Monday, April 25, 2005

Redeveloped to death

The symptoms come on every time I read about the Pittsburgh Urban Redevelopment Authority. My throat constricts and I start frothing at the mouth. I start to convulse, and if no one is around to stick my wallet in my mouth, I'm likely to bite off my tongue. Here is the cause of today's histironics, a profile of URA Executive Director Jerome Dettore in the PG:

"I'm proud of Washington's Landing," he said. "I'm proud of Summerset at Frick Park. I'm proud of the SouthSide Works. I'm proud of the Pittsburgh Technology Center. We've impacted almost every neighborhood in the city."

Let's take Summerset and Washington's Landing. Truly progressive cities devote redevelopment funds to rejuvenating blighted, run-down neighborhoods, not building upscale housing and a marina. Both Summerset and Washington's Landing were built on former brownfield sites, and I have no problem with government assuming the costs of preparing such land for redevelopment. I just want government's role to end there; let the private market take over.

And as for SouthSide Works, the last thing this city needs is more subsidized retail, particularly in an already thriving commercial and residential district. Again, I don't question tax dollars going toward reclamation of abandoned industrial land; but I do have a problem with government subsidizing the private developers who take over once that process is completed.


Blogger fester said...

Jonathan: From my understanding of the URA and more particulary the Summerset and Washington's Landing projects, the way that they were structured were pretty much the only way that brownfield reclamation could have occurred with any significant private money involved in the deal. Summerset at Frick/Nine Mile Run was a slag dump, and for the city of Pittsburgh and the URA to be "Truly progressive cities devote redevelopment funds to rejuvenating blighted, run-down neighborhoods, not building upscale housing and a marina," would have required, if I am reading you correctly to dump forty or fifty million dollars into the area for below market rate housing, land stabilization, and environmental remediation. Else we would have seen absolutely no action done to remediate a slag dump. If Herr's Island/Washington Landing was to be low or median income housing, there would have been next to no private money involved. Brownfield reclamation is expensive and risky, and the way to attract private capital that can finance the majority of that project is to create conditions for above market rates of risk adjusted returns which means in development, upper end development.

At the start of your blog, we had a pretty good discussion on the low levels of substitution effect between very old housing (which is most of the PGH housing stock) and brand new housing. New housing in large quantities sell at a much higher price, with the attendent property tax valuation increases that benefit the city. Increased tax revenues creates more resources that can be used in the neighborhoods that need the help the most. As it is, the URA has never devoted more than 10-12% of its yearly resources towards these two projects, and in the last fiscal year it committed 5% of its resources between Summerset and SouthSide Works.

So the URA is devoting a relatively small percentage of its budget to a couple of major projects that are designed to accomplish three major things; increase the tax baes, remediate and reuse three major and prominent brownfields, and supply a new economic development niche to the city. The rest of their budget is based on doing what you suggest that they should be doing.

10:02 AM

Blogger Jonathan Potts said...

What I was suggesting was that more funds go toward rehabilitating EXISTING housing in the city, not towards building more in a city that has embarked on a 60-year population decline. I respect your views, but I'm not convinced that the lack of new housing is what is keeping people out of the city.

What I was suggesting regarding brownfield reclamation was that it is an acceptable use of government funds, but that any subsequent development should be the work of the private market. If a private developer wants to build luxury homes, then by all means, go ahead. I just don't want to see any further subsidies after that, and I don't want the city dictating terms beyond existing zoning codes.

Finally, I'm glad to hear the URA is good things in neighborhoods. I might suggest, from a public relations standpoint, that they start talking about those things.

10:43 AM

Blogger "O" said...

As I've posted before, housing rehabiliation may work in Friendship, Southside, or the Mexican War Streets, but I doubt that it would work in, say, Larimer.

But beyond that, according to the URA website, they offer their Housing Recovery Program mortgages for people to rehabilitate their homes. From 2003-2004, they closed on $3,220,215 worth of these loans, and $841,265 in deferred mortgage commitments to developers renovating existing units. This accounts for 139 units of housing. This apparently doesn't include actual development funding, just deferred mortgage loans. No idea what that money is, but apparently 47% of URA funding goes towards housing programs.

But in terms of the costs of rehabilitation, it is often more difficult to rehabilitate housing than to build new, because of the inherited problems from the original contractor. Moreover, the costs of owning an older, less energy efficient older home over the long run makes a newer home more attractive to those on a fixed income.

The cost of developing a home is directly related to the final sales price. If a developer is going to sell a home, he's going to need to be able to pay for it through sales proceeds, or be able to write that cost down on the construction side, i.e., grant financing. So from a public perspective, it's a trade off of subsidizing affordable housing a lot or subsidizing market rate housing a bit.

Further, if you're going to be a public official and make a decision, would you choose a project that has a high return in tax revenue with low subsidy or a project that has a low tax return and high subsidy.

Just sayin'.

9:44 PM

Blogger Jonathan Potts said...

Again, the question is whether a government agency should be in the business of developing upscale housing on swathes of undeveloped land. I'm glad to hear they are doing more than I thought toward housing rehabilitation, and I'm not arguing that they be spendthrift in neighborhoods where the return on their investments might be low. I would argue, however, that there are long-term benefits to taking steps to rehabilitate blighted neighborhoods.

8:49 AM

Blogger fester said...

As a defensive measure, I have absolutely no problem with the government giving reasonable subsidies with a high probability of a high ROI for upscale housing, especially when the alternatives are to leave three brownfields pretty damn brown AND seeing both city residents and potential in-migrating individuals decide to cross Pittsburgh off the list of options if they are looking for high quality new housing. Should it be the exclusive activity of the government ED agency: HELL NO, but it is not the exclusive or even dominant activity of the URA as "O" points out. Should it be a tool and a segment that the URA works in --- most likely YES.

12:45 PM

Blogger Jonathan Potts said...

It seems to me that environmental reclamation can occur without full-scale redevelopment.

While I do believe that livability factors are very important, extremely important, to economic development, I'm skeptical that we are losing out on in-migration because of a lack of new housing. The entire region is losing population, not just the city.

I certainly hope both developments are successful. That certainly would prove demand exists. But at some point, if you keep subsidizing new development, you'll never attract unsubsidized development.

12:55 PM


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