to the point, we must integrate these disciplines to work hand in hand to foster downtown revitalization, catalytic mixed-use development, suburban retrofits and corridor reinvention. Furthermore, public works and engineering must be at the table, so short and long term infrastructure policy can be contemplated in a manner that fosters the creation of these new, walkable locales. We must align infrastructure strategy and investment with land use, each leveraging the other to provide the greatest return on investment.
The question then becomes, is YOUR community properly positioned to leverage the evolution from past strategies to those that take a Place-Based Economic Development approach? What are the short term, low cost and easily implementable opportunities to better meet the needs of this new market? What mid and long term placemaking, land use and infrastructure strategies must you take to drive responsible economic growth?
Finally, how can cities and regions that are currently stuck in place begin to evolve to drive economic development by investing in place? It’s all about integration and Place-Based Economic Development.
If you want to learn how to position your community to better attract and retain talent – and the companies that employ them? Do you need assistance convincing key decisions makers to take a more place-based approach to economic development? Whether you are just beginning the journey or are ready for a fully integrated process that aligns urban design, land use, infrastructure and public policy, The Downtown Collaborative & 3BL Strategies are here to serve your needs. Reach me at brandon@3BLstrategies.com.
Not long ago, a group of developers, planners and housing advocates huddled around a table, joined by municipal representatives in a region that is grappling with how to effectively deal with their growing affordability issues.
The good news is that their region holds the potential for significant, focused growth along a new transit corridor. This could open up new revenue streams to be directed toward affordable housing. The reality, however, is no one source of revenue is sufficient to overcome what has become a national affordability crisis with historical roots. To further complicate matters, affordable housing is one of many issues that the community wishes to address, each of which demands funding and resources. To paraphrase the sentiment of one of the local officials: “Please don’t spend my ‘new revenues’ seven times before we even receive them – I’m already committed to spending them three times over as it stands today!”
That last point is illuminating, as it demonstrates the competition for every slice of potential new revenue. As folks around the table discussed the need to fight for their slice of the pie, we realized that there simply would not be enough to go around. Which brings us to a kitchen analogy for how to better orchestrate a housing affordability strategy:
From those discussions, a few overarching themes came to be.
1. Expand the pie and bring a bigger fork: Be intentional about new funding to address affordability.
As folks around the table were throwing out potential hurdles and competing needs for the funding that would become available through new development efforts, it became apparent that just divvying up the pie was not going to suffice – not enough revenues could be created by the new development to address affordability and the many other competing needs of the community. We had to expand the pie, and we needed to bring a bigger fork.
Resources, including financial, are necessary to meaningfully impact the affordability crisis. A concerted effort must be undertaken to redirect existing funding in a more efficient and outcome oriented manner while new sources of funding are identified moving forward. These new sources can lean strongly on the private sector development community (inclusionary zoning, fees-in-lieu of, density bonuses), but exactions alone, placed on the back of the most costly to build, new development, are simply not sufficient. Public AND private sector investment is necessary.
Local revolving funds for small or midscale investment. Partnerships with banks and local financial institutions. Value capture, TIFs and other revenues that can be created through new development. More efficient use of existing revenues to produce greater outcomes. All of these may be necessary to actuate a meaningful affordability strategy. The reality is without funding, you can’t do much. However, getting that funding is only the first step.
2. Make something fresh – and make good use of those leftovers! A community must take a hard look at reimagining its existing stock while fostering new development.
One of the most important strategies to ensure the provision of affordable housing into the future is to provide programs that ensure existing affordable stock survives, while promoting new development to increase supply and provide additional revenue streams that may be tapped.
For example, a municipality may wish to purchase naturally occurring, non-subsidized product that exists today, and convert it into protected and affordable units into the future. If not done intentionally, such stock would eventually reach the end of its economic life, and be redeveloped – usually with significantly higher price points. This could be conducted through any number of channels, including public-private partnerships with not-for-profits and/or private sector apartment owners and management companies.
When it comes to new construction, focus efforts where maximum benefits will result. Does the opportunity exist to increase activity and density in or around a downtown, mixed-use environment, or to promote the creation of one? Leverage the market for walkable urbanism to build vibrant hubs of commerce and culture that provide far greater economic returns than lower density sprawl. A mixed-use, downtown oriented focus will increase housing supply (affordable and higher end alike), provide new revenue streams to tap into, and reduce the growing pressure for larger scale development within established bedroom communities.
Finally, don’t expect exactions on new development to be the only, or even the primary, means to support affordable housing. While policies such as Inclusionary Zoning or Density Bonuses work in some cases, they must be properly calibrated according to the local market and built environment. If you expect to place the full burden on creating affordable housing on the back of the most costly product, and new construction, the result may be further constriction of the market and an exacerbation of the affordability issue rather than a solution
3. Don’t just focus on the main course. We need small plates, too. – Encourage development at all scales, from incremental through institutional.
