Do you prefer a market-driven downtown, or one that is equitable? Are they mutually exclusive? Here are some of the arguments. You decide.

by Ben OlivoDecember 1, 2018

potential headline: What kind of downtown do you want your city to incentivize?

are prices going up? how fast are rents ging up? have they stabilized

what is the demand?

now long will it take for prices to level off?

get robin's analysis

what is that demand??? supply and demand???

this is where this debate has taken
no one is addressing other questions like supply and demand
city and adelman has not gone there

it's the restrictions that have made it more affordable

nirenger is trying to strike that balance

how long will it take
forget supply, what is the demand
occupancy rate
austin investors numbers

i don't think saldana is saying no market-rate, but he's saying more, more affordable.
who can come out with the strongest language

NYMBYism
whether it's poor neighborhoods who don't want to be gentrified, or whether it's rich neighborhoods who don't want poor people/crime (this is anecdotal. During the low-income housing tax credit public process last year, sponsored by the city of San Antonio, this was the dominant sentiment at public meetings on the Northside, where affordable housing developers were trying to build. This was the defining issue behind Ana Sandoval, for example, getting elected. read this story here.

how does it benefit the entire city?

don't think 60 percent is going to happen

Yes, people are getting priced out of the downtown area. It's unfortunate, but ... the market, the market, the market.

Therefore, insist developers add cheaper rents, or they won't receive incentives from the city.

this is head spinning stuff, is as complicated as you want it to be

[ grab the reader, draw them into the conversation, give them what they need so they feel like they have a grasp of the story lay out why this matters, why the reader should care why it's important ]

The Robert E. Lee apartment building (right) is one of the few remaining apartments for low-income households downtown. BEN OLIVO | SAN ANTONIO HERON
This series
This is the third analysis in an series examining revisions to the Center City Housing Incentives Policy. The City Council is scheduled to vote on the changes Dec. 6.
» Part 1: Downtown’s housing incentives are changing. Here’s why you should care.
» Part 2: Are developers receiving incentives they don’t need?

The debate over incentives for downtown housing in San Antonio—Are they worth it? How much affordability should we demand from developers in exchange for millions of dollars in tax breaks?—has boiled down to these two diametrically different arguments.

» Equity: The incentives are producing predominantly market-rate or luxury apartments in the downtown area that most San Antonians can't afford.

"We do have to make a very good argument that what we've done here is to the benefit of the entire city," District 4 Councilman Rey Saldaña said at a Council meeting last week.

» Density: San Antonio must build up its core and reduce sprawl. The more dense, the less infrastructure and services that are needed—less police substations, less water lines, less streets and interchanges, etc. In the long run, taxpayers end up paying less.

"We want to incentivize, because we want to see the city of the future," developer David Adelman said in a recent interview. "We want to see a city that is sustainable. We want to see a city that's desirable."

[ Editor's note: These are the positions that have come front and center in San Antonio's incentives conversation. But there are many more and some of which I'll explore in this piece. However, a few points I cannot explore because either there's more reporting to do, or I simply don't yet understand them enough to write about them.

For example, there's a whole story to be written about motive. What's driving Saldaña and Adelman to say what they're saying. Because they're basically alluding to San Antonio's May 4 general election. And so it would be foolhardy to ignore the message made by voters just a few weeks ago with the passing of Proposition B, which restricts future city managers' salaries, and limits their tenure. If City Manager Sheryl Sculley's $550,000 in salary and bonuses rubs voters the wrong way, how about developers receiving a few million dollars in tax breaks over 15 years? I'm not saying I agree with this sentiment. I'm saying 60 percent of voters may agree with it as they did with Prop B. And I'm interested in asking Saldaña and others who feel CCHIP needs to be tweaked in favor of more affordability how Prop B factor's in their outspokenness. In his defense, Saldaña has been making these comments for at least a year.

