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

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“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. (Maybe it helps that Illinois law requires only 75% of units to force an en-bloc sale.) 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”

A condominium next to the Huntington Metro has put itself up for sale via an RFP process, with an 80% approval threshold and a requirement that replacement units be built and offered to current residents first.

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 two cases (at Aventura, North Miami’s fortress mall, and Metrotown outside Vancouver) 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.

NIMBYs: loss aversion and, geography of, and rhetorical fallacies of

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Not all change is bad.

It won’t rank high in the annals of “speaking truth to power,” but it’s interesting to read Washingtonian writer Marisa M. Kashino’s take on DC’s systemic housing underproduction: “But the District hasn’t shown much nerve when it comes to making big changes… Which brings us to the unusual power wielded by the city’s NIMBYs.” (City magazines usually aren’t known for taking their wealthy readers to task.)

But Megan McArdle, writing for Bloomberg View, says this is an unlikely scenario. Writing about the current back-and-forth regarding DC’s zoning, she says it’s been “Two steps forward, sure, but such little steps, and now we’re looking at going backward again.” But why are zoning fights so inherently difficult? McArdle points to cognitive biases: “At the heart of the matter is loss aversion: people will fight harder to preserve something they have than they will for a potential gain.”

Three related thoughts on NIMBYs:

1. History doesn’t offer much encouragement. In theory, a clear majority of citizens would benefit from abundant housing, but they rarely voice broad support on behalf of their minimal gains — and certainly rarely can drown out the fewer but louder voices who could lose benefits under the current system. For example, Red Vienna democratically chose to tax the rich to build mass public housing, but it took an abominable housing crisis (and the World War-spurred collapse of an empire) to force the electorate into action.

2. It’ll be interesting to see how similar politics plays out in other policy arenas — a thought that came to mind when listening to a recent talk about the feasibility of “deep decarbonization,” i.e. reaching the -80% CO2/2050 goal necessary to stabilize a changing climate. Although the study found that total energy services costs will increase only slightly — by about 1% of GDP by 2050 — it found that, within that energy services budget, the balance will shift from fuel providers to capital.

A clean energy economy will build renewable power plants (i.e., cap ex) which cost more upfront, but thereafter will throw off energy with very little ongoing costs. In the case of “negawatts” from efficiency, highly efficient or even net-zero buildings cost more up front, but cost much less to operate and maintain. This is a huge contrast from the existing system, whereby fuel providers extract huge rents from the rest of the economy.

Geographically, this shift should benefit most places, since green power is widespread — somewhat like Portland’s Green Dividend. However, the relatively few places that currently live off of fossil-fuel “resource rents” will lose out, and will fight back. Even though just three small states produce almost 60% of US coal, their representatives’ passion for coal far outweighs the millions who would benefit if coal pollution were reduced.

3. One of the NIMBYs’ favorite rhetorical fallacies is “the shill gambit,” an ad hominem attack that proclaims any non-NIMBY to be a secret, Astroturf-esque “paid shill” for development interests. (Some people can’t conceive that there are non-monetary, non-selfish reasons to hold a given position.) This contemptible lie — which slanders the opponent’s ethics to “poison the well” and thus avoid an argument on the merits — is readily leveled against pro-density forces even when it’s demonstrably false, including SFBARF in San Francisco or, of course, against yours truly.

This particular lie isn’t unique to arguments about development, of course. Naturally, conspiracy theorists of all stripes like to paint their opponents as all part of the same conspiracy that’s out to get them. It’s especially common among “alternative medicine” quacks, who love to call anyone who questions their arguments pharma shills — a label some have embraced with the hashtag #shillarmy. In an indication of how tired and un-useful the argument is, it’s been banned on parts of Reddit. If only such moderators were active elsewhere.

