The Importance of Housing in Downtown Revitalization
Kentucky Main Street Program
Winchester
January 30, 2008
Donovan D. Rypkema
Thank you, Becky, for inviting me. I always appreciate being asked to make presentations for Kentucky Main Street, and particularly now that my daughter is a resident Kentuckian in Louisville. As many of you know, when I go to conferences what I usually do is to try learn what downtowns around the country are doing. I write down the good ideas and tell other places about them. I confess that that is my real profession – thief of ideas about downtown and neighborhood revitalization. But I particularly like the assignments given to me where I can talk on the broader scale about downtown housing across the country. I’m the biggest advocate I know of for downtown housing.
So what I would like to do in this afternoon is try to answer six questions about downtown housing: 1) What is happening in downtown housing around the country; 2) Why is it happening? 3) Who are the beneficiaries of downtown housing; 4) What are the impacts of downtown housing? 5) What are the prerequisites for a successful downtown housing strategy; and, 6) What are the elements of success for downtown housing projects?
What is happening in downtown housing around the country
So we’ll begin with what’s happening around the country. Anecdotally here’s what I can tell you – it is happening everywhere – east, west, south, midwest; small towns, big cities, and everything in between. I visit around a hundred downtowns a year, of every size. Today it is rare that I ever go into a downtown where there isn’t at least talk about a downtown housing initiative and increasingly where there aren’t at least a few examples.
So let me start with some of the examples I’ve seen in the last few years. I’ll begin with Topeka, Kansas. There Downtown Topeka, Inc. had partnered with the landmarks commission to sponsor an Upper Stories tour of 13 historic buildings that had developable upper floors. In some instances development was almost completed, in some cases just underway, and sometimes no specific plans afoot, but a property owner who was willing to open the upper level to public visitation. In fact they had started with eleven buildings but after the program was printed two more owners said, “We want to be included in this”. What spurred Downtown Topeka to initiate this event? The town of Salina, a hundred miles west and about a third the size of Topeka has in the last few years seen over 60 loft apartments created in upper floors of downtown buildings. Two hundred people toured the upper floors in Topeka.
Shortly after I was in Topeka I was in Sayre, Oklahoma – population 4100. Well, the Census Bureau says 4100 but 1600 of those are long-term guests in a local maximum-security prison. These inmates were from Wisconsin, by the way. They used to house prisoners from both Wisconsin and Hawaii, but the two groups couldn’t get along so they sent the Hawaiian prisoners back home. I don’t know what the groups were fighting about – maybe the relative merits of cheese versus pineapples. But whatever it was the local privately owned penitentiary was getting $5 per prisoner per day more from the State of Wisconsin so that’s how they made their decision about who stayed and who left. But the prison at Sayre is not my example of downtown housing. Rather it is the owner of a used merchandise store in downtown Sayre – his name is Troy Region – who converted the upper floor of his building into a 4000 square foot apartment for he and his wife. There are four bedrooms, three baths, a sunroom, living room, dining room, and kitchen. Now Troy is quite a carpenter and did much of the work himself. And he ended up spending a bit more than he intended – about $30,000 in all – but now he has a great apartment that his grandchildren love to come and visit. The local Main Street program hosted an open house when the work was done and a couple of hundred people toured the apartment. It caused the owners of the adjacent building to make plans to do the same with their upper floor.
A few years ago I was in Joplin, Missouri. There a local dentist owned a downtown three story 25’ by 100’ building that housed his practice on the first floor and the upper two floors were vacant. He and his wife owned a large older house in the nearby historic district and decided that when their two sons had left home they would move to the upper floors downtown. But then they decided, “why wait?” They converted those upper two floors to 5000 square feet of living space and their boys loved being able to skate to the downtown library. They did report to me a downside, however. When the apartment was completed they too held an open house, mostly for their friends – you know the other members of the local country club. Now everyone ooh’d and ahh’d over the apartment, but their closest friends gently pulled them aside – one-on-one – and said, “I’m sorry the dental practice isn’t going so well and you had to move downtown.” Well, of course, that wasn’t the situation at all and my now I’m sure their friends have figured that out.
