About 100 people came out last Wednesday to our first public discussion on housing despite inclement weather. It started about the future of housing in the downtown area, and quickly turned to a discussion about affordability citywide.

Thank you to our panelists, Mayor Ron Nirenberg, Sofia Lopez, housing researcher; Randy Smith, president of Weston Urban; and Assistant City Manager Lori Houston for participating.

More thanks:
» to our staff and volunteers who helped pull it off.
» to the Cherrity Bar staff, who worked their butts off to transform the dining tent into a speaking venue.
» to NOWCast SA for recording the discussion.
» to San Japan, the local anime convention, for donating the sound system.
» to Dorcol, the distillery and brewery, for donating the keg of Betty beer

As I said that night, we realize there are many voices when it comes to housing who need to be heard in open forums such as these. We plan to host more events that include everyone from renters to housing nonprofits to bankers—the whole gamut.

These events don't grow on trees. Please consider supporting us so we can host more events like these. Learn how here.

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

From left: Chad Miller and Mariela Delgado-Miller ride their bikes Feb. 17 at the corner on E Nueva St. Photo by V. Finster | Heron Contributor
Chad (left) and Mariela Delgado Miller go for a bike ride on East Nueva Street. Photo by V. Finster | Heron contributor

Chad and Mariela Delgado Miller, who live at Encore SoFlo on South Flores Street, became downtowners together. Five years ago they had their first date at SoHo Wine & Martini Bar on West Crockett Street. They'd meet downtown because it was centrally located, he driving from Pleasanton, she from Alamo Ranch.

Date after date, downtown was their playground and in 2016 they got a place together at the Milmo Lofts on South Flores Street. He proposed to her on top of the Market Street parking garage, where they would end their nights, talking, before parting ways early in the courtship. They eventually got married at the Spanish Governor's Palace, and would bounce around to other communities, including the Alteza Residences atop the Grand Hyatt and the Steel House Lofts just south of downtown.

You could say Chad and Mariela bought into the downtown lifestyle from day one.

"My husband and I live, work and play downtown," said Mariela, 38. "We walk everywhere; we hardly ever leave. When I have to go out to The Rim, oh my God, I feel like it takes me forever. Sometimes we have to go meet friends out there and it's such a drag."

The Millers are not alone.

There is roughly 91% occupancy for the 17 apartment buildings built in the last decade and that are more than a year old—4,061 units—based on a survey the Heron conducted in January. We define the downtown area as having a radius of more or less 1½ miles from the 200 block of East Houston Street, downtown's center.

The 91% figure doesn't include older dwellings such as the Vistana or the Robert E. Lee apartments. What it does provide is a snapshot for the demand at the newer developments that were built with the help of public subsidies, most of which come in the form of tax breaks. Include the three newest developments that opened last year—Encore SoFlo (June), The ’68 (July) and the Pearl’s Southline Residences (October); for a total of 712 units—and the occupancy drops to 82%.

Housing experts say 91% signals a stable market, but that levels need to be around 95% occupancy for the downtown market to be considered booming.

Property managers also expect to see their occupancies and leases tick upward as the apartment market leaves the slow season and enters the hotter time of the year, literally and figuratively.

The group that's likely taking a hard look at downtown's occupancy numbers are developers. In recent years, there's been a drop in new incentive agreements signed with the city, in which developers receive tax rebates on the city portion of their property tax bill, development fee waivers and forgivable loans. The lull happened after Mayor Ron Nirenberg's moratorium of 2018, the year incentive packages were put on ice while city officials, at the mayor's behest, tweaked the program so that it offers less subsidy to developers while attempting to generate more affordable housing.

Some observers believe developers aren't pulling the trigger on new deals because they want to wait and see how well developments in the pipeline do, nearly 2,000 units either under construction or in development, in terms of occupancy.

Downtown appears to be in the middle of the old chicken-and-egg analogy, where the few thousand apartments and condos that have been built in recent years has yielded some neighborhood-type amenities. They've also attracted employers to the area such as USAA, and Credit Human, Bank of America and Jefferson Bank near the Pearl. Downtown is home to a plethora of bars and restaurants, and some event venues and spaces such as the Majestic Theatre, Travis Park and the Pearl. Parts of downtown still lack basic neighborhood amenities.

Downtown is also an expensive place to live; with some exceptions, it lacks affordable housing. Good luck finding a studio apartment for less than $1,000. One bedroom rents tend to start around $1,300. Would occupancy levels be higher if rents were closer to San Antonio's median income?

Empirically speaking, possibly more people live downtown today since the days before Hemisfair '68, and before Urban Renewal destroyed the old West Side. But the city, since it prioritized the construction of downtown housing under Mayor Julián Castro as a means to its revitalization, is reaching for the largest central population in San Antonio's history.