Housing market myths: USA’s biggest landlord says outsiders not to blame for high SF, NY, DC rents

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Conference calls announcing corporate quarterly earnings don’t usually turn up explanations about why the Rent Is Too Damn High, but then again most companies don’t own 100,000 apartments across America, clustered in the biggest and most expensive cities. These are the folks who are raising your rent, and the reasons why don’t have anything with the usual bogeymen.

So, forthwith, some annotated comments by David Santee, chief operating officer of Equity Residential, from their 2014 results call.

Lofts 590, Crystal City

Equity Residential owns this building, and most of the thousands of apartments in Arlington’s Crystal City neighborhood.

 

1. California’s multi-year drought wasn’t solved with a few days of rain this winter — and, as the state legislature’s own analysis says, the generation-long drought of housing starts won’t be solved with a few new towers here and there:

“San Francisco continues with epic pace with significant acceleration in Q4 [2014]. In one of the most under-housed cities in the country, deliveries are minuscule and simply don’t seem to be relevant.”

Indeed, San Francisco is in such negative territory with housing (and water, for that matter) that more than doubling San Francisco’s population (which would still leave it half as dense as Manhattan) might only have kept housing price inflation in line with the national average. Note that’s not “falling housing prices,” since that’s rare, just “not increase quite as fast.”

2. New York City’s too-damn-high prices can’t be blamed solely on a handful of zillionaires snapping up shoeboxes in the sky. Instead, the blame lies squarely on everyday New Yorkers, or rather on the buoyant economy they’ve created and surprisingly limited new construction they’ve permitted.

New York City specifically Manhattan remains stable, with only slight concentrations of new deliveries on the upper west side… However, with population in the metro achieving the new high of 8.4 million people, a pick up in business and professional service jobs, and the continued growth in jobs away from financial services, New York should produce four-handle revenue growth supported by an expected 155,000 new jobs in 2015.”

(“Four-handle” is bond-trader slang for “4-5%”.)

3. The era of “boomtown DC,” the city of Fox News nightmares where Barack Obama used government debt to hand out Obamacare-regulation-writing jobs like candy, appears to be ending. Or maybe it never existed: much of the District’s population growth turns out to be just the usual machinations of a large metropolitan area rearranging itself — in this case, as with many others, centripetally.

The district itself continues to see outsized population growth and 25% of our district move-ins were from folks moving closer in from Virginia and Maryland…

Not that this particular phenomenon is unique to DC, of course; Equity boss Sam Zell has noted a broad-based “increasing demand for housing in the urban markets.

The centripetal pattern also applies to the usual flow out from cities, which has been stanched in recent years:

The recession diminished this flow. Fewer than 23,000 young adults left New York annually between 2010 and 2013. Only about 12,000 left Los Angeles—a drop of nearly 80% from before the recession. Chicago’s departures dropped about 60%.
Young adults who moved to the three cities for school, internships or early jobs—or simply because it seemed cool—may now be stuck, said William Frey, a demographer at the Brookings Institution… In tough times, finding well-paying jobs may be easier in big cities, offsetting their relatively high costs of living.

This would be a terrific smart-growth opportunity to capture more population in resource-efficient, highly-productive, low-footprint urban areas — if only said cities were more affordable!

——-

While I’m quoting at length, and because it’s marginally relevant, Old Urbanist wrote up this useful comparison to how America’s zoning system systematically creates bountiful affordable housing… for cars:

American states and cities have engaged in onerous mandatory inclusionary zoning for cars (parking minimums), zoning exemptions (e.g. not counting garages toward FAR limits and allowing parking, but not housing, in mandated setbacks), tax exemptions (only 16 states maintain a personal property tax that covers automobiles) and fringe benefits (the commuter parking benefit), in addition to rent-free public housing for cars (overnight on-street parking).

Will Mayor Bowser recommit to Sustainable DC & MoveDC?