To that point, District 6 Councilman Greg Brockhouse also offered strong criticism of CCHIP, but in a totally different direction—one I'll examine further down. Brockhouse all but announced his bid to challenge Nirenberg for the mayoral seat during a victory party on Props B and C held Friday night at the San Antonio Professional Firefighters Banquet Hall, sources tell the Heron.

And, of course, with Adelman, he's a developer and it's easy to say of course he wants more incentives so that he can make more money, which, after interviewing the guy a few times, he wouldn't deny that. But this is an excellent segue into the other point I'm not touching here ...

Supply and demand. There is a movement known as Yes In My Backyard (YIMBYism) which subscribes to the idea that more housing—a bent toward incentivizing development, rather than regulating it—will result in cheaper housing. The basic laws of supply and demand. To which, I would say: Explain San Francisco. To which, they would say: Their government's regulations on housing have exacerbated the affordability crisis there. And on and on. This is a wormhole I'm not equipped to enter. A quick Google search on this topic yields experts—bona fide university professors and researchers—who back both stances.

So what the hell is this article about if you're not going to tackle the juicy stuff? Read on, read on ...

This piece explores these broad stroke philosophical questions posed by Adelman and Saldaña. The big ideas. Free market vs. regulation.

The answer is as diverse as San Antonio's population in terms of the amount of money they make, where they live, etc. It's a point Mayor Ron Nirenberg made during the City Council B session last week.

"Nearly everyone in this community is a stakeholder in this process," Nirenberg said. "So it's going to be really difficult to get to the ideal policy with regards to development incentives."

What kind of downtown do you want your city to incentivize?

CCHIP CCHIP CCHIP

[ Download a copy of the incentives presentation the City Council saw last week. ]

. . .

What is affordable?

There was a telling moment in last week's meeting, when Nirenberg asked the city staff about its use of area median income (AMI)—which is defined as $66,800 by the U.S. Department of Housing and Urban Development—in defining affordability.

"Why are we defining affordability at 80 percent AMI rather than 60 percent AMI?" Nirenberg asked Assistant City Manager Lori Houston.

To give you some context, of the 6,810 units CCHIP has incentivized since 2012—that are either built or in the pipeline—the city characterizes 1,544 of them, or 23 percent, as affordable. City officials have told me that about half of the 1,544 is 80 percent AMI, and the other half is 60 percent AMI. By Nirenberg and most other San Antonians' definition, that's 772 units, or 11 percent of the total CCHIP units so far, that would be considered affordable.

"The challenge we have is that we want to continue economic development in the city, we need market rate housing in our downtown and we want projects to pencil (work out financially, i.e. make enough profit so the developer will build them)," Houston said. "We do not have enough resources to help subsidize 60 percent AMI."

This 60 percent AMI threshold was a line in the sand for Saldaña.

1:02:39
if we don't feel like we're there, and the dev comm is upset ...

mayor's housing task force findings

1:04:00
where do we need to get to have rents support???

1:05:00 adelman says the assessment says $2 is attainable in the pearl area

1:06:00 billions of dollars in revenu athare in place with high denstuy, for me it's a fariy easry argument ...

1:08:00
we have momentum
i would hate to see it stop
housing first and the

high constructin cost

AMI

6,800 housing units . . .we do expect to be able to achieve 7,500 by 2020

What Adelman as a downtown developer thinks is affordable is different than what another downtown developer who builds luxury apartments thinks is affordable. Or, from what Nirenberg considers to be affordable, or the definition Maria Berriozabal, the former councilwoman who sat on the Mayor's Housing Policy Task Force. Or you, who may be reading this from the Cellars at the Pearl. Or, you, who may be reading this from Zarzamora Street. Etc., etc.

"If I say, 'Oh, I delivered a $1,200 a month studio downtown, and I'm saying that was heroic, I delivered an affordable product," Adelman said in an interview in September. "But if I say, $1,200 is affordable, the person who can only spend $600 (a month on rent) says, 'What are you talking about? That's not affordable at all' Yeah, yeah, yeah. I understand that. That's not what I'm was talking about. I'm talking about what it costs to build downtown—high-rise or mid-rise. I'm saying it's affordable, but it's not affordable to that other person."