Read the first part of this series:
Downtown housing market is steady, but far from the boom of recent years

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The numbers

Frost Bank and Weston Urban, which co-developed the tower along with KDC of Dallas, hosted a media tour on Tuesday, Sept. 17, 2019. Photo by Ben Olivo | Heron
The view looking east from the top floor of the Frost Tower. Photo by Ben Olivo | Heron

In January, we called every new apartment building that was built in the last decade, and asked for their occupancy figures. Here's what we found:

[table id=5 /]

A few notes:

The Cellars at the Pearl, among the city's most expensive apartments, boasted the highest occupancy at 95.9%. Other market-rate developments in the Pearl and Museum Reach area were nearly a percentage point behind: The Mosaic, Jones & Rio, River House.

The newer developments understandably have lower occupancy levels. David Adelman, the developer who built The '68, attributes its lower number to the fact that the building is somewhat hidden, tucked deep inside Hemisfair. At Southline and Encore SoFlo, the managers attribute the lower figures to the slower part of the leasing season.

At Encore SoFlo, where the Millers live, they're starting to see a sharp rise in occupancy, which jumped from 30% in January to 37% this month. Mercy Klebahn, the community manager at Encore SoFlo, says her office is fielding calls from prospective residents who are looking to move in in the spring and summer.

"With the traffic we're getting right now, we're looking out to the March-April timeframe," Klebahn said. "We're even looking to June and July. Right after Spring Break, we usually see that increase."

At Encore SoFlo and The '68, the managers say they have a healthy mix of residents.

"We're getting retirees, couples, professionals," Klebahn said. "Being that we're downtown, we get a lot of the downtown professionals, attorneys, doctors, nurses. We're also seeing a lot of people coming from out of state."

What's AMI?
The area median income (AMI) for a family of four in the greater San Antonio area (Bandera, Bexar, Comal, Guadalupe and Wilson counties) is $71,000, according to the U.S. Department of Housing and Urban Development. Here's how it breaks down for lower-income households:
» 80% - $56,800
» 70% - $49,700
» 60% - $42,600
» 50% - $35,500
» 40% - $28,400
» 30% - $21,300
Editor’s note: For a complete AMI breakdown that shows other household sizes, scroll to the bottom of this article.

Star Workcuff, the business manager at The '68, said the community has a mix of city employees, military members, nurses, doctors, and some students. It's one of the few newer apartments downtown with affordable housing. Half of its 151 units are reserved for people making 80% of the area median income (AMI), which is $56,800 for a family of four, according to the U.S. Department of Urban Development. It's a requirement because the development was built in partnership with the HemisFair Park Public Facilities Corporation (PFC), a nonprofit that affords Adelman a full property tax exemption under state law. Hemisfair has its own affordability requirements for housing built at the park: 10% of the units must be rented to people making between 50% and 70% AMI. In addition, rents cannot exceed 25% of the tenants' income.

Charles Tiseth, general manager at Playland pizzeria on East Houston Street, lives in one of the subsidized apartments. He lived in New York City for four years for college, and says downtown San Antonio is affordable compared to other cities. Compared to San Antonians, the story's different.

"Downtown units are still a little bit out of my budget," Tiseth said. "I make a total living salary, but I have student loan debt and at the end of the day it's not enough to afford market rate."

...

Not there yet

From left: Stacy Cantu-Pawlik and Joey Pawlik and pose for a photo with their dogs Stella and Otto Feb. 2 on the balcony of their residence at Broadway Lofts. Photo by V. Finster | Heron Contributor
Stacy Cantu-Pawlik and Joey Pawlik hang out on their balcony at 1221 Broadway with their dogs Stella and Otto. Photo by V. Finster | Heron contributor

Two years ago, Joey and Stacy Cantú-Pawlik, both 28, moved into 1221 Broadway, where they live with their two dogs, Stella and Otto. He works as the transportation planner at the Alamo Area Metropolitan Planning Organization in Southtown, and rarely takes his car to work, opting for the bus, a scooter or his bike. She works in the Medical Center and therefore has a more difficult commute.

Pawlik says his part of downtown, the north Broadway area, for all of its newly-built apartment buildings and high occupancy, still lacks some basic amenities like a grocery store.

"It would be nice to go walk and buy something some times," Pawlik said. "A little bodega or market on the corner would be fantastic."

He's ready for more nuanced retail offerings that cater to residents.

"Hopefully, something more than restaurants and bars would be great," he said.

[et_bloom_inline optin_id="optin_1"]

Brenda Lee Gonzales, 40, would love to live downtown, where she works at the Atkins Group, an advertising agency on Soledad Street, but the rents are outside of her price range. For work, and for her Instagram page, where she posts regularly about the food scene, Gonzales says she spends 85% of her time downtown.

"I want to classify myself as middle class with a degree," said Gonzales, who is a graduate of the University of the Incarnate Word. "I do feel like I make enough money to support myself, and I live within my means ... I feel like I have to take on another job in order to live in the location I want to in the city I grew up in."

The downtown area's average rent at the end of 2019 was $1.74 per square foot, far above the city's average of $1.20 per square foot, according to Austin Investor Interests, an Austin-based company that researches housing there and in San Antonio.