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[updated 1 April]

In a recent speech to District Department of Environment employees, Mayor Muriel Bowser offered some warm words about Sustainable DC — but fell short of a full-throated endorsement:

The decisions that we make are often, I would always say, 50 year decisions… The decisions we make around transportation options, whether we put something someplace or not — again, 50 year decisions. What is clear is that we’re making decisions right now that affect the next generation, and shape the options for the generation after that.

We have to be very careful in government about how we distribute our resources, and how we take care of the community. We inherited it, and we have to leave it better for the generations that follow us…

I inherited the past successes… I inherited some good things, and one of those good things was Sustainable DC. And so what I know Tommy [Wells] will do with me is make recommendations on all the things we should keep, all the things we should push harder on, the things we have to add, and if there are things we have to change or delete we should do that too…. I was elected for a fresh start, not a start all over, and so we want to make sure that we’re building on the successes of your hard work… and push the District even farther.

Mayor Gray leaves behind a substantial legacy of ambitious plans, particularly Sustainable DC and national award winning direct descendant Move DC. Both began with citywide public involvement, set ambitious performance goals, and have started to guide real implementation efforts that would, if continued, really advance the long process of creating a truly sustainable District.

Just to put one of those performance goals into a global perspective, Sustainable DC has twin goals of increasing the District’s population by 40% and shifting 75% of commute trips out of cars — baseline goals that MoveDC started with, and crafted an implementation strategy around. Alex Block points out that this is certainly doable, but it isn’t easy.

MoveDC capacity targets

To do so will require more than doubling transit capacity, almost tripling bike capacity, and cutting car capacity by 7%. It would avert over one milion VMT every weekday — which (with current emissions factors, which assume today’s technology) would cut 580 tons a day from DC’s carbon emissions, more than 3X as much as the reviled Capitol Power Plant puts out.

Smart growth policies like MoveDC are a fine example of acting locally while thinking globally, as these are local policies that would have global consequences. The National Research Council & TRB estimate that a national shift towards denser development — including shifting more population growth into the District from the suburbs — would cut CO2 emissions from driving by 11% by 2050, even before any change in vehicle technology. That’s 132 million metric tons of CO2 each year, an amount exceeding all coal emissions from DC, Maryland, Virginia, and West Virginia. Or, put another way, smart growth cuts driving, which could cut as much CO2 as shutting down all of our region’s coal power plants.

Of course, we will absolutely need to do both — and much more — if we’re to have any hope of avoiding a certain existential threat to DC’s future. But only smart growth and energy efficiency cut emissions over the long run, and pay for themselves in the short run.

Abundant housing supply moderates prices, but only drastic oversupply cuts prices

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Daniel Kay Hertz assembled a few current examples of how overbuilding in the rental apartment market is keeping rents down.

South Michigan

Market-rate and affordable apartments under construction side by side in the South Loop.

A commenter pointed out that the South Loop multifamily market cratered in 2009 — and more broadly, the downtown Chicago market was flat over the entire 2000-2010 real estate cycle. People who bought some of the first Loop loft conversions have not earned more than the rate of inflation. In 1999, the buildings at 208-212 W. Washington St. were purchased for loft conversion, which was truly unusual then. (I worked just a few blocks east, and was in the market for a condo when it was closing out.) Today, 212 W. Washington St. #2108 is on the market for $395,000, less than the $414,411 that its $319,000 sale price in 2002 inflates to. Other properties in the building have recently sold for less than their 2001 nominal prices. This is despite a “hot” market that’s “running out of condos.”

(I brought up this example during the Height Act battle, when some obtuse conservatives claimed that skyscrapers caused, rather than merely correlated with, high housing prices in Manhattan. Well, Chicago builds more skyscrapers, which allows its downtown housing supply to match growing demand.)

More broadly, the entire 2008 financial crisis is one big national case study in house price decline. Namely, it’s the prime example of why house price declines are rare: housing is so highly leveraged, and so central to household wealth, that falling prices really hurt the entire economy. As Ryan Avent writes: “since buyers are heavily leveraged, losses in value are magnified, raising the risk that price declines become crises.”

