Decking over freeways isn’t as lucrative as you might think — but there are alternatives

Ponte Vecchio for a new era

I-670 hides below this building in Columbus, Ohio.

Whether I’m biking down F Street and running headlong into it, or dodging its construction equipment on the infrequent occasions when I have to drive through the I-395 tunnel, it’s hard to miss Capitol Crossing — now the largest development underway within downtown Washington, DC. I knew that this was an unusual project, but it turns out that it’s incredibly unusual: the only instance of a privately financed freeway deck anywhere in the country.

The “Ponte Vecchio” example that everyone points to is The Cap at Union Station: two narrow retail buildings alongside the principal spine of Columbus, Ohio, all built on a bridge over a freeway. It is a marvelous example of a place connector, one that seamlessly unites two emerging neighborhoods to one another.

However, these caps aren’t exactly something that can be replicated everywhere, since it’s an incredibly expensive way to fix a place. The Columbus example was funded by the federal government, as a mitigation measure for widening the freeway below. Most other recent cap proposals resulted from similar mitigation measures — and thus most are parks, both because that’s what the government builds and because their relatively light weight keeps the cost of building a deck down. Klyde Warren Park in Dallas is one example; 70% of the money came from the federal and state governments.

Three things to keep in mind when evaluating a freeway cap:

2009 01 20 - 0573-0575 - Washington DC - I-395

The future site of Capitol Crossing, on a rare car-free day (Inauguration Day 2009). Photo by Bossi, via Flickr.

1. The price of the structure is only justifiable if you’re surrounded by very high-value land — namely, a high-rise, high-rent CBD of a high-cost city. This limits the situations where these caps make economic sense to premier sites. For instance, a few blocks of air rights over the Massachusetts Turnpike in Boston’s Back Bay are currently in the planning/proposal phase, having seen prior plans fall apart during the Great Recession.

Capitol Crossing’s developers paid the District $60 million for air rights and are sinking another $400 million into constructing a platform over I-395 just east of Union Station, yielding a cost per “FAR-foot” (square foot of potential development) of around $150-200. That’s substantially higher than the $75 per FAR-foot seen in recent transactions for development sites at the periphery of downtown — but comparable to the $190 per FAR-foot paid for “dirt” within downtown DC, which is pretty much extinct. The net result of this scarcity and high prices is that only the very highest value land uses, namely office and retail, are economically feasible at this development — residential just doesn’t pay enough.

(Calculation based on pre-construction cost figures and final buildout of 2.2 million square feet. Post building calculation doesn’t include demolition costs.)

The economic feasibility line might also be teased out from the RFI responses that Virginia DOT received regarding two sites over I-66 in Arlington — one at the edge of Rosslyn’s high-rise core, and another in low-rise East Falls Church (actually within Arlington County). Almost none of the responses deemed the EFC parcel economically feasible, but many of the responses indicated that the effective “land cost” for the Rosslyn parcels, including cost of construction, at nearly $100 per square foot of FAR.

Unlike private development, a park’s feasible land value is set off-market and is thus completely subjective. In a neighborhood in dire need of a park, or on an irreplaceable waterfront site, the value of a new park may indeed justify the cost of construction.

2. It’ll be much easier, and cheaper, to build a cap if the freeway is completely closed for a while — say, for a major reconstruction. Staging construction over an operating freeway is risky, dangerous, and ultimately costly. Hence, many existing freeway-lid projects, like the Prudential Center and Copley Place in Boston, were constructed before the road underneath them opened to the public. Columbus’ lid was built during an 18-month closure of I-670, for example.

Even at Capitol Crossing, the developer realized the folly of trying to keep the freeway open during construction, and proposed to close 395 entirely for 15-18 months. The closure eventually came to naught due to politics, but would have “cut in half the construction time,” according to the Post: “Building the deck requires installing about 150 caissons along the median to support a network of steel girders… installing the caissons while the highway is in use would be hazardous and disturb nearby residents.”