Gonzales says what's often left out of the equation are fees apartment buildings tack on, such as for security, trash pick up and parking.

Last month, during a City Council meeting in which the city's incentive policy for downtown housing was hotly debated, Councilwoman Ana Sandoval said the cost of building parking shouldn't be handed onto a tenant—either with rent or sales price—who doesn't own a car.

In the city's current incentive policy, which the City Council ratified in December 2018, developers are given less of an incentive—75% property tax rebate over 15 years; 25% feeds an affordable housing fund—and are required to offer units to households under the area median income if they are built on downtown's outskirts and beyond.

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Both sides now

Mariela Delgado Miller and Chad Miller call the family dog Blanca over sit for a portrait inside their residence at the Encore SoFlo Apartments Feb. 1 at 326 S. Flores St. Photo by V. Finster | Heron Contributor
Mariela Delgado Miller and Chad Miller call their dog Blanca over inside their apartment at Encore SoFlo. Photo by V. Finster | Heron contributor

In 2017, when Mariela and Chad lived at the Alteza, which they rented for $2,100 from a condo owner, she would joke about their low-income status at the posh community that sits on top of the Grand Hyatt hotel. They were lower-income relative to the condo-owners who also lived there—the executives, judges and doctors.

Mariela, who works in the communications department at H-E-B's headquarters, had come a long way.

Her family immigrated from Mexico when she was four, and lived in public housing—at the Villa Verimendi apartments on the West Side—for a short time. She picked up English quickly, learning from the neighbors she'd play with. When her father landed a job with the city, the family moved to the South Side where she eventually attended Burbank High School. She describes a loving home growing up, one in which her parents were invested in her education. She entered Upward Bound, a federal program that allowed her to earn college credit while still at Burbank.

Mariela says she's supports Nirenberg's plan to bring rents down to lower-income households. She also agrees with his assertion that San Antonio needs to help lift up lower-income residences to the market-rate rents.

"I'm grateful Chad and I can afford to live in the place we're living in now," she said. "I know that I worked very hard for it. I see those who have had the same opportunities like me not taking advantage of them. In my freshman year, I started with 500 people in my class. Senior year, in the class of '99, there was 150—a lot of that was pregnancy, a lot of that was dropouts."

"I agree with our mayor. I think we should give those opportunities to people ... I also see the other side. You have to work hard for what you want. At the same time, you have to have those opportunities."

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

[table id=4 /]
The area median income (AMI) levels shown here are for the greater San Antonio area (Bandera, Bexar, Comal, Guadalupe and Wilson counties), according to the U.S. Department of Housing and Urban Development.

[table id=7 responsive="collapse" /]

[table id=7 responsive="scroll" /]

wed

√ A-1
labor street
consent

==

A-4
pinkerton's

SACS
conservation society
virgnivan claeve
opposes appliation for park
represents such an oroignla departure from application two years ago, so that could be called a bait and switch
the proposal approved by commission, later in june 2018 included drawings that showed no buildings beyond a gazebo and shade structures
"any future building is restricted to a max of 5,000 sf"
"oriingl stones from church stucure
8K sf
even if you do not include the exterior courtyard area, the rest stil
"the park with a gazebo had become a restaurant with a park.
Michael Imber Architects

Michael Imber
addressing thos two issues, one we've never, we were given, the requirements of the park either 4-5 sf building, the building is AC under that sf, there's no defiition on what 4-5 sf is. we were under in terms of AC sf
requirement of stone, we weren't involved in the approval of initial park, so we're not sure what the approval is
but that stone has been used to create the original footprint of the old pres church closer to where the old pres church was located at the park

LADY—we did incorporate some design elements that spke to the pres church footprint that was the corner of houston street and flores street, so in the park promenande you can kind of see a nod to that footprint

stone from old frost motorbank

i dont think it was pres church stone, but it was stone we were incprorating to be in that same area, that is actually installed now.

will open in april

all of that was incorporated.

pinkerton's is in a differet portion of the site

as far as the sf goes, we were trying to keep wtihin the 4-5K sf range, the space fo the restuarant is within that threshold
some extensions that feel like an immerson into the park
for that reason, we try to accomodate what the teannt was expecting barbecue in downtown SA inside of a park

COREY

shows original site plan

LADY

as we began to work the 4-5 sf into that red circle, inside that red circle are several existing oak trees, in order to protect the health of those trees we tried to skoot the building footprit a little farther out

but the building footprint we had to skoot over a little bit to the east

???

pit room has screen panel walls to allow for some transparency, connect to outer park edge into the park itself

CARPENTER???

I wasin a couple of the DRCs

we asked designers to go back and look at detailing and materials, and they have done that, bringing in more masonry, as opposed to siding or cooregated metal. change from coorugated metal to standing seam

our goal was to keep it as much of a park space as possible, adding a restuarant was part of the manner to operate it as a park.

approved with staff stpulations???