Just up the street was a building that housed a music store on the first floor. The family that owned the business was headed by an older woman, probably in her early 70s. She was still active in the everyday activities of the business and owned a house some distance away. But she didn’t like driving in bad weather so she had built for herself a very modest but comfortable apartment upstairs where she could stay during snow and rain storms. And, by the way, she was quite adamant about not needing an elevator to get to the second floor.
I don't know how many of you have even been in Rock Hill, South Carolina, just south of Charlotte, North Carolina in the Charlotte growth path. Well 25 years or so ago Rock Hill thought their downtown was declining and that shopping malls were thriving so they decided they needed to make their downtown like a shopping mall. So they looked at shopping malls and said, "What do they have that we don't have?" And their answer was, "they are indoors, they are surrounded by parking, they are constantly 72 degrees, and they have music." Well downtown Rock Hill, like lots of your downtowns, is made up of two, three, and four story buildings. So what did they do in Rock Hill? They put a roof on it. Four blocks of roof at the first floor cornice level, and then they put walls and doors on the ends of downtown and on all of the side streets. And then they tore everything down surrounding this four block area and covered it with asphalt. They put a heating/cooling system in to keep the temperature constant and they pumped in music. Of course downtown only deteriorated faster. The most surreal experience of my life was walking on the tar and gravel roof of downtown Rock Hill and seeing second, third, and fourth stories popping up. Well, finally after the economic development director whose idea it originally was finally left they made the sensible decision to remove the roof. Well I don't believe in instant solutions to downtowns but removing that roof and opening up the street was as close to a quick fix that I've ever seen. People began reinvesting in downtown, opening new businesses, rehabilitating buildings, building new buildings. Rock Hill today has a great downtown. Oh, and those upper floors? They are now some of the best, highest quality upper floor housing I've seen.
Livingston, Montana although only 6500 people, has become something of a hot spot for people from the east to have a second home, or a first home, or an in town place when there is no snow for their ski lodge. And it has become an artists haven for those who can no longer afford to live in Missoula thirty miles away. And what are they doing in Livingston? Putting housing in upper floors.
Then I was in Beloit, Wisconsin, an old industrial town about a hundred miles northwest of Chicago. But it is also home to an excellent small liberal arts institution – Beloit College. Under the leadership of the local Main Street manager, the city of Beloit, and a member of the economics faculty at the college the redevelopment of an old hotel downtown was undertaken. This property had become largely a flophouse, vacant on the first floor, and was deemed an adverse influence on the revitalization of the downtown. The college moved its bookstore into the ground floor along with a coffee shop and a student oriented gift and sundries store. The upper two floors were turned into market rate housing. Nearly all of the units were rented before completion at rents that topped the highest in the community.
About a year ago now I was in Waverly , Iowa, population 9000, where with the active support of the Main Street program an investor turned the upper floors of a downtown building into what became the most expense rental property in town – rental rates equivalent to what they could get in Des Moines. And of course my most recent and now favorite example of great and increasing numbers of upper floor downtown housing units is Paducah. I was in Paducah in November after having not been there for 7 or 8 years. I was amazed at what that Kentucky Main Street community has accomplished.
I myself live in downtown Washington, DC, halfway between the White House and the Capitol Building, a block from the Verizon Center and a block from the National Archives. The population of my zip code in 1990 was 11 people – and I suspect most of those were the homeless. By the 2000 census there were 901 people and there must be nearly 1000 more housing units built since the census. Now we even have a farmers’ market every Thursday.
A couple of years ago the Brookings, the Fannie Mae Foundation, and the University of Pennsylvania took a sophisticated look at twenty-four cities in light of the 2000 Census data. In six cities the overall population of the city declined but the downtown population increased. In twelve of the cities there were population increases both in the downtown and the city overall. But in 75% of those cases, the downtown grew faster than did the city. In two cities – St. Louis and Cincinnati – the population of both the downtown and the city declined. Now just a couple of years later, that is no longer true n St. Louis where there are great residential units being made out of industrial buildings. Finally there were four of the twenty-four cities where there was population increase in the city as a whole but a decline in downtown residents. Why? Here’s what the authors of the report speculated, “Perhaps Charlotte and Phoenix lost downtown population in part because their downtowns do not offer enough to distinguish themselves from their suburbs.”