3. A more entrepreneurial approach that governments can take to such a project is suggested by Matthew Kiefer, who worked on an earlier iteration of the MassPike deal:

MassDOT should adjust its expectations about the revenue potential of these difficult sites to reflect economic reality. It should rely more on rent derived from the net profit of a stabilized real estate asset – percentage rent or a share of proceeds of future sales or refinancings – and less on initial land value, which can be illusory. The Commonwealth will be around for a long time to realize patient returns.

In this PPP structure, the state “speculatively” builds the platform, then executes a “ground lease” for the air rights while keeping the property under state control. This may require a more entrepreneurial attitude towards monetization than most state DOTs are willing to take, but well-located center-city land is a great long term investment. If you really believe in the quality and long-term value of the place that you’re creating, a percentage-rent ground lease is a great way to discount the rent up front but to participate in the long-term gains.

Interestingly, Brandywine Realty Trust also suggested the same net-lease arrangement in its response to VDOT.

4. There are lower-cost alternative to a full bridging project while minimizing the freeway’s footprint and impact. In many cases, the most expensive bit will be bridging the through-traffic lanes — but even sunken urban freeways usually have lots of other spaces. Embankments are usually excessive, and building platforms can be cantilevered out over their edges. Lower-traffic ramps and shoulders are easier to close temporarily for construction. Skybridges can be assembled off-site rather than in-situ, providing more connectivity across the site while minimizing closures of through lanes.

ULI sponsored a governors’ advisory panel study about another downtown Boston air rights parcel in 2012; it recommended a lighter approach than a full-on deck, with buildings surrounding the interchange and bridges over it. (Ironically, the parcel was created through the Big Dig project!)

5. Railroad air rights have also seen active development in recent years, e.g., Hudson Yards in NYC, River Point in Chicago, and 30th Street Yards in Philadelphia. However, the costs aren’t truly comparable to freeway decks: the column spacing can be much closer for railroads than for freeways, and the vehicle movements are rather more predictable.

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Friday photo: CIAM’s embarrassing questions about your rowhouse

Jose Luis Sert book: Why is your house gloomy?

Can Our Cities Survive,” Jose Luis Sert’s provocative 1942 treatise on the future of Western cities, posed this set of “embarrassing” questions to residents of the era’s cities. Those who claim that rowhouses are uniquely well-suited for families might recall that, not that long ago, they were widely seen as “gloomy” and unfit for family habitation unless extensively modified — and that most of America still thinks so.

Of course, Sert was largely wrong — in particular, the automotive menace should be solved by restricting the cars, not the children — and the Modernists were never quite successful at convincing families that high-rises were worthwhile.

Attitudes had softened just a bit by 1950, when the regional chapter of the AIA issued a report called “Of Plans and People.” Washington was then in a frenzy over the need to house its exploding population. Rowhouses were merely “disreputable,” rather than intrinsically awful:

Home owners have insisted on increasingly severe restrictions against apartment buildings and row-houses–this despite the fact that for many families they are the most suitable forms of housing. Part of this opposition results from the crude design of these buildings. The ugliness of the typical Washington row-house with its two-story back porches has done more than anything else to bring the row-house into disrepute. If builders were more concerned about good design, the public might feel less need for “protection” against apartments and row-houses.

Friday photo: Mixed residential densities vs. single-density zoning

Richmond: around the Fan

Monument Avenue at Belmont, Richmond, Virginia: one, two, and six-family houses, side by side, on one of America’s most famous residential boulevards

Many of America’s most celebrated urban neighborhoods, like the Fan in Richmond, have a fine grain of different residential densities. Neighbors might live in buildings of broadly similar sizes, but at substantially different densities. But the entire premise of American zoning, as established in Euclid vs. Ambler, was to maintain uniformly single-family districts — uniquely among any country, as Sonia Hirt as shown.