APPROVED

The Heritage Plaza apartment building is under construction at South Main Avenue and Old Guilbeau Street, a block south of the Bexar County Courthouse. Photo by Ben Olivo | Heron
Heritage Plaza is under construction last month at South Main Avenue and Old Guilbeau Street. Photo by Ben Olivo | Heron

The downtown housing market, to use one of Manu Ginobili's favorite mathematical analogies, has regressed to the mean.

In terms of unit production and demand for downtown living, housing in our center city is doing well, but not the boom we saw for much of the last decade.

A total of seven housing developments have been announced in the downtown area since 2018, the year Mayor Ron Nirenberg placed a moratorium on incentives for downtown-area projects. The program, which doles out property tax rebates and development fee waivers to developers, was launched in 2012, two years after former Mayor Julián Castro prioritized the production of multifamily housing as a means to revitalize downtown. It worked. Housing production in San Antonio's center thrived between 2013 and 2017, when there was an average of 12 incentive agreements signed per year.

CITY SUBSIDIES BY YEAR
Center City Housing Incentive Policy, aka CCHIP, agreements executed by year:
» 2012 — 1
» 2013 — 11
» 2014 — 8
» 2015 — 16
» 2016 — 14
» 2017 — 11
» 2018 — 1 * (moratorium year; one project approved in late December, a week after council reinstated incentive program)
» 2019 — 7 * (one in the Medical Center)
Editor's note: Some of the projects announced in 2019 were ready to receive incentives in 2018, but didn't because of the moratorium.

In December 2017, concerned the incentives were producing exorbitant amounts of market-rate housing, whose downtown rents are well outside many San Antonians' price range, Nirenberg ordered the policy revised so that it produced more affordable units, which meant developers would receive less subsidy.

"These are public resources, and it’s increasingly a concern that we use public money to (incentivize) development that the general public can't even afford," Nirenberg said last week.

Meanwhile, 90.9% is the average occupancy for the 17 apartment buildings that were built in the downtown vicinity the last decade and that are more than a year old. When factoring in the three projects built last year—Encore SoFlo (June), The '68 (July) and the Pearl's Southline Residences (October); which have naturally lower occupancy rates because of their infancy—the overall average is lowered to 82.6%.

[ Editor's note: These averages represent the total number of occupied units against the total number of units, which we gathered and calculated by calling each property in January. They are not averages of averages. ]

Housing researchers and leasing agents we spoke to describe these averages, like the number of projects in the pipeline, as being good, not great. They also say occupancy levels typically start to tick upward beginning in February.

"San Antonio has been a slow and steady market that has remained fairly consistent with their annual growth rate," said Robin Davis, founder of Austin Investor Interests, a firm that researches housing in Austin and San Antonio.

[ Editor's note: There are dozens of ways to gather this type of data. We surveyed multifamily properties built since 2010 in the downtown vicinity, roughly 1½ miles from the geographic center of downtown, which is more or less the 200 block of East Houston Street. Austin Investor Interests' definition of San Antonio's central city is everything inside the highways (including I-37 to the south) as well as the near West Side. Also, the company surveys every apartment building, including older ones like the Brady Tower and Maverick building. ]

Davis' firm shows occupancy levels in San Antonio's center city the last decade as reaching their peak of 95-96% between 2011 and 2014. They ended 2019 with an average of 85.3%, according to the company's research; citywide that figure was 92.1%.

Rent-wise, Austin Investor Interests shows central San Antonio as having an average rent of $1.74 per square foot, far above the city average of $1.20 per square foot.

APARTMENT TOTALS
Since 2010 in the downtown area:
» 4,773 — apartments built. The number jumps well above 5,000 when factoring in condos and townhomes.
» 1,100 — currently under construction
» 864 — in development

So why the partial slow down after the downtown area reached its peak in housing production and occupancy just a few years ago?

Did the downtown housing market sputter on its own, a natural regression to the mean? Nirenberg's moratorium of 2018, when the tax rebate and development fee waiver program went dark, certainly played a role in curbing the momentum. But did it dull it forever, or just temporarily?

Can San Antonio achieve housing density in its downtown while also setting aside some of those homes for lower-income households?

The incentive policy, formerly known as the Center City Housing Incentive Policy, or CCHIP, expires Dec. 13. Soon, the city's downtown development department will begin to assess the program, which will inform the City Council's decision on whether to maintain the incentives, adjust them in the direction of more or less subsidy, or end the program altogether—a debate certain to happen later this year.

What impact will the council's decision have on future developments of significant magnitude, such as Weston Urban's strategy to add at least 1,000 apartments to west downtown, Silver Ventures' desire to expand the Pearl footprint west of the San Antonio River, and GreyStreet Partners' ambition to build the multi-use Broadway East, a kind of Pearl extension east of Broadway in Government Hill? And how will their decisions impact the affordability of San Antonio's already-changing inner city neighborhoods?

So many questions. Let's try to answer a few.

...

HOUSING SNAPSHOT
This piece examines the city's incentive policy and its impact on downtown's housing supply. Read the second piece, Downtown living remains in demand, but there's room for growth.