Adelman, who aided the Center City Development Office in its latest analysis, which says housing at a 7 percent profit cannot produce apartments rented to people making 60 percent of the area median income. Their assessment says developers would need between $4 million and $13 million to make an acceptable profit at 7 percent rate of return on investment. I asked her, "Why 7 percent?"

we looked at land values
we looked at other projects of similar size ???of those units
we looked at construction costs
for each of the housing unts we're seeing in the downtonw are
we also loked at the variance was really based on those land values

you're seeing some poperty by the river that's 200 a foot, proeprty near utsa is 40 a foot

there's this huge discrepancy and you can also have property at utsa, but then you have property at the pearl that's on the river, those are both Tier 2, so we had to show that variance.

peopel think tier 2, they're looking at river north and midtown area, but also near east side and west side we have to look at as well

it's really kind of a balloon, you squeeze one end, and the other blows up . . .

pro formas
broadway jones
museum reach residents project
pearl nuder construction, brewery south
adelman's project at hemisfair

land values on near east side and west side, we know the land values, and we can plug those number sin the model

7 percent. and that's is low, some dev won't even touch something unless it's 8 or 9 percent.

we're fortunate that we have some developers in San Antonio who are local who will hold projects longer, and they'll do it for a lower percentage.

projects longer,

some Tier 2 may still need incentives, but what we're saying is we have enough of those. let's go for density and more affordability.

housing pokicy
we do have an affordability issue in this city

some of it comes from a supply demand imbalance, we need more production, we can't have more production if housing and land costs cont to rise inordinatnely,

but

nirenberg, we also have some work to do to make sure when we use incentives, not only are we allowing for pojects to pencil out in all categories, but we're also showing to those other stakeholders who are not nec buying home, but who are contributing tax dollars, that there's a public benefit
that's where it's not computing right now when people see the artists residences, for instance, and they see this is a partially tax payer funded project

i understand how complicated this is. our best effort in finding the asnwer, is not lock ourselves into a long term policy

She said her staff analyzed the pro formas (or, financial documents) of several developments in different parts of downtown to come up with this gap assessment.

"."

For the second part of this series, Bill Shown, managing director of Pearl developer Silver Ventures, told me that the 223-unit Brewery South project, currently under construction on Newell Avenue, had an ROI of less than 6 percent. That is a 100 percent market-rate project Shown said absolutely needed its $3.5 million CCHIP package in order to make it work.

can't be accomplished without one of two methods—9 percent low-income housing tax credits, or the buying down of rents in projects that partner with the city-created San Antonio Housing Trust Public Facility Corp.—

??? hinges on this

how it works is really simply, take somebody wage, and multiply it by 30 percent, that's how much they can pay in rent, that's definition sort of everybody agrees is affordable

cause there's all these definitions of affordability

now you start talkig about, if people are
24000
that they acn pay basically a third, they can pay about 7500,
about 700 a moth and have that be defined as affordable, you can't deliver that downtown, unless you heavily subsidize it, and what I saw heavily, i say to the tune of lots and lots of money

they have to

'Don't scream at the developer'

Adelman conflate

If people can't afford to live downtown, tough luck. Want to tackle affordable housing, address wages and education.

NIRENBERG AMBIVALENT

BRING UP SUPPLY AND DEMAN

nirenberg brings up austin, la, seattle
supply and demand
why are austin and seattle still so expensive?

SIDEBAR BACK STORY

How it works

rent restrictions

25 percent go into

Has it worked?

lack of density
ram gonzales

waht's actually been produced
80 percent AMI, half

not downtown

double down

Recently in the New York Times,

In San Antonio, its doubly an issue, because of WHAT and WHAT

The unspoken standoff

Is this about incentivizing, or is this about demanding? Stand off

The debate that ensued on Wednesday among Council members, city staff and a handful of developers and lawyers on hand to answer minutia detailed questions, was one of free market vs. regulation, carrot vs. stick.