In a Brookings post-mortem [PDF] on the 2008 crisis, Karl Case (yes, of Case-Shiller) notes that broad housing price declines are rare: “nominal prices never fell over any full quarter between 1975 and 2005,” and that fact gave bankers’ computer models undue confidence in ever-rising prices. Moderate oversupply rarely results in falling prices because housing markets have other ways of discounting — sellers trade time for money and just wait it out:

Another important aspect of housing market efficiency is that prices tend to be sticky downward. In most markets, when excess supply develops, prices fall quickly to clear the market. But housing downturns have been characterized by sticky prices. Sales and starts drop but prices are slow to respond…
Downwardly sticky prices lead to “quantity clearing markets” rather than “price clearing markets.” […] Demand drops. The inventory of unsold homes rises. Prices stick. Output falls. The inventory of unsold property remains high (because a house is a durable good, not a consumable). But household formation rates remain positive, and the new households eventually absorb the excess inventory and output rebounds. Assuming there is upward inertia, prices then rise and ultimately overshoot; demand again slows, starting the next cycle.

For rented real estate, contract rents are only one way to set prices. Other ways of discounting abound: free months of rent, tenant improvement allowances, improvements to fixtures or common areas, bundled services (like utilities), additional amenities, and outright gimmicks can effectively act as “discounts” even while nominal rents don’t decline.

Case also mentions that housing is a heterogenous good, where each property is different. In real estate markets, that usually plays out as a “flight to quality” where prices hold up for the best buildings, and prices fall for lesser locations and uglier buildings. This phenomenon has dampened urban dwellers’ memories of the 2008 crisis — they’re less likely to remember the price decline, since “home values have generally held up better the closer a home is to the city center.”

At a local or regional level, though, housing prices do decrease on a pretty frequent basis, and over-supply is usually why. In “Why Do House Prices Fall?,” a pre-crisis paper written by Daniel McCue and Eric S. Belsky for the Harvard Joint Center on Housing Studies, the authors found that severe overbuilding almost always leads to housing price declines.

“While only about a third of all spells of moderate overbuilding resulted in price declines, nearly two out of every three spells of severe overbuilding resulted in price declines, and eleven of the twelve spells of extreme overbuilding resulted in price declines, all of which were large.” [emphasis added, extraneous definitions omitted]

housing price declines

The graphs do appear to vindicate the notion that market forces alone can, without subsidies, cause housing prices to decline. The housing-permit equivalent of a 300-year flood will almost guarantee that prices will drop by around 15%.

McCue and Belsky note that such overbuilding has basically disappeared from major cities in recent years, though. Instead, these cities have extirpated the rare beast and now systematically underproduce housing. Since nobody can remember prior oversupply crises, they now feel free to deny that such a thing is even possible.

Note that of the three major factors McCue and Belsky tie to house price declines, overbuilding is implicated more often than either employment loss or overheated prices. Just high housing prices on their own rarely led to corrections; because housing prices are sticky, high prices just plateau for a while.

housing price declines

Even in the realm of luxury goods (which some wrongfully claim that housing is), a good old supply shock is always eventually able to bring prices back into line. Here’s the supply and price of Maine lobsters, whose prices collapsed as the recession cut demand for ostentatious restaurant meals, but where growing supply has kept prices down even as demand rebounded: “Lobster, long considered a luxury, is becoming a little more ordinary.”

lobsters

Sadly, San Francisco has underbuilt to the point where it would take a a 26% increase to its current housing stock to get the market back into balance.

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

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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 ever–growing 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

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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.

A few more thoughts on beautiful Brutalism

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Board formed concrete

Writing “The five best Brutalist buildings in DC” required a lot of attention to definitions. The article’s less about the “best” Brutalist buildings than about examples of Brutalism that fit in well with their urban surroundings (or, in one case, rural surroundings). I love the Hirshhorn Museum’s courtyard, for instance, but it’s pretty awful towards everything around it, so it didn’t merit a mention in the article.