Why the slow down?

When asked this question, Silver Ventures Managing Director Bill Shown said he didn't have a definitive answer, but he has theories.

"Anything I give you would be pure speculation without digging into it. I speculate that part of the reason is because the incentives aren't enough to make these things pencil," Shown said meaning the developments aren't projected to make enough profit (to which the rate of return on investment varies for each developer). "But again, that's just speculation. I just don't know."

In the older version of CCHIP, pre-moratorium, developers received a full rebate on the city portion of their property tax bill. They still pay other taxing entities, such as Bexar County, school districts, etc. Typically, for the larger apartment projects we've seen emerge ubiquitously, the tax rebates are estimated to be worth $3-$4 million spread over 15 years.

The current version of CCHIP, spurred by Nirenberg's edict, offers a 75% rebate on city property taxes to developers; the other 25% is funneled into an affordable housing fund. Depending on the development's location, setting aside a small percentage of affordable units is required.

[ Editor's note: Other programs, like public facility corporations, grant developers full property tax exemptions, which are well documented in this recent San Antonio Express-News article. ]

Because developers now receive less tax incentive from the city—75% compared to 100%—some say that's enough of a difference to sink a development early. The numbers don't work, developers say.

District 1 Councilman Roberto Treviño agreed that can be the case.

"This speaks to how much planning goes into these projects," Treviño said of the slowdown. "It's hard to believe that a small change here and there can impact the entire project, or its feasibility. The unfortunate fact and reality is that it can."

The question of profit is one the Heron has attempted to answer before, but it's tough. Developers who receive public subsidies often challenge our requests for their financial documents, which are made via open records laws. For more, read "Are developers receiving incentives they don't need?"

Developers say in order to build multifamily projects in the downtown, they'd have to receive 6-8% return on investment in order to make them viable, i.e. make enough profit. In an interview two years ago, Shown said the return on investment for the Southline Residences, the recently-completed 223-unit market-rate apartments that have extended the Pearl's footprint across Newell Avenue, was calculated at less than 6%. Silver Ventures, he said, can build at lower returns because they are long-term owners—not looking to sell soon after completion, as is common practice in the development world.

Silver Ventures plans to build on property it owns west of the Museum Reach, but the company hasn't yet crunched the numbers to see if the current version of CCHIP will work with what they want to do, Shown said. He expects those calculations to happen later this year.

That's Silver Ventures. Every developer is different.

In the suburbs, developers can make triple the return because land is usually cheaper, and there are less regulations and infrastructure hurdles to overcome, developers and city officials say. This could also explain why most CCHIP-backed developments are located in downtown's outskirts, where land is cheaper, although that's slowly starting to change with properties like Encore SoFlo and Heritage Plaza (expected to open in May) in south downtown, and the Augusta Flats (currently under construction on McCullough Avenue), to name a few.

"It could be that the land values are still at hotel-price levels, where every property is waiting to be the next hotel," John Jacks, director of the Center City Development and Operations Department (CCDO), said about downtown land owners seeking premium prices for their dirt.

...

Join us for a candid conversation about downtown housing on Wednesday. Visit the Facebook event page.

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Former Councilwoman Maria Berriozabal, who served on the Mayor's Housing Policy Task Force, said the city needs to play a larger role in solving issues like land values, and other impediments to producing more affordable units. She points to the city's current effort to develop a coordinated housing system, which was the chief recommendation from the task force's August 2018 report. Last month, Assistant City Manager Lori Houston told the council they'd be presented with a recommendation for the housing system in June.

Such a system would corral all of the commissions and boards focused on housing and homelessness, the various incentive programs and entities outside of the city's purview, and align them in a more efficient way and give San Antonio a better chance at solving its housing affordability issues.

"We leave it up to developers to come up with their projects and then the city works with them a bit—it’s developer driven," Berriozabal said. "If it's developer driven, making money is going to be the bottom line. Who is the partner on the other side pushing the other way. I think (city officials) just do what developers want to do."

Berriozabal believes in Castro's strategy to infuse downtown with as much housing as possible.

"I’ve always thought there should be more people living downtown, my problem is that we’re making it a rich people's downtown," she said.

...

The twelve26 townhome project is under construction at 1226 S. Presa St. in Southtown.
The twelve26 townhome project is under construction at 1221 S. Presa St. in Southtown. Photo by Ben Olivo | Heron
What's AMI?
The area median income (AMI) for a family of four in the greater San Antonio area (Bandera, Bexar, Comal, Guadalupe and Wilson counties) is $71,000, according to the U.S. Department of Housing and Urban Development. Here's how it breaks down for lower-income households:
» 80% - $56,800
» 70% - $49,700
» 60% - $42,600
» 50% - $35,500
» 40% - $28,400
» 30% - $21,300
Editor’s note: For a complete AMI breakdown that shows other household sizes, scroll to the bottom of this article.