How much can a governmental entity demand (in this case, it's affordable housing) from an industry (in this case, it's multifamily housing in the downtown) in exchange for the incentives that are necessary to make that industry thrive? On the other hand, how much is asking too much when the thing the government is trying to fuel is harmed by the rules placed on the incentives that are supposed to be fueling the industry?

Climate, Dec. 6 vote

the funny thing is that there seem to be enough council votes to make this happen without nirenberg or saldana's support
shown and adelman
nytimes
ami — climate is changing

Is more affordability possible?

it's not can they, maybe it is

but maybe it's also will they want to

we have to believe what developers are telling us.

we still don't know whether people are telling the truth
so far, we just have the city officials, and david adelman telling us the numbers don't work
veronica soto, mayor's housing task force

lori houston

7 percent ROI

Pro forma

Nirenberg's edict

I was in the room when Nirenberg laid down his edict. It was a bit shocking. WHAT COMMITTEE

QUOTE

District 6 Councilman Greg Brockhouse was in the room observing, and even he was shocked. There was a sense of deflation on the part of City Manager Sheryl Sculley and Assistant City Manager Lori Houston. This is just my personal observation. But it was almost as if they were saying, Crap, "there goes the momentum." We work at the pleasure of the mayor.

There are some developers, such as Adelman, and Silver Ventures' Bill Shown, who feel like Nirenberg has no choice but to make changes, because of the political climate of the country. Inequality being the No. 1 topic in all parts of the country right now.

/ / /

Years ago, when I was writing about downtown and housing incentives for the Express-News, the mood was different. Nobody talked about the need for affordable housing the way it's being talked about now. Mayor Ron Nirenberg has take the conversation of inequality that we're having as a nation—one that San Antonio is perhaps experiencing more than any other city because of its own history that has shaped the disparities—and brought it to the front of San Antonio's discourse.

His Housing Policy Task Force, and the revisions he's demanded from the Center City Housing Incentives Policy are the two biggest he's named.

Nirenberg declined a request to be interviewed for this article, so I'll take you back to the day he threw down his edict. I was in the room that day. There was clearly a sense of defeat from City Manager Sheryl Sculley and Lori Houston, who created CCHIP under Mayor Julian Castro, and a sense of shock from District X Councilman Greg Brockhouse, who was in the room as an observer. He had asked for a review of the program, because he felt incentives were . .. and Nirenberg came over the top with his edict.

QUOTE

It's a point of view that is certainly not shared by developers.

I remember asking city officials about the role affordable housing plays into the downtown development surge that it was looking to incentivize. We know from reading Jane Jacobs and other famous urbanists that diversity is the key to a prosperous neighborhood—a diversity of races, a diversity of ages, a diversity of cultures, a diversity of rents. And though they acknowledged the concept, and talked about how good it would be to have that type of equitability, it simply couldn't be done. Perhaps reusing older, historic buildings was the answer, or perhaps build on city-owned property was the answer.

There's a push now for more affordable housing in the Center City Housing Incentives Program because of

Not just downtown

when you look at the actual location of MF housing growth in the city, most of it is in the suburbs and the periferay

that's not to say that's good or bad, to incentivize housing downtown is good, i understand the point of it, . . . at the same time, yo uhave to balance that with reality, most of th ehousing is not going to be built downtown, that's why i think it's smart to distribute the benefits of AH throughout the area.

the issue of affordability is about access to jobs, if you have a lot of jobs in one area, and then
it's better for everybody that the housing is dfisttrinbuted in my mind

Ian Caine

UTSA

brockhouse

Will it work? Predictions?

It's kind of like the first 10 minutes into an episode of Bob Ross, where you

solutions
shown
what happens when Nirenberg leaves?

trevino

occupancy rate

saldana pulled incentives

Contact Ben Olivo: 210-421-3932 | ben@saheron.com | @rbolivo on Twitter

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