That said, I did check each of the buildings against Reyner Banham’s original 1955 article on Brutalism, which established these three criteria:

1, Memorability as an Image;
2, Clear exhibition of Structure; and
3, Valuation of Materials ‘as found.’

If any of the seven buildings are “on the cusp” per Banham, the CFPB and Canadian Embassy fit in too well with the perimeter-block typology of the city around them — and therefore don’t quite have the cartoonishly simple standalone imageability* typical of the Brutalist sculpture-as-building. Yet both are very clear in plan and intent and have imageable elements. Perhaps the Canadian Embassy’s devalued materials make it more of a postmodern spin on Erickson’s own Brutalism, but that’s a fun tautology.

Commenters have disputed Dulles Airport’s inclusion, perhaps because they actually like it and want to reserve “Brutalism” for stuff they don’t like. Yet it easily meets Banham’s definition, and furthermore celebrates a vast expanse of béton brut like no other local structure.

Other links I wanted to include, but that didn’t quite fit:
– Sometimes, even a clumsy Brutalist building can be better integrated into the urban fabric through changes to landscaping and circulation; such repairs are underway at Boston’s City Hall.
– Over in supposedly kinder Ottawa, Brutalism was the house style for many cultural institutions, and insensitive changes to these buildings are proving controversial.
– The BBC is currently airing a two-part series on Brutalism.
– Some very highly expressive concrete canopies are on view now in an exhibit at the Art Museum of the Americas about the work of Félix Candela, whose soaring but paper-thin concrete shells enclosed everything from bandshells to cathedrals throughout Mexico.

* Favorite story about this: A cab driver in Shanghai didn’t know which Hyatt hotel I wanted to go to. Instead of fishing around for the address, I drew the shape of the building, and we were off. (It turns out that “Hyatt” was Sinicized in Cantonese, perhaps because the chain opened in Hong Kong before China, so when written in Mandarin it’s pretty much gibberish.)

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

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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.

A similar concept was floated on POP in 2012 and roundly criticized in the comments, although it seems most of the commenters misunderstood which segment of RCP was being referred to.

* 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

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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.

Shorts: Critical Masses

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Critical Mass I Ching

A few short topics for January, all around the theme of achieving critical mass in three very different markets for metropolitan services.

1. Nathan Donato-Weinstein, reporting for the Silicon Valley Business Journal about Google’s October purchase of buildings along San Francisco Bay:

Google — which like many expanding tech companies is focused on reducing its car and shuttle trips as traffic worsens during the current boom — may be eyeing transit options beyond freeways. Pacific Shores is a half mile from the Port of Redwood City, where a Google pilot project earlier this year tested running ferries from San Francisco and Alameda to the port. The Water Emergency Transportation Authority, which administers the San Francisco Bay Ferry routes, has studied regular public ferry service to Redwood City, with a potential public terminal practically next door to Pacific Shores.
“I know they really liked the ferry and the concept. Their challenge was getting people off a boat and putting them on a bus to Mountain View, and that was taking 25 minutes,” said Kevin Connolly, director of planning and development for WETA. “This might be one way to address it.” […]
A Redwood City terminal would cost about $15 million. But the county doesn’t have ongoing operational funding, Connolly said.
A major built-in user such as Google could help make service pencil out, he said.

I’ve written critically about the peculiar geometries (and thus poor economics) of water taxi transit before. Having high-density development built on landfill immediately adjacent to a deep-water port certainly solves some of those problems — but a ferry does need at least two ports. However, most other Bay Area jurisdictions have incredibly restrictive development policies along their waterfronts, and many of the Bay Area’s most desirable residential areas are well inland (and atop hills, in fact).