The numbers now

The city's strategy for more than a decade has been that of housing first—meaning, build as much housing as possible in the downtown area as a way to revive it. As the downtown population grows, then enter the companies and jobs, the restaurants and other retail, upgrades to parks, roads, and other public amenities—which is happening to a degree.

Since 2012, when CCHIP began, 7,150 units, for-rent and for-sale either completed, under construction or in development, received CCHIP packages, according to the city.

Keep in mind, these units are predominately in the center city, but not all. Version 1.0 of CCHIP spread far beyond the downtown area, which is why you have apartments like Mission Escondida (the luxury development that replaced the Mission Trails mobile home park) and The St. John (which is incorporating the old St. John's Seminary) popping up in the Mission Concepcion area.

It was Mission Trails, and the fear the program was encroaching on vulnerable communities, that spurred the city to revise CCHIP's boundaries, pulling them closer to downtown proper in Version 2.0.

At the very end of 2018, the City Council revised CCHIP again by introducing affordability requirements, thus ending the moratorium. It also extended the boundaries—roughly along major transportation corridors in the 13 regions identified in the city's SA Tomorrow comprehensive plan. As a result, Franklin Development of San Antonio recently received a CCHIP package for its Medical Center project of 196 units, all of which will be rented to households making 60% area median income (AMI) or less.

Since 2012, $104 million in incentives, mostly city tax rebates, have been given to developers yielding the 7,150 units, CCHIP's citywide total. The projects, 69 by the city's count, have pumped $1.4 billion into San Antonio's economy.

If we zoom in on downtown-area housing in general ...

By the Heron's count, 4,773 apartments have been completed in the downtown area, with or without CCHIP, since 2010. Of that total, 577 units—or 11%—are considered affordable meaning they are priced below market rate.

Another 1,100, all with some level of CCHIP, are currently under construction—

» Heritage Plaza, 410 S. Main Ave.—343 units (all market rate), by Cypress Real Estate Advisors of Austin

» The Flats at River North, 1011 Broadway—283 units (141 market rate; 114 at 80% AMI or less; 28 at 60% AMI or less) by NRP Group and San Antonio Housing Trust Public Facility Corp.

» Augusta Flats, 819 Augusta St.—260 units (247 market rate; 13 at 80% AMI or less) by Stillwater Capital of Dallas

» Museum Reach Lofts, 1500 N. St. Mary’s St.—95 units (9 market rate; 70 at 60% AMI or less; 9 at 30% AMI or less) by nonprofit Alamo Community Group of San Antonio

» The Arts Residences at the Thompson Hotel, 101 Lexington Ave.—66 units (all luxury) by DC Partners of Houston

» Floodgate, 143 E. Commerce St.—53 units (all luxury) by Keller Henderson of San Antonio

— and another 864 are under development and have yet to break ground.

For more, visit the city's CCHIP database: sanantonio.gov/CCDO/IncentiveAgreements.

Some theorize developers want to see these nearly 2,000 units completed, and observe their occupancy and rents, before pulling the trigger on their own project.

...

District 9 Councilman John Courage (left) and District 10 Councilman Clayton Perry, pictured here at a press conference last year, have both criticized CCHIP of late. Photo by Ben Olivo | Heron

Looking ahead

If a recent City Council debate is any indication, there is a strong desire for more affordability to be baked into CCHIP.

Last month, for his 48-unit condo and townhome project near the Pearl called SOJO Commons II, developer Steve Yndo asked the City Council for an additional $282,225 in a forgivable loan, bringing the project's overall CCHIP package to $1 million. In return, he'd add five "affordable" units to the 10 already built into the project, for a total of 15. Also, the loan would help pay for burying utility lines underground, a city code requirement, and other infrastructure costs.

The "affordable" units would be priced for households making 120% AMI or less, which is $68,150 for a couple, or $76,700 for a family of three. Yndo told the council that studio and one-bedroom condos would be priced at $250,000 to $280,000, which, he said, a couple each earning in the low $30,000 could afford.

That's when District 9 Councilman John Courage unleashed a barrage of incredulous questions. He asked about the condo fee, to which Yndo said would be about $100 a month. Courage also cast serious doubt that a family could live in the smaller units Yndo was reserving for the lower price points.

"Probably a couple, possibly a couple with a child," Yndo said.

"You're optimistic," Courage said.

Houston told Courage that Yndo would have to pay back the $282,225 loan if he sold one of the affordable units to a household making more than 120% AMI.

It was a unique conversation in that debates about median income usually pertain to apartments, where no one would ever describe 120% AMI as affordable. Local housing observers have debated whether 80% AMI or less is affordable for your average San Antonian, or whether it's closer to 60% AMI or less.

Houston said Yndo could build the project without the additional incentive, but sales prices would rise to at least $500,000 per unit.

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Yndo said the project's proximity to jobs will help a household save on transportation costs, referring to the two office buildings going up on Broadway next to the Pearl—one anchored by Credit Human, the other by Bank of America—and Jefferson Bank's planned headquarters across the street.