Most new affordable housing that is created falls into the “large scale” or “institutional level” of development. Between the high cost for entitlements (which can be exorbitant in anti-growth environments that fear the very range of housing types necessary to promote an economically healthy and socially vibrant community) and the manner in which federal subsidies are created, it is becoming ever more rare to see small and mid-scale construction of new affordable product.
As such, tools on a local level must be provided to encourage neighborhood oriented development (think accessory dwelling units, or fourplexes) and “missing middle” product that could also include projects of a few dozen residential units. To start, ensure local zoning codes do not prohibit the very types of development that promote a community’s stated desires, including social equity and housing needs. Make small scale multifamily, granny flats, and other typologies legal by right within a full range of neighborhoods. Where appropriate, zone to allow and even encourage (perhaps coupled with local financing assistance or loan backstops for local developers) buildings that could house 6-30 units, or even 30-60 units in transition areas that abut a more walkable, dense and often mixed-use framework.
By legalizing the very types of housing that are best suited to be more attainably priced, affordability can be addressed throughout different neighborhoods without sole reliance on large scale, subsidized product
4. Everyone loves a layer cake! Work to address the shortcomings in the capital stake by aligning local, state, and federal programs in addition to tools and incentives for smaller scale developers
In addition to the need for financial resources, it is essential to maximize the impact of those available dollars, once procured. Think of the funding gaps that are traditionally faced by developers of affordable product (the specifics of which will shift from state to state, region to region) and work to overcome those hurdles through strategies such as a local revolving fund, creation of funding and financing programs with local banks to support local investment and construction, or to provide backing for loans that would be made to local developers who might not otherwise be able to move forward with small and mid-scale projects.
Finally, ensure that local zoning and land use ordinances and other regulations do not conflict with, nor discourage the use of federal programs such as the New Market Tax Credit program, Low Income Tax Credit Deals, Historical Rehab credits, the new Opportunity Zone policies or HUD financing guidelines. Do the same on a state level, in a manner that addresses the expected gaps in a developers pro forma, creating a layer cake of federal, state and local programs/policies that work in harmony with one another to enable financing and construction of attainably priced housing at different scales.
Finally, look to create and leverage innovative partnerships that may include public and private sector participants, local financial institutions or local large scale institutions such as health care systems and institutions of higher learning. A large employer might be able to provide some amount of assistance for a program that in turn helps build workforce housing, again further leveraged by the additional policies and programs discussed throughout this article.
5. Get to work! Start prepping your meal and then keep on cooking. Find a way to build more housing, at all scales, across all incomes level. And do it NOW!
This reminds me of an ancient Chinese proverb. The best time to plant a tree is 20 years ago. The second best time is today.
While land is more expensive than it’s ever been, it will also likely never be cheaper than it is today. Couple that with Economics 101 (supply vs. demand), and the two most important factors to overcoming a growing affordability crisis become clear. Not taking immediate action on the affordability issue will only make the crisis worsen. Second, the most successful long term strategy to address housing affordability is to ensure that supply keeps up with demand.
It is essential that affordable housing policy be at the forefront of community and municipal initiatives. Whether a community is to undertake an economic development strategy, a comprehensive visioning or a future land use plan, it is essential to consider the issue of affordability, throughout. Strategies must be created today that align with other polices as described above, but also ensure that any further growth is done in a manner that best promotes the desired outcomes of more affordability and equitable neighborhood growth. There must be an intentional strategy to incorporate a range of solutions, as described above. And there is no time like the present to do so.
The underlying reason for this, in addition to the realities of land prices escalating, is the fundamental reality that those regions which have best tended to the issues of affordability are those that have created policies designed to promote more construction of housing across the board – subsidized and naturally occurring, local investment and institutional finance, incremental development and catalytic development. The immutable laws of econ 101 are at work: additional supply reduces cost pressures; constrained supply - be it through zoning that makes it illegal to develop in the first place, or financial structures that don’t support the market’s ability to build new or enhance existing product – increases cost.
Final takeaway: Try things out, experiment with new policies and approach – then try again
There is no silver bullet to the growing affordability crisis. Each community has a specific set of needs, its own opportunities and unique constraints. The market may support one set of strategies in some locations, and an entirely different approach in others. Finally, it will take the utilization of a full list of ingredients to concoct a recipe – or better yet, a series of recipes – that can ultimately make a dent in providing more housing product across income levels and development types, while ensuring a greater stock of affordably priced homes. In addition, housing cost is only half of the affordability equation. Access to transportation and an array of mobility solutions, coupled with proximity between where one works and lives are essential components of the equation. But that's for another article and another day.
Don’t be afraid to fail, because in the long run, trying, failing, and adjusting, are the only ways to succeed. Embrace your role in a national effort to find new solutions as we individually and collectively work toward inventing strategies that can improve the quality of life in communities throughout the country.
Want to learn more about Triple Bottom Line strategies to address issues such as affordability? Email email@example.com.