Redeveloping multifamily: condos are forever, co-ops perhaps less so

“A diamond is forever, a suburban R-1 zone nearly so” – Jonathan Levine, “Zoned Out”

And what’s even more permanent than an R-1 zone? A condominium.

Dearborn Park, Chicago

See those townhouses tucked among the trees? Hope you like them, ’cause they’re there, forever. (CC photo of Dearborn Park, Chicago, by Doug Nichols)

The saga of the Frontiers West condominium along 14th St. NW — as told by Lydia DePillis a few years ago — recently came up in conversation. A few years ago, multiple developers attempted to buy the entire complex, but ran up against an implacable foe: consensus. “Redeveloping any one of the parcels,” DePillis reports, “would require unanimous consent from the owners of all 54 units—so just one person could doom any deal.”

Frontiers had been built as public housing in 1977, an attempt to revitalize a neighborhood still deeply scarred by riots a decade earlier, and was sold off to tenants in the 1990s. (Jack Kemp introduced a Thatcher-esque scheme to sell public housing to tenants during the Bush 41 administration.)

Frontiers West’s unusual backstory created an unusually wide “rent gap” (the difference between value as-built and value as highest and best use) at that location. However, condominium ownership is over 50 years old in America, and thus the first stick-built condos are probably running up against their expected service lives. For those buildings, the economics of depreciating structures will soon run up against appreciating land values, and associations with structural problems (and in good locations) will have to face tough decisions. Says one condo owner outside Vancouver (probably the most condo’d city in North America), “We don’t have a system that allows people to understand what to do at the end of their unit’s life.”

It’s not necessarily impossible to buy every single owner out. MetroWest in Fairfax is being built on what was a low-density subdivision, where every owner consented to the sale. In a single-family situation, it should be possible in most cases to buy most of the parcels and leave a few “nail houses” outstanding.* Eminent domain, as at Atlantic Yards in Brooklyn, is also an option in situations where legal justification can be found.

Steven J. Smith found one recent example of a 30-unit condo — a singularly awful 1970s building in Chicago’s Lincoln Park — that had been re-assembled. But for other examples, he points overseas to Singapore and Japan — both even more urbanized than the USA, but also both societies where achieving political consensus is easier (their effective one-party rule being the prime example).

Singapore took Thatcher’s idea of council-flat ownership to an extreme, encouraging Singaporeans to purchase their public housing units with their social pension funds. (It’s also a clever way of locally recycling capital to fund their ambitious housing scheme.) Now that some of these buildings have become attractive redevelopment opportunities, the government has begun a “selective en-bloc redevelopment scheme” (or SERS, in the acronym-happy Singaporean government-speak) for scores of 1950s-1980s concrete-slab tower blocks, provided that 80% of owners consent. It helps that HDB flats are technically not owned, but instead are tied to 99-year leases; this gives HDB the authority to do things like impose anti-speculation rules to keep prices stable between the time redevelopment is announced and all individual contracts close.

Speaking of unique authority, this is one area where the greater legal flexibility granted to cooperatives, rather than condos, can come in handy. Whereas New York condominium law requires 80% approval for an en-bloc sale, its cooperative law only requires 2/3 consent to dissolve the corporation. For the particularly obstinate, District of Columbia law also permits cooperatives to kick out individual members through a simple majority vote.

Northern Virginia again offers a local example, where the Hillwood Square co-op in Falls Church sold itself after a two-thirds vote:

“They were faced with the prospect [of] spending a significant amount of money to upgrade the property’s underground infrastructure… ‘Hillwood was one of the most complicated as well as the most rewarding land deals we have had the opportunity to represent in our careers,’ [broker Mark] Anstine said in a joint statement”

An interesting application of a cooperative scheme to urban redevelopment challenges could involve capitalizing new cooperatives with existing smallholdings, or redeveloping part — but not all — of a co-op. A co-op, as a stock corporation, has relatively few restrictions on its property holdings and financial activities — especially compared to a non-profit condominium association, which typically would have to distribute excess funds to members.

Land assembly for major projects in Japan, like Roppongi Hills, can be undertaken by pooling properties together into a “Redevelopment Association.” By guaranteeing equity participation in the new development (and new on-site replacement housing), this approach ensures that landowners share equally and fairly in property value gains — thereby removing individual owners’ worry that they sold out too early/cheaply.