The world’s best loved cities are the way they are not because of zoning bylaws but in spite of whatever zoning may now be in place… Serendipity, complexity, conjunction, anticipation, surprise and delight: these very human experiences are what great cities offer. But zoning is a blunt, inflexible tool. Zoning is by definition exclusionary, limiting things to a preordained set of possibilities. It determines what cannot be done, rather than what can be It does not anticipate nor nurture new, untried forms of city-building or habitation. It does not, in short, encourage the city of desire.

So little of the [American] city was built before zoning was introduced that its more deleterious effects are much magnified. There is very little evidence of the organic city, the intricate web of urban spaces and built forms that rose before the heavy hand of zoning was applied. There is no “old town” core of narrow lanes and multiple layers of use. And there is very little unpredictability, no edge. At the risk of sounding simplistic, it is boring.

— Lance Berelowitz, “Dream City” (Douglas & McIntyre, 2005), pg. 223.

Richmond: around the Fan

Bonus: down the street, an illegal mix of uses. Orchid shops and churches, oh my!

How growing income inequality affects places, part 2: The favored quarter gets richer, the wrong side of the tracks still suffers

The same divergence in fortunes appears to be accentuating price differentials between metropolitan sectors (essentially, “sides of town”). In an economy where the rich are getting richer than everyone else, the rich side of town is also increasing its comparative advantage over everywhere else.

LA office rents

This split was apparent during a recent trip to Southern California. The region might still be “polycentric,” but where one side of town — the Westside favored quarter — now completely dominates local wealth creation. What were merely lopsided prices before have now become absurdly imbalanced, with mediocre buildings on the Westside commanding top rents while perfectly nice areas, like Long Beach and Pasadena, are lagging badly.

In cities where houses or offices on the “right” side of town are scarce, such real estate becomes a privilege only available to the wealthiest people — who, as we’ve noted, are getting wealthier, and in large part because of their houses on the “right” side of town. Even though real estate prices generally track local incomes, the favored quarter of Los Angeles now has prices that track only the exploding incomes of the ultra-rich.

This Redlands ISEA animation of LA-area housing prices from 1988 to 2011, over the course of several cycles, illustrates the “flight to quality” that has occurred during the three busts (mid-90s, early-00s, 2010). At the start, high-value areas are relatively well dispersed across the basin, with only the inner city (particularly the near south and east) suffering from low prices. But, over time, the cumulative advantage of being near the beach increases over time — especially because prices don’t fall as much during the busts, but grow by just as much during the booms.

The trend is perhaps in sharpest relief in high-Gini areas like LA, but is broadly occurring across the country. Joe Light reports in the Wall Street Journal that lower-priced houses are lagging even as prices nationally rebound:

Between January 2006 and May of 2015, the median value of homes in the bottom third of the market has dropped 13% to $101,900, according to Zillow. The median in the middle third is down 6% to $172,600, while in the top third it is off 4.5% to $325,800… The [disinvestment] cycle has been hard to break in large part because low-wage workers have seen little, if any, income growth during the recovery—putting them in weak position to qualify for mortgages.

Recently, Rolf Pendall at the Urban Institute identified the most and least privileged neighborhoods in metro areas nationwide in the 1990, 2000, and 2010 censuses. Over those two decades, the most privileged neighborhoods saw home values rise by an extra $80,000, and their residents actually benefitted from that gain — their homeownership rate is twice as high as in the least privileged neighborhoods. (Since fewer than half of households in the least privileged areas are homeowners, their property value gains accrued to someone else.) Privileged neighborhoods also stockpiled human capital: the growth in their college attainment rate was four times higher than in the least-privileged areas.

This has tremendous implications for intergenerational social mobility, which is closely tied to income, human capital, and wealth. Not only do wealthier families have more private resources for their children, but in a country where schools are largely funded with local property taxes, wealthy communities have more public resources for their children. Three generations ago, legal segregation awarded suburban nest eggs to white families while denying black families the same opportunity — resulting in a “titanic wealth gap” between the races today. (Furthermore, generations of zoning have sought to freeze this status quo, and perpetuate the original injustice)

Thus, the “segregation tax” that penalizes property values in majority-minority communities creates a vicious cycle both for families and for communities, and one that is only getting more pernicious — sadly illustrated recently by the events in Ferguson, Missouri.