District 7 Councilwoman Ana Sandoval aired a concern, one others on the council share, including District 5 Councilwoman Shirley Gonzales, about the cost of parking in the monthly rent or mortgage. If a household rents or buys a downtown dwelling, and they don't own a car, do they still have to pay for the cost of building parking (usually a garage) into the development's overall cost?

Developers have told council members in other committee meetings that banks won't finance projects without including parking; San Antonio is still a vehicle-heavy town.

Sandoval, Gonzales and others on the council said San Antonio has to do a better job of pushing back on aspects of developments before allocating subsidies.

"If we ever revisit these guidelines again, I do not want to be using taxpayer dollars to subsidize parking that's required for people to buy," Sandoval said.

District 10 Councilman Clayton Perry suggested perhaps it's time to pullback on incentive packages in areas that have done well so far, like the Pearl.

It was a candid conversation about the city's role in subsidizing housing, especially in the downtown. When the council revisits the issue, closer to years end, by what measure will it judge the program's success? The production of the most units possibly built, the program's original metric? Or the level of affordability it yields?

"I think CCHIP's success should be measured by density first and foremost, but our overall success in the housing system is density in the segments of affordability that we need the most," Nirenberg said. "We can get myopic when we just look at what the CCHIP is doing when we don't consider the overall health of the housing ecosystem. That's ultimately the balance we are trying to create with the new CCHIP, one element of the overall system."

One priority everyone seems to agree on, from politician to developer to housing advocate, is educational attainment of the city's youth, as well as the development of its workforce, as another approach to solving housing affordability—downtown or elsewhere.

San Antonio has to make a "concerted effort to raise the overall wage standards of the city through the creation of good, high-paying jobs and a workforce development pipeline that can sustain it," Nirenberg said.

A topic to delve into another day.

Related
» Commentary: The Decade of Downtown is over. Now the hard work begins.
» Has downtown lost its housing momentum? Lack of applications for incentives suggests so
» City Council reinstates downtown housing incentives policy after one-year hiatus
» Exclusive: In new policy, downtown housing incentives would spread to other parts of San Antonio, exclude ‘luxury’ developments

Clarification: The total number of apartments built in the downtown area has been adjusted to 4,773.

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The area median income (AMI) levels shown here are for the greater San Antonio area (Bandera, Bexar, Comal, Guadalupe and Wilson counties), according to the U.S. Department of Housing and Urban Development.

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

does san antonio have an affordability issue?

political argument, there is an economic segregation in San Antonio
it's not like Nirenberg's making this up,
so help me understand

conflate the two?

Crews demolish three buildings on the 100 block of East Commerce Street for the construction of the 17-story Floodgate luxury apartment tower. Photo by Ben Olivo | Heron
Three one-story buildings on the 100 block of East Commerce Street were demolished this week. Photo by Ben Olivo | Heron

On Tuesday, crews began demolishing three single-story commercial buildings on the 100 block of East Commerce Street for the 17-story Floodgate, a luxury apartment project by local developer Keller Henderson that will also face the River Walk.

The $43 million, octagonal tower will stand between the Witte building and Esquire Tavern, which are both owned by local developer Chris Hill. Hill and Merritt Development Group of Austin are also building the 22-story Canopy by Hilton on the end of the block at North St. Mary's Street, across from the Aztec Theatre.

On Dec. 5, 2018, the Historic and Design Review Commission (HDRC) granted the Floodgate a certificate of appropriateness, which approved the design as well as the demolition of the row of commercial structures, which were local landmarks, that stood in its place. In recent years, notable tenants included restaurants Bella on the River and Jerry's Chicago Style Hotdogs. The HDRC ordered the historic stone flood wall along the River Walk, the parts of the buildings that face the River Walk, be incorporated into the Floodgate's design.

It's unclear whether Henderson will deconstruct the wall stone by stone and reconstruct it later, which is the method Hill and Merritt Development are using for the former Mortgage Investment Corp./Sullivan Bank building and Alamo Fish Market facades at the Canopy site.

Henderson did not return an interview request for this update.

Scroll down for more info.

The Floodgate apartment tower by developer Keller Henderson is proposed for 143 E. Commerce St.
The Floodgate design was approved by the HDRC on Dec. 5, 2018. Courtesy Rhode: Partners

The Floodgate info

» Address: 143 E. Commerce St. (also faces River Walk)
» Developer: Keller Henderson (San Antonio)
» Property owner: Keller Henderson (San Antonio)
» Type: Housing with retail
» Height: 17 stories
» Units/square feet: 53 units; 15,000 s.f. restaurant (river and street)
» Rental type: Luxury
» Land size: 0.17 acres
» Cost: $43 million
» Investors: Undisclosed
» Incentives: $3.9 million from San Antonio's Center City Housing Incentive Policy (view CCHIP agreement)—an estimated $3.1 million in city property tax rebates, $300,000 SAWS fee waivers, $111,288 in city fee waivers, and a $375,000 mixed-use loan.
» Rate of return on investment: Undisclosed
» Construction start date: Unknown
» End date: Unknown
» Architects: Rhode: Partners (Austin)

The Floodgate locator map, 143 E. Commerce St.