Cohabitation Strategies included an equitable-growth idea similar to this strategy — what it called “Cooperative Housing Trusts” — in MoMA’s recent “Tactical Urbanism” exhibit. These community land trusts could aggregate and sell otherwise unusably-small quantities of air rights, and reinvest the proceeds into permanently affordable housing. (It was the one interesting idea in the entire exhibit, IMO.)

* No examples come to mind off-hand, but this is a common practice in shopping mall redevelopments. Department stores that own their own land have been excluded from many redevelopments that engulf them, as with the aging JCPenney at North Hills in Raleigh:

Raleigh, North Hills on iMAPS

The opposite situation was bound to happen someday, and of course it’s flailing-about Sears that is leading the way. It’s not just subdividing its boxes and adding new subtenants like Whole Foods, but in at least one case (at Aventura, North Miami’s fortress mall) it’s going rogue and doing its own mini-de-malling without permission from its “landlord.” Sears’ footprint at Aventura will shrink almost 90%, to just 20,000 feet — maybe their agreement with Simon requires that they not abandon the site entirely.

DC will not become ‘like Amsterdam.’ It’ll be better.

District of Columbia Mayor Muriel Bowser said this week “that the District will not become ‘like Amsterdam,’ as though being ‘like Amsterdam’ would be a bad thing,” says a blog post by the Netherlands Embassy.

The embassy backed up their umbrage with a stylish infographic showing off several metrics where Amsterdam handily surpasses the District — particularly in transportation choices, as Amsterdam offers its current residents more waterways, more bikeways, and more streetcar lines.

For one point, the infographic concedes that the District is bigger and better than Amsterdam: Washingtonians can now legally possess over 11 times as much marijuana as Amsterdammers. But since the Netherlands has more permissive laws regarding the retail sale of marijuana than the United States, many visitors (like, perhaps, Mayor Bowser) instinctively use “Amsterdam” as shorthand for a place with libertine drug laws. (Dutch society has a long history of taking a uniquely hands-off approach to social policy.)

On several other points, though, the infographic shows that although DC isn’t quite there yet, we’re well on our way. DC already has ambitious plans to beat Amsterdam on two points: the Sustainable DC Plan projects another 250,000 Washingtonians, for a total of 868,000 to Amsterdam’s 810,000; and the Move DC plan has plotted out 343 miles of bikeways, including 72 miles of Dutch-style protected bike lanes, which easily beats the mere 250 miles of bikeways in Amsterdam.

DC is also making significant progress in closing the 12-museum gap with Amsterdam. With an evergrowing number of museums here, DC is well on its way to overtaking Amsterdam in this particular metric. (I don’t have statistics handy, but it seems likely that DC has fewer but larger museums, which probably have an edge in terms of collection size and total visitors.)

On two other metrics, though, we have a long way to go. At the current rate of construction, it will be a while until DC manages to build its 16th streetcar line — but note that the Dutch embassy conveniently doesn’t count Metro lines, as DC boasts six to Amsterdam’s five (almost), as construction on their north-south line is almost as delay-prone as our streetcar.

The yawning gap between the two cities’ canal networks is only half as dire as the Dutch say. Yes, Amsterdam has 165, but DC actually has two operating canals, not one: The embassy may have been confused by the name of Washington Channel, which is a brackish waterway built to drain tidal flats and to keep open a shipping channel. In other words, it’s hydrologically far more similar to Amsterdam’s canals than the freshwater C&O.

In any case, I’ll concede that more of Amsterdam is below sea level than Washington. In an era of rising sea levels, though, that’s probably not something worth trumpeting.

On definitions: equitable communities, magpie infrastructure, vibrant centers, gentrification

Bellevue goes upscale

Bellevue was not one of the “suburban vibrant centers” examined for a NAIOP report on office occupancy trends.

Some recent reports left me appreciative of their aims and ends, but not exactly how they got there, and in particular with how other analyses have defined key terms.

1. The Living Community Challenge certainly provides an inspiring goal to reach for, notably in its use of elegant performance criteria that broadly require “net positive” environmental performance on site — broadly, that new developments can strive to shrink their ecological footprints to fit within their actual footprints. It also pretty seamlessly integrates the Transect throughout, and in a balanced way that sometimes rewards and sometimes penalizes both ends of the spectrum.

However, having participated in the creation of LEED for Neighborhood Developments, it’s telling that some of the same battles in that scheme have emerged within this one. Prescriptive approaches still occur throughout, and some of the personal-health ones are somewhat wishy-washy. (The emerging science of health impact assessments may have been a useful complement here.) The equity section (“petal”) has a lovely intro, but its imperatives don’t address many social criteria — affordable housing is a notable omission — and almost entirely use prescriptive standards. Another long-running debate was over the use of prerequisites in the rating scheme: It seems strange that a baseline, “Petal Community” certification can be done while ignoring a majority (four of the seven) of the petals.

I’ll be interested to learn more about the Challenge in the coming weeks, and to see how others feel about whether it’s rigorous and balanced.

2. Kriston Capps brings up Mikael Colville-Andersen’s term “magpie infrastructure” in a recent CityLab piece. Bicycle and pedestrian infrastructure, examples like the Bloomingdale Trail aside, rarely needs architects’ attention — their structure-first solutions are usually fundamentally anathema to bicyclists’ lazy inclination to not climb hills. By and large, people should be encouraged to stay at grade, and landscape architects and engineers should be entrusted with their care.

Closer to MCA’s home, the current BIG exhibit at the NBM includes Loop City (video; skip to 2:30), a proposal for an elevated rail loop around Copenhagen + Malmo. The proposal lifts up the stations so that trains decelerate on the approach and accelerate as they exit — a clever idea lifted from subways like Montreal’s. When done below-ground, this brings trains closer to the surface just where they’re needed, but when above-ground, the same approach antagonizes the energy needs of the passengers (who need to climb ever-higher escalators to get to the platforms) and the energy needs of the trains.

Another obvious flaw is that the proposal repeats the Corbu-in-Algiers mistake of thinking people would want to live in flats beneath a railway, without realizing that below-the-tracks spaces are almost always only valuable in situations (I’m thinking in Ginza, the Viaduc des Arts, or 9 de Julio) where such space is just the cheapest way of getting valuable ground-level, street frontage. Even maglevs are pretty awful to stand right underneath.

Besides, haven’t we tried grade-separation of different modes before?

3. NAIOP recently published a report offering slight encouragement to the notion that office users are increasingly choosing mixed use environments — namely, 24-hour CBDs and 18-hour “suburban vibrant centers” (their terminology, not mine) — over single use suburban office parks. Their findings indicate that rental rates are indeed higher in CBDs, but that CBDs haven’t seen as much absorption as suburbs, whereas “vibrant” parts of suburbs had a verifiable edge in the leasing market. There’s certainly plentiful anecdotal evidence, and this has been the mantra of “Emerging Trends” and other qualitative reports for quite some time, but I’ve seen few attempts to quantitatively analyze the phenomenon.

Yet the two sets were compared quite differently. The comparison of CBDs vs. suburbs was strictly quantitative, an approach that didn’t control for the quality of the urban environments — downtown absorption was hurt by including a great many “dead” downtowns (Dayton, St. Louis, Hartford) among the comparison set. Most of the liveliest downtowns have seen strong positive absorption, since it’s less the CBD location than the mixed-use amenities that draw users.

The “vibrant centers,” on the other hand, were compared using a robust paired-case approach: single-use suburban areas were paired with mixed-use suburban areas within the same part of town. They even came up with a pretty strict definition of such centers and their comparison sites, using Walk Score and building-level maps. This better methodology dives into why people are migrating towards such sites, and goes beyond the not-terribly-nuanced submarket definitions found in typical office market reports.

Although the lower absorption figures for CBD office may look discouraging at first glance, it’s necessary to consider both that higher rents might result in tenants using CBD space more economically. Square feet don’t necessarily correspond with people, much less dollars. (Edit 26 Feb: City Observatory has a new report indicating that job growth has indeed been more robust in CBDs than in suburbs.) In addition, the supply constraints on new downtown office might suppress demand from space-hungry users — e.g., many large companies are expanding both in San Francisco and Silicon Valley, but adding more jobs in the Valley where construction isn’t limited by constraints like Prop M.

4. For good measure, here’s one instance where the methodology and the results both turned out okay: Governing’s recent analysis of gentrification at the Census tract level. The scale of the analysis is correct, the results pass the smell test, and the variables used (rankings of changes in household income and physical [home values] and cultural capital [college attainment]) seem reasonable.

Modest proposal: depave Foggy Bottom’s riverfront, but leave I-66

Neil Flanagan recently wrote about current and past proposals to heal the urban-renewal scars that separate the Kennedy Center — which should be a terrific urban amenity — from the city around it.

Erasing RCP by the Kennedy Center

The KenCen, along with the Watergate complex and what’s now the Saudi embassy, stands in a tiny island isolated from both the city and the river by two parallel highways. Neil’s post focuses on a long history of proposals to bridge the chasm of I-66, built alongside this island as part of the grand urban renewal scheme that obliterated Foggy Bottom’s industrial heritage.

Yet the 1920s-era Rock Creek Parkway that runs on the riverfront through this stretch is perhaps a greater urban offense. It’s a limited-access highway that squeezes strolling pedestrians and cyclists into a narrow riverfront strip. It intervenes between the bike path and the river at one point, creating a particularly confusing, and dangerous, joint in the otherwise admirably complete trail network along the region’s waterways, and pretty much completely interrupting any pedestrian flow between the Mall and the waterfront. (Speaking of harrowing junctions, its at-grade intersection with I-66 creates a terrifying two-stage left turn at the end of I-66’s Independence Avenue ramp.)

And it could be eliminated with just two ramps — the ones shown in red in the map, linking the existing and underused ramps that link I-66 Extension to the Whitehurst Freeway, to Rock Creek Parkway. Adding these two ramps would enable cars that currently use Rock Creek Parkway to use the woefully empty I-66 that runs just two blocks east — and thus permit depaving Rock Creek Parkway (in pink), south of Virginia Avenue and north of the Lincoln Memorial.*

(A 1998 FHWA study also proposed the same ramp at the northeast quadrant of the interchange, but instead of a loop suggested a signal and a left exit. It also proposed to leave RCP, and grade-separated the Ohio/RCP intersection.)

Creating a linear park along the river between the Thompson Boat Center and the Lincoln Memorial would more clearly link three great linear open spaces — the Mall, Rock Creek Park, and Georgetown Waterfront Park and the upstream parks. (A clearer, perhaps grade-separated walkway behind the Lincoln Memorial would still be needed.) It would finally connect the KenCen and Watergate to the water, and break apart the asphalt chains that encircle the old Watergate Steps. It would also attach this little urban island to the city (well, Georgetown).

It would accomplish these aims at a cost far lower than decking over I-66, a proposal that has failed several times for want of funding. The surrounding renewal-era fabric would require retrofitting if such a deck were built, since most of it was built with high walls that ignore I-66.

Yes, direct access between Memorial Bridge and Rock Creek Parkway would be eliminated. Drivers would instead have access to the Roosevelt Bridge, which is currently denied, and could use Virginia and 23rd to reach Lincoln Circle and thus Memorial Bridge.

* On second glance, the north Lincoln Memorial loop may be needed to allow Independence Avenue traffic to flow onto Memorial Bridge.

Downzoning R4: Zoning Commission testimony

Price per square foot premium

My name is Payton Chung, I live in yes, an apartment in Ward 6, and I am testifying with regard to Case 14-11.

This rezoning amounts to a severe reduction in the potential number of housing units within the District. This action seems incongruous with the Office of Planning’s recent arguments that the District is adding a thousand residents each month, which will result in exhausting its “zoned capacity” for new development within 25 years — and perhaps sooner, if ambitious plans like the Sustainable DC plan bear fruit.

OP has suggested that existing single-family neighborhoods should accommodate some of that growth, through accessory dwelling units and corner stores. Yet now OP has reversed course, shutting the window on secondary units in one-third of the central city, and in some regards (like with height) making R4 more restrictive than the lower-density R1, R2, and R3.

The supposed principal rationale that OP offers, that further restricting an already severely constrained supply of housing will somehow make housing more affordable to a select class of households, is spurious and discriminatory towards smaller households like mine. As former OP director Harriet Tregoning once said, “Part of the challenge is to right-size our housing stock so we can have the type of housing that matches the needs of our residents.”

Tregoning pointed out then that larger housing units are already amply supplied within the District. Today, there are 2.4 large housing units in DC for every one household that needs one. More specifically, 33.5% of our housing units have three or more bedrooms, but 13.9% of our households have four or more residents.

This imbalance results in the market awarding a substantial discount to large units. On a per square foot basis, three-bedroom units sell for 15% less than the citywide average, while zero and one bedroom units pay a 15% premium. And yet OP wishes to exacerbate this crisis by further constraining the supply of small housing units, with no guarantee that larger units will be at all affordable.

I happen to enjoy living in a high-rise apartment building, but it is neither feasible nor desirable to shoehorn all residential growth solely into the rapidly diminishing areas available for high-rises — which are, of course, subject to the Height Act. High-rises have intrinsically high costs due to their fireproof construction, elevators, and interior corridors.

It’s no accident that most of North America’s great urban neighborhoods, from Boston to Brooklyn to Chicago to San Francisco, are comprised of small, low-rise buildings with 2-4 units apiece. Such buildings are affordable to build and maintain, yet create just enough density to keep eyes on the street and shops within walking distance. In fact, Milwaukee reveres two-unit pop-ups as the city’s characteristic housing type — former mayor John Norquist described its so-called “Polish flats”  as a housing type “specifically designed both to accommodate and to accelerate the economic improvement of the family.”

Almost 40% of Boston households live in 2-4 unit buildings, and so do nearly one-fourth of households in New York City and San Francisco. Yet here in DC, scarcely one in nine of our households do.

This text amendment certainly has a number of supporters, but in the end we must also consider its inadvertent result: to deny thousands of people the option to live in neighborhoods like Columbia Heights, Mount Pleasant, Park View, Trinidad, and Capitol Hill; to further diminish the prospect of more walkable retail within these neighborhoods; to sharply limit investment in some of the region’s most centrally located areas; to make Washington even less affordable to the young strivers who are, more than ever, its lifeblood.

Thank you for your time.

Majority rule, minority rights — or Moses and NIMBYs

Terror alert

I snarkily wrote up a little headline last Monday: “Belmont Bypass’ Immediate Neighbors Slam Outreach, Will Vote On Keeping Bottleneck.” Then Daniel Kay Hertz wrote a somewhat fuller reponse, pointing out that a few people would vote on a project that impacts rail service for hundreds of thousands.

(Not surprisingly, the referendum failed, with 583 votes against. In June 2014, the three rail lines that would benefit from the bypass carried 6,353,313 passengers.)

Many broadly beneficial, but locally detrimental, projects are subject to being torpedoed by hyper-local concerns. As with any Locally Undesirable Land Use (LULU), the benefits are broadly distributed but the costs are highly focused. Many will gain a bit, but the benefits are in the distant future and somewhat speculative, so the issue has soft salience to the majority. On the other hand, a few will lose a lot, so those loss-averse few have a strong incentive to fight tooth and nail against threats to their homes. It’s just human nature.

Later comments directed at both Hertz and I raised the specter of Robert Moses bulldozing East Tremont for the Cross-Bronx Expressway. Yes, there are some surface similarities: properties expropriated for a transportation improvement. Yet these projects differ incredibly, not just in what is being done, but more importantly in how they are done.

A new highway arguably fails a cost-benefit analysis once social costs are calculated: It exacts leviathan costs, from destroying communities to contributing mightily to destabilizing the planet’s climate. (This probably even applied in Moses’ era, before thousands of miles of highways were built, subjecting further investments to the law of diminishing returns.) A new transit connection has a much better balance sheet. The Belmont Bypass has particularly high leverage, since it finally unleashes the bottlenecked potential of the miles of four-track structure beyond it.

More important is how the project is executed. In a democracy, the majority rules with respect for the basic rights of the minority. Moses infamously low-balled property owners when seizing land, and paid tenants (and rent-controlled tenants in an era of high housing inflation arguably hold a claim resembling property) almost nothing; such expropriation is clearly contrary to the Fifth Amendment or to the UDHR‘s Article 17.

Several property owners stand to lose their property to the Belmont Bypass. In such a high-profile situation, which public opinion broadly in their favor and multimillion-dollar properties on the line, I imagine that this group will receive just compensation — quite unlike the residents of East Tremont, who were largely ignored by the press, whose cries for help went almost entirely unheard by their legislators, and who lacked funds to file lawsuits.

Yes, a slightly larger population will be inconvenienced by construction for a few years, and this crowd appears to have provided most of those damning 583 votes. While pollution, even non-toxic pollution such as carbon, can justifiably be construed as violating others’ right to life, the noise and dust from construction can be mitigated to a significant extent.

In short, the substantial benefit that the majority will derive can justly be seen as outweighing the relatively minor rights claims in this instance, and the comparison to Robert Moses is spurious.

Of course, it’s rare for citywide transit agencies to make decisions at the hyperlocal level. Yet it’s absolutely typical for decisions to be made about permitting additional housing at almost a parcel level; in that case, the marginal benefit to other regional residents is so marginal as to be doubted entirely. Yet affordable rentals, in particular, are a LULU that local NIMBYs have successfully engineered the regulatory regime to discriminate against. Ryan Avent writes in the Economist: “The benefits and costs of population growth occur in a way that practically guarantees highly restrictive building rules.” Michael Lewyn takes the view that “cities cannot be trusted to weigh the citywide interest in new housing against neighborhood concerns… the chances of abuse are simply so high that a higher authority must step in.”

New economic geography: fewer centers, more edges

from a plane

There’s obviously no room to build anything, anywhere.

October’s Economist Survey on the global economy by Ryan Avent included a shout-out to his Piketty-informed thoughts on housing prices. In short, the productivity gains from current technology have increased inequality between people and places. The returns on specialized skills are worth more in an era of cheap communication and transportation, great cities aggregate many people with such specialized skills –and furthermore, agglomeration effects appear to be growing even as communications costs decline. Even virtual reality won’t be able to replicate the everyday, subtle reinforcement of ambition that great cities provide; as Paul Graham writes:

The physical world is very high bandwidth, and some of the ways cities send you messages are quite subtle… A city speaks to you mostly by accident—in things you see through windows, in conversations you overhear. It’s not something you have to seek out, but something you can’t turn off.

Ideas have become so complex that those with specialized skills need to gather around others with complementary skills just to understand topics, much less to achieve the discovery or innovation stage. And, well, interesting people like one another; not for nothing has “assortative mating” taken off, spawning study of managing “the two-body problem” in fields like academia and medicine. (Hint: bigger cities, with bigger labor markets, are more likely to solve the problem. This has become a boon to universities recruiting in large metro areas, while those in small college towns struggle.)

In short, there are fewer centers and more edges. Scarcity being what it is, the centers (and only the centers) are winning more capital, and the edges are losing.

The result has been a highly uneven reallocation of wealth, whereby some places are winning in the form of skyrocketing property prices. These high prices create a substantial drag on the economy: increasingly high rents in the most productive locations steal from the most productive. This steers:

  1. Capital towards landlords, enlarging a rentier class (as Piketty notes) and starving more productive sectors.* This creates a vicious circle, as the NIMBY cartel further tightens its regulatory capture over the land use regime, and extracts ever-higher rents.
  2. Labor towards less costly, and less productive, places, creating economic losses. One recent study quantified that economic loss to the United States in 2009 at 13% of GDP — equivalent to sawing off the entire state of California.

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This might be worth unpacking further at a later date: Just reforming land-use regulations, or even entirely repealing the “shadow tax” of zoning, still won’t do enough to produce more affordable housing. Even if zoning is reformed to “make more land,” that land’s still subject to construction’s “hard costs,” which are just too high nowadays.

Construction costs have risen faster than inflation, and far faster than stagnant workforce incomes. Slides 5-6 of this presentation [PDF] by Thomas Hoffman from Enterprise points out that even with free land, even the cheapest construction now costs 50% more than the affordable rent for a low-income family.

Sure, embedded within construction costs are other perhaps-useless regulations, but housing affordability in gateway cities is a problem with many root causes, and with many solutions as well.

—–

* Rent or mortgage principal paid, aka “housing service expenditure,” does not have a multiplier effect on GDP because it’s not factored into GDP. However, it’s worth noting that in 2000, HSE amounted to nearly $1 trillion, which supported only some of the 1.1 million jobs in real estate (NAICS 531). Reducing rental prices would take investment income from landlords and give them back to consumers, who would probably spend in other sectors that generate more jobs per dollar.