Locally, stagnant housing prices in Prince George’s County have contributed to an ongoing foreclosure crisis. Stagnant housing demand from the “underwater limbo” is compounded by its relative isolation from the favored quarter’s jobs engine, and the area’s ongoing “segregation tax” discount. For example, in 1965-1975, the Levitt firm built two large “Levittowns” in suburban DC — Belair in north Prince George’s and Greenbriar in south Fairfax. Even though these are the favored and less-favored sides of their particular counties, near-identical ranches recently sold for an average of $300K in Bowie and $440K in Fairfax.

(An even more striking dynamic can be seen in the Philadelphia area’s twin LevittownsLevittown, PA has property values twice as high as Willingboro, NJ. What’s more, over the 2007-peak-to-2012-trough cycle, Levittown property values declined by only 25%, whereas Willingboro values declined by 50%. And yet, all of the Levittowns began as mostly or exclusively white.)

Meanwhile, formerly moribund downtowns adjacent to job-creating Favored Quarters are finding some success reinventing themselves as the easiest place to add new residential, away from the fierce FQ NIMBYs. The boom in downtown LA’s residential and retail market diverges sharply from its flatlining office market — which still suffers from 20%+ vacancy even though dozens of office towers have been converted to other uses. Downtown Atlanta and Dallas are similarly benefitting from escalating prices to their north.

Friday photo: Greedy developers built your city

Two rental houses on Capitol Hill

I recently came across these plans by a fantastically wealthy land speculator, seeking to profit by ruining DC’s pristine Capitol Hill neighborhood with a towering building crammed full of tiny rental “microunit” apartments for immoral singles — rather than wholesome nuclear families! This kingpin practices his avarice from posh Fairfax County, within a “resplendent” mansion overlooking the Potomac.

This paragon of greedy, out-of-town developers is, of course, George Washington, the very namesake of Washington city. (Yet another greedy developer, Alexander “Boss” Shepherd, is memorialized with a statue right outside the Wilson Building.) Cities don’t arise via immaculate conception; they’re built by developers.

John DeFerrari’s book Lost Washington has a much more detailed account of the houses, showing that the NIMBY nightmare of “out of scale” “overdevelopment” was indeed what this city, and all other cities, was built on. (Otherwise, we’d all still be in caves!) Washington wrote to his architect, “Although my house, or houses… are I believe, upon a larger scale than any in the vicinity… capable of accommodating between twenty and thirty boarders.” A later, even greedier, developer popped up (and popped-under) the ruined buildings in the aftermath of 1814’s fire, and the buildings grew to six stories tall. Anti-pop-up NIMBYs might take heart from its fate: it then descended into criminal infamy and was bulldozed for a park.

[The plans in the photo above are from GW’s Albert Small Collection.]

Friday photo: The first sprouts in a freshly plowed field will be weeds

Country road again

An ecological analogy for retail:

Many of the plants we call weeds originally evolved in tough conditions, where there is annual glaciation, periodic flooding, or severe fires – extreme events that leave exposed, bare earth. It’s in these devastated conditions that our weeds are at home. They germinate first and grow the fastest. And through these characteristics they have found important roles in re-establishing healthy ecosystems… Once the weeds are established, longer-lived plants, less adapted to disturbance, germinate and the process of succession begins. The process may end in a grasslands, woodlands or forest, depending on the soil and climate. Indeed, the weeds create the conditions of their own inevitable demise – inevitable unless of course the disturbance recurs.

The “weedy species” that so many bemoan, the token dry-cleaners and fast-food joints that sprout in brand-new buildings, are one key to building a retail market. Over time, better adapted shops will take root — and given enough stability, species will evolve into very specific ecological niches. These new species will both adapt to their environment, and also change the environment around them. The key is to give the habitat time to evolve by avoiding excessive disturbance — a condition ecologists call “disclimax.”