Timeline

Dec. 5, 2018
Design for The Floodgate, a 17-story luxury apartment tower on East Commerce Street, received a certificate of appropriateness from the Historic and Design Review Commission. Its contemporary design and octagonal shape on one of downtown's most prominent blocks makes the project stand out. The project, by Keller Henderson of San Antonio, will include 53 units and restaurant space on the River Walk and on Commerce. Read more.

June 6, 2018
The Floodgate design wins conceptual approval at the Historic and Design Review Commission meeting. The design shoots from 10 stories, the original concept, to 17 stories. Read more.

2017
Word of the Floodgate, named for its location near the River Walk's north floodgate, first appears in an article in the San Antonio Express-News. In the piece, Henderson says rents would average $4 per square foot, which would make it the most expensive apartment property in San Antonio. Read more.

More images

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Experts say most rental housing construction is aimed at high-income renters — making it harder for low-income Texans to rent affordable homes.
Experts say most rental housing construction is aimed at high-income renters — making it harder for low-income Texans to rent affordable homes. Photo by Miguel Gutierrez Jr. | The Texas Tribune

By Juan Pablo Garnham • The Texas Tribune

The percentage of Texans who rent instead of own their homes is rising at a faster rate than the state’s population. So, too, is the number of households spending more than 30% of their income on rental housing costs.

According to a Harvard University Joint Center for Housing Studies analysis released late Thursday, by 2018, nearly half of Texas households that rent were considered moderately or severely cost burdened by 2018. Moderately cost burdened means people spend between 30% and 50% of their household income on rent. And severely cost burdened means they spend more than 50%.

“In terms of other states, this is kind of in the middle of the pack,” said Whitney Airgood-Obrycki, research associate at the Joint Center for Housing Studies. “But Texas is seeing affordability pressures grow maybe faster than the rest of the country.”

In 2008, 1.3 million Texas households that rent were moderately or severely cost burdened. By 2018, that number rose to 1.7 million.

Meanwhile, the number of renter households in Texas is growing at twice the rate of owner households, according to census data. Airgood-Obrycki said this can have long-term effects on families’ wealth.

“This decreases the number of people that are gaining equity through home ownership,” the researcher said. “Also tenants don't have as many protections in Texas as in other states. So it creates a greater percentage of folks in vulnerability.”

One of the problems that Texas has, according to experts, is that although housing is being built, almost none of it is affordable.

“New construction is almost entirely at the high end,” said Airgood-Obrycki.

The Dallas area is the most extreme example of this in Texas. There, the market added more than 199,000 units available for $1,400 per month or more between 2008 and 2018. But the number of units renting available for less than $800 decreased 73%. Similar trends happened in the Houston area and, to a lesser degree, in the Austin and San Antonio regions.

“In Dallas it seems there is a really strong growth in high-income households who can actually afford those units, and you do see new construction to be able to absorb the demand [for that segment],” said Airgood-Obrycki. “Hopefully over time, those units will filter down to low incomes, but that's going to take a long time. We need to think about different segments of renter households and what they each need in terms of supply.”

Texas as a whole has lost around 586,000 units under $800 a month in 10 years while gaining more than a million rental units costing $1,000 a month or more.

“Texas is very unaffordable for the lowest income households,” said Airgood-Obrycki. “This is true everywhere across the country, but when we look across the states, Texas does have one of the highest burden rates for low-income renters who are making less than $15,000.”

In the Austin region in particular, 91.2% of the households that earn under $15,000 a year spend at least half of their incomes on rent. This percentage of severely cost-burdened families is bigger than in any other metropolitan area in the country for that income bracket.

“Anyone who is that poor is probably having to work another job or work on the weekends just to be able to make ends meet,” said Nora Linares-Moeller, executive director of HousingWorks Austin, a housing advocacy organization. “More than likely don't have health insurance, so it just takes one incident in which you go in the hole. And it also just takes one or two months where you don't pay your rent and then you could get kicked out.”

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Between 2008 and 2018, the Austin area had the third-highest growth rate of renter households in the country. That was fueled by a dramatic increase in upper-income renters.

“Part of the story is that there's pressure coming from these high-income renters, and that's filtering down through the market and affecting the middle income,” said Airgood-Obrycki. “The higher-income renters are pulling rents up.”

Advocates and researchers say that these conditions, added to the fact that Austin has the lowest vacancy rates and the lowest percentage of units under $600 per month of any metropolitan area in Texas, might be contributing to homelessness.

“When you [own] a home, you have the ability to go and work out some kind of payment process,” said Linares-Moeller. “But with renters, they can kick you out if you haven't paid your rent. So, yes, I absolutely think that's another reason why we are seeing people and families experiencing homelessness.”

Disclosure: HousingWorks Austin has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.

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