ARCHCITY—It’s difficult to have a serious conversation about economics with someone who poses this “Since when do politicians have to worry about apartment gluts? My understanding has always been that potential gluts are for actual real estate developers, investors and/or bankers to worry about and measure”. While daily Washington is still discussing how the housing bubble that created the crash of 2008 is the result of subsidies in the form of federal guarantees to Freddie, Fannie, and to the banks through the FDIC, and everything from Glass Steagall, to further privatizing Fannie and Freddie to regulating credit default swaps is subject to legislative change.
STLENGINERD—of course we are not presently able to calculate elasticities, but it is through those optics that I have made almost all of my decisions for the last 20 years. There are other ways to increase demand beyond just reducing prices which is what providing incentives do. I spend most of my time trying to create demand in other ways. If you can create demand without cutting prices (the heart of price theory) you create value. A $10 million investment in a metro stop will create more demand than $10 million subsidy for an apartment building. It will increase value of the real estate around it and reduce the need of subsidy. The relationship you should focus on is $of public money/unit of demand. The problem is there are so many variables coming up with the right metrics is hard and you will in the end still be left with a subjective decision. If you can create demand without cutting prices the construction projects will come.
ARCHCITY claims that these decision to reduce or cut subsidy are arbitrary, but if every project gets incentives then there is no incentive. The best way to create an incentive is to limit it. The more scarce it is the more it is worth. By limiting incentives we can direct and steer development.
ARCHCITY in the non virtual or real world this is happening everyday all around you. I’ve been using zoning and incentives to leverage developers for years—I do it almost weekly.
Need examples:
I moved the subsidy heavy, relatively low density 6 North Sarah project from where it wanted to be at the Park East site to where it is today. With the amount of subsidy that project had it could have easily outbid anyone else for the Euclid site. I told them to go East of Sarah to find a location or get no city money. We compromised on Sarah retail and they put in live work spaces.
I also rejected a safe project by Bob Sauer that he wanted at the Park East site. He was already doing the Metro Lofts and proposed a 6 to 8 story project. I took a long shot with Opus. If they had failed to make the pre sales, there was enough going on that it would not ruin the momentum of the neighborhood. When Bob didn’t get the site he didn’t go away, he just changed his project and built on Lindell.
CVS wasn’t told no at Lindell and Sarah, they decided there were too many restrictions so they moved down Lindell.
CVS was told no at Hampton and Oakland. I didn’t want a suburban strip near that intersection. After a year of meeting with Imo’s and Hardees, I gave up on consolidating the site for an office building or hotel and compromised with the property owner and agreed to provide incentives to Mercedes if they put their building to the sidewalk.
What should incentives be used for? High on my priority list for the CWE is to strengthen the Euclid and Sarah corridors with retail, connecting SLU to the CWE, and building density on the vacant lots. Doing those things will create more demand than demolishing an economically viable historic buildings which is why this project is not a priority.
We need developers, and over the years I have cultivated and recruited many of them to my ward, but this is our city, our incentives, and our priorities.
Covington is more than welcome to build in the area. It is my understanding Convington is part of the group that is building the West Pine Lofts and I and PCD would welcome a proposal from them for one of the vacant lots on Sarah. If they do retail and provide off street parking as Mills and Opus have done, I believe PCD would try to scale the incentives to both the need of the project and our perceived value to the city and the neighborhood—and yes we look at market conditions of supply and demand and currently would be far more likely to provide a more generous incentive package to condos if they could get financed.
Regarding the complaints about who am I to decide. Currently each Alderman makes decisions for their ward, and there are 28 policies. Some will only provide 5 year abatement, others none, others as much as possible. Some are providing incentives to gas stations. There is no consistency, and there are no brakes on this at City Hall. That is why as Chair of the HUDZ committee I am reviewing the process.
Until/if city hall gets its act together, I voluntarily include PCD in the process to create transparency and some checks and balances. PCD collectively engages dozens and dozens of 17th ward residents and business owners to staff its committees. Additionally it has institutional representatives from SLU, WU, BJC and Cortex. There is no other organization like it in the city--if there were more this would be a better city. I work for the residents of the 17th ward who have the choice to actively participate wit PCD in the reshaping of the most dynamic 3 square miles in the region. I have no intention to overrule PCD’s decision based on some anonymous complaints but I posted on here and offered to meet to provide insight into our process to those who do not live in my ward. I hate to leave a good argument early, but is very time consuming and a horrible medium discuss price theory as it applies redevelopment.
Statistics: Posted by ward17 — Fri Jun 13, 2014 6:59 am