An analysis done for Boise, Idaho surveyed of downtown workers and Boise area residents. Here were the results: 31% of the residents and an amazing 61% of downtown workers stated that they would consider moving downtown. Now Boise has been experienced a growth spurt with significant immigration of young professionals, so you might think, “Well, yeah, but these are people moving there from San Francisco or Seattle or Portland where downtown housing is more accepted. Well over two-thirds of those saying they’d consider moving downtown had lived in Boise for over 10 years. And two-thirds of the respondents expressed a willingness to increase their housing costs to live downtown.
Well one would think that with the increasing evidence of the demand for downtown housing the real estate development community would get the message. Alas, not necessarily so. Let me give you the example of Atlanta. Over the ‘90s the population of downtown Atlanta grew four times faster than did the population of the city as a whole. A study done around at the beginning of this decade for Central Atlanta Progress – the downtown organization there – indicated that 27,000 workers would consider living downtown. A subsequent analysis showed that the demand for downtown housing far outstripped the supply of units. But what did the headline in the Atlanta newspaper say, “Surveys Show Hot Downtown Atlanta Housing Market, Developers Disagree.” and then quotes a real estate consultant saying, “There’s a deeply ingrained perception that downtown is not the place to be in the development community.”
Why is it happening?
So it is clear that housing downtown is in the ascendance. But the question is – Why? I would suggest that there are a series of factors that over the last decade have come into convergence that have made this phenomenon possible.
At the top of this list, of course, is what all you are involved in every day – organizations committed to downtown revitalization. The impact of what downtown organizations do simply cannot be overstated. Initially it begins to enlighten city hall and the business community about the importance of having a healthy and vital downtown. Then even small success stories increase in confidence level of property owners, lenders and investors in the viability of downtown. Then, lo and behold, downtown really does begin to get better. New businesses, better businesses, reinvestment, enhanced property values, increased sales and property tax revenues, infrastructure improvements. These are all precursors of and catalysts for additional activity, including downtown housing. It would be a mistake to attribute the rapid growth of downtown housing to some spontaneous action in the marketplace. In nearly every instance I can think of it was preceded by years of advocacy by downtown organizations such as yours.
There have also been political forces at work. Elected officials have finally begun to recognize that the quality of the downtown is often seen as a direct reflection of the quality of the institutional leadership of the community. If downtown looks shabby, tired, and abandon the assumption will be that the institutional leadership is mediocre at best. As historic preservation has moved beyond the museums into the mainstream its political influence has increased as well.
I think it merits pointing out that in most places today downtown organizations are strong proponents of historic preservation. But that hasn’t always been true – the International Downtown Association has been around since 1954 – almost as long as the National Trust for Historic Preservation. In fact for several decades downtown organizations were at the front lines of promoting the destruction of city centers known as urban renewal. In the ‘50s, ‘60s, and ‘70s downtown advocates and historic preservation advocates were probably on the opposite side of 95% of issues. Today there are still occasions of disagreement but in most places preservationists and downtown advocates are probably on the same side 95% of the time. This certainly increases the political muscle of both groups and has paved the way for downtown housing to occur.
Then over the last few years there has been this incredible Smart Growth movement. I would be hard pressed to identify a citizen-based movement that has surfaced so rapidly in all parts of the country across the political spectrum than has Smart Growth. Democrats are advocates for environmental reasons; Republicans are advocates for fiscal responsibility reasons. Big city mayors are advocates to stem out migration; rural county commissioners are advocates to maintain an agricultural base. The changes in thinking and in policy that Smart Growth is making are remarkable. But as this movement has evolved there is now a clear understanding that both downtown revitalization and historic preservation are irreplaceable components in a comprehensive Smart Growth strategy, that any Smart Growth strategy that doesn’t include downtown revitalization and historic preservation is stupid growth, period. This, too, has added political commitment to downtown housing.
So there have been both organizational and political forces at work that have laid the groundwork for downtown housing to occur. But clearly there