Saturday, January 13, 2018

As Affordable Housing Shrinks, City Hits Pause on Downtown Development Incentives

Posted By on Sat, Jan 13, 2018 at 4:31 PM

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In 2010, then-Mayor Julian Castro introduced a new, streamlined way to encourage residential development in tourist-crowded downtown San Antonio. Called the Center City Housing Incentive Policy, the plan would waive city and San Antonio Water System fees for new downtown developments with 16 housing units per acre or redeveloped historic or industrial buildings with 8 housing units per acre. Developers who included “structured parking” or retail space into their residential project could even qualify for forgivable loans. The goal was to create 7,500 housing units in downtown by 2020.

On the surface, the plan worked. In the following five years, long-empty lots sprouted colorful apartment buildings and abandoned industrial blocks were revived with hip restaurants and retail spaces. But, while the 64 incentivized projects (with 6,543 housing units total) brought new life to the quiet city center, they catered toward wealthier, upper-class residents. The Cevallos Lofts, 1221 Broadway Lofts, the Pearl Can Plant, Steel House Lofts — these “luxury” apartments and condos built with city tax write-offs all come with rents and mortgages above the city’s average rates.

Currently, San Antonio’s rental average dances around $1.07 per square foot, per month. The cheapest studio at the Pearl Can Plant is $1.71 per square foot, according to Zillow.com records. Same goes for the cheapest apartments as 1221 Broadway ($2 per square foot), Steel House Lofts ($1.79 per square foot), Cevallos Lofts ($1.69 per square foot), and the brand new Jones & Rio ($2.25 per square foot).

As the revived city center brings in higher-paying renters, it’s also booted long time lower-income residents out of their newly-expensive neighborhoods. This unexpected side effect has prompted Mayor Ron Nirenberg to pump the breaks.



At the Jan. 11 City Council meeting, Nirenberg proposed the city pause the incentive program for six months to reevaluate its long-term impact on all of the city’s residents. The council approved.

“We’ve accomplished one of the goals of the project, which was to jumpstart development downtown and increase housing,” Nirenberg told the Current. “That said, if the council knew what we know now about rising housing costs and property values, we may have included an affordable housing component to the plan.”

Nirenberg has known the CCHIP program had its faults. He can remember talking with Castro about it a few years back, after the former mayor became Secretary of Housing and Urban Development under President Obama.

“I remember him telling me it was time to throttle back, that it was evident we needed more discretion in the process,” Nirenberg recalled.

After entering the mayor’s office in June 2017 with the promise of equity-focused development, Nirenberg began having conversations with planning experts and community members concerned with the dwindling affordable housing options in the city’s center. And then, last week, he pulled the plug.

That’s not to say developers can’t submit applications for incentivized plans to the city in the next six months — but they have to get the entire City Council to sign off on the plan instead of just the city’s development department.

According to John Jacks, director of the Center City Development Office (which oversees CCHIP), the timing couldn’t be better. The program, which has doled out over $97 million in incentives, was set to expire in June and, Jacks said, there’s not enough money left in the pot to fund another development anyway.

“This pause gives us time to internally review the program and ask questions like, ‘What would it look like to include affordability into the project?’ and ‘Could a market rate project survive downtown without funding?’” Jacks said.

Developers, of course, aren’t as pleased with the pause. Several have commented on how sky-high construction rates in downtown San Antonio have made it hard for them to include affordable housing units in their projects. It’s just not financially wise.

“I can understand their concern,” Nirenberg said. “Policymakers have identified the rock and a hard place.”

The Mayor’s Housing Policy Task Force (created by Nirenberg shortly after his election) has been tasked with finding a happy medium — a way to increase affordable housing options downtown without making developers broke in the process. He suspects the city’s lengthy development approval process may have something to do with the problem.

With under 1,000 housing units left before meeting Castro’s 2020 goal, the city has a choice to make. That’s why, according to Nirenberg: “Everything’s on the table.”

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