Perhaps last-mile bus service would supplement a 101-bypassing ferry on one or both ends. That adds in the time and hassle of a transfer; when combined with a lower peak speed (around 40 MPH) and increased susceptibility to inclement weather, it’s tough to see how it would be a faster, more reliable, or more fuel-efficient option. (2008 figures submitted to FTA, as reported by Wayne Cottrell in Energies, indicate that ferry operators in the USA have a median fuel economy of about 10 seat-miles per gallon of fuel.)

2. General Growth Properties plans a $2 billion investment in street retail, ultimately aiming to have 15% of its portfolio invested on high streets in the principal gateway cities of NYC, Chicago, Miami, Boston, DC, SF, and LA. Even in these high-rent areas, GGP sees “assets with significant unrealized growth potential,” with below-market rents and under-used vertical space.

General Growth Properties investor presentation slide

Many office REITs have focused on CBD office, but these properties have historically been neglected by large retail REITs. Adjacencies matter much more with retail than with office, which creates a “commons” problem that undermines streets with fragmented ownership.

GGP has hinted at two approaches to circumvent this. Like Acadia Realty Trust (an exceptional retail REIT that has redefined itself as a high-street owner), it might hope to aggregate enough properties to create its own mall-like ecosystem, and thus internalize the external benefits of its investment. GGP’s first big investment, an equity stake in the Miami Design District, certainly has that advantage. However, the DD is a singular example unlikely to be replicated elsewhere, so it appears that GGP will instead have to rely upon its high-rent neighbors to similarly aggressively upgrade their properties.

This could be a long waiting game, though, since a lot of urban property isn’t owned by others who need the same quick upside that a REIT does. Micah Maidenberg quotes a skeptic in Crain’s:

“The street-retail business, just like luxury hotels and other sorts of high-end projects, tend not to be a quarter-to-quarter-growth kind of business. It’s more of a long-term hold,” says Jeffrey Donnelly, a managing director at Wells Fargo Securities in Boston.

3. Two few weeks ago, I was visiting my parents in North Carolina and feeling under the weather. While looking up my out-of-area health care options, I came across an instructive article in Milbank Quarterly (by Daniel Gitterman, Bryan Weiner, Marisa Elena Domino, Aaron McKethan, and Alain Enthoven) about why Kaiser Permanente’s integrated group medical practice failed in the Triangle — where I’d previously been a satisfied customer.

My main takeaway from the case study was that, while “prepaid group practices” like Kaiser or GHC in Seattle (not to mention vertically integrated government systems like the VA) do offer tremendous cost efficiencies, they also rely on economies of scale that are difficult to set up from scratch.

The article estimates that KP’s break-even point is around 100,000 members in a metro area. That figure would have been a huge ask, given that the Triangle’s population was well below a million at that time, and spread out across a broad area. KP needs that kind of scale to build bargaining power, both:
– on the cost side, when bringing services in-house (the essential feature of their cost-containment model) or bargaining with hospitals and specialists; and
– on the revenue side, when selling their product to employers and employees who have to be sold on a choice that (a) most would find less convenient and (b) involves disrupting the “stay with my doctor” inertia many customers have.

It’s not a coincidence that prepaid group practices are best established in markets where either government employees or unionized employees bulk-purchase healthcare services. But HMOs are beginning to re-emerge now that the Triangle is bigger and denser, the ACA exchange has made the health insurance market less fragmented, and more doctors have organized into group practices linked to specialists via electronic health records. One new option in this year’s ACA marketplace for North Carolina (and especially valued, since last year only NC Blue Cross participated in the marketplace) is Coventry’s CareLink HMO, which uses Duke Medicine’s primary care network as the in-house practice.

New steel & wood innovations that make mid-rise construction easier, faster, cheaper

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Earlier this year, I wrote about some new materials and techniques that could make structural engineering for mid-rise buildings easier, faster, and cheaper. If widely implemented, these could make human-scaled mid-rises more affordable, more widespread, and frankly better looking.

ConXTech

Steel makes elements like this penthouse easier to build. (Alas, the exterior’s been toned down from this glassy early rendering.)

1. While I was in California, I saw two examples of steel-framed mid-rise buildings constructed using ConXTech, an Erector Set-like approach to steel frames that promises to save time and money through computer-aided prefabrication. Eddie Kim writes in the LA Downtown News that the Eighth & Grand grocery + apartment building, “There’s no army of welders diligently fusing each joint and beam. Instead, steel girders are being lowered and snapped into place.”

Dan Garibaldi from developer Carmel Partners told Kim that the technique cut costs some, but really saved time and added design flexibility, particularly crucial in a mixed-use project: “We contracted for the steel at a beneficial time so the cost differential is not nearly what it would be today… The main benefit is how quickly we can complete the framing. In addition, ConXtech allowed us [to build] an additional residential floor and create long spans that are not easily achievable in wood frame.”

ConXTech co-founder Robert Simmons expressly invented the system to compete with Type III-over-I construction. He told Kim, “we were looking at ways to create a competitive method of structural framing versus wood and I couldn’t do it with concrete, so I started looking at steel.” His firm worked on the concrete retail podium at Santana Row in San Jose, which suffered a massive construction fire — not unlike recent fires that destroyed under-construction, pre-fireproofed Type III buildings in Mission Bay and on Bunker Hill.

Santana Row

Not Type III over I.

Santana Row’s upper-story apartments (and hotel) were rebuilt using ConXTech steel, and there are palpable differences between it and, say, Rockville Town Center (another Federal Realty development, built as conventional III-over-I), notably more generous window openings and a subtler transition above the podium. At Santana, the base of the building often extends above the second floor, allowing not just for retail mezzanines but also adding vertical articulation.

2. Cross-laminated timber is a particularly exciting new technology for D.C. buildings: under current building codes, it can reach up to 90′ high — the height limit outside of downtown — and uses wood, which is locally available, easy to work with (i.e., fast and inexpensive), and has a comparatively small carbon footprint. Plus, it can look like the old timber lofts of yesteryear, a building type I’ve long been fascinated with.

Architect Michael Green’s Wood Innovation and Design Centre in Prince George, B.C. was recently completed; it reaches 90′ with its eight stories — or, technically, five stories and a penthouse over a one-story podium with a mezzanine, a bit of creative accounting perhaps done to satisfy code requirements. But whatever, Prince George might as well be on the moon, since it’s 500km from even Edmonton or Vancouver.

A heavy timber loft for the 21st century, built with rapidly renewable materials.

What’s more notable is this seven-story speculative office building that fits right into downtown Minneapolis’ loft district, designed by Green and developed by office titan Hines. Sam Black writes in the Business Journal, “Unlike Warehouse District buildings such Butler Square and Ford Center that were built out of huge logs, modern timber buildings use wood engineered from several layers of younger trees.

Today’s office tenants disdain boring concrete high-rises, and even the new-construction concrete “lofts” that began popping up in the 2000s are a weak alternative. CLT offers architects a chance to build an authentic timber loft building, from scratch, and without harming old-growth trees. Bob Pfefferle from Hines told Kristen Leigh Painter of the Star-Tribune, “it provides an authentic building that is respectful of the neighborhood. This will have the ambience of the old warehouses with timber beams that everyone wants, but solves all the problems of energy efficiency and light.”

Coincidentally, this month’s Arch Record has a sponsored feature on “tall wood” buildings. The IBC, it points out, limits commercial-occupancy wood buildings to six stories (vs. five for residential), hence the seven stories that Hines is proposing.

I can imagine that similar new-build loft offices could be popular in similar downtown-adjacent submarkets, and transformative for Sunbelt cities where sparse “warehouse districts” have little competing product. I’m thinking Austin, Denver, Raleigh, San Diego, Seattle, or maybe infilling Bay Area subcenters like West Berkeley and Redwood City