Cultivating biodiversity requires striking the right balance between stability and renewal. The goal should be less to conserve individuals than to maintain the health of overall communities, to not seek out stasis forever but to manage change for the long term.

Gradual change within human communities also helps to sustain and build linkages, according to a paper by sociologist Katherine King: “A gradual pace of redevelopment resulting in historical diversity of housing significantly predicts social relations.”

CNU conversations: Striking before the neighborhood’s hot

DeKalb Market, Long Island University

Yet more thoughts from our (apparently quite long) lunchtime conversation about community-building.

We talked extensively about how, but where would these strategies have the greatest impact? It’s important to jump off the price escalator — to opt out of the gentrification process — early on, before outside capital floods into the neighborhood.

The “tipping point” in neighborhoods is always tied to outside money. First, an urban neighborhood is “discovered” by suburbanites looking to spend their extra $20s in cute restaurants, then by institutional investors looking for $2 million investments, and pretty soon the whole place jumps the shark. But if the small dollars are ever going to have a chance to win the game, they’re going to have to start early on — or else console themselves to small, subsidized slices of the neighborhood, post shark-jump.

“Favored quarter” locations in gateway cities are probably too far gone (more on this in a future post). Even the immediately adjacent areas have probably been bid up too far to be affordable without turning to outside capital. A Place Corp takes a substantial investment of time, rather than money, so the key is not to overpay.

One approach that can work where explosive change appears inevitable is what I’d call a “waterfall TIF.” This uses redevelopment revenue from a “sacrificial” area — for instance, an underutilized industrial corridor separating a gentrifying area from a stable area — to shore up the affordable housing stock in adjacent areas. Two examples:

  • The Hill District in Pittsburgh is a historically poor, African-American neighborhood overlooking downtown. The Lower Hill was demolished for urban renewal, displacing 8,000, but it was never fully developed, except for one arena. A recently adopted TIF to develop the site will direct property tax revenue “into two separate accounts: one for infrastructure needs in the Lower Hill and one for reinvestment in the Middle and Upper hill.”
  • In Houston, the Midtown TIRZ spent $15 million to purchase 34 acres of the adjacent Third Ward, including hundreds of vacant lots, which was then handed to nonprofits and thus taken off the market.
    • Kinder Institute: “Adjacent to the Third Ward, the quasi-public tax increment reinvestment zone that was transforming Midtown — an area formerly divided between the Third and Fourth Wards — was required to dedicate a portion of its revenues for affordable housing. But [State Rep. Garnet] Coleman saw that property values there were rising so quickly, affordable housing would be a difficult pitch to developers, so he convinced a related agency, the Midtown Redevelopment Authority, to use the money to buy properties in Third Ward instead. The redevelopment authority would then sell the property to developers who were required to build affordable single-family homes and rental units. Today, the authority owns 3.5 million square feet of land in Greater Third Ward. Coleman started banking land through the authority in the neighborhood he grew up in, hoping to buy up enough to make a sizable percentage of its future housing affordable. That scheme has already yielded a crop of single-family homes and plans for apartment complexes.”

By the time the usual affordable-housing resources, like TIF funds and inclusionary units start to flow, it’s already too late — prices will already be on an upswing. For maximum effect, resources need to start flowing before new construction and new investment create new amenities, which raise property values. Of course, this requires neighborhood organization (and probably capacity-building) beforehand, to identify areas about to undergo change, and to plan for the process.

Think of it as an approach comparable to Transferable Development Rights, which have preserved many rural communities, just applied to urban communities instead. To use the photo as an example, imagine if some of the value created by the Downtown Brooklyn rezoning (affecting the sites in front of Flatbush) could also have steered capital funds towards rehabilitating and expanding NYCHA’s Ingersoll Houses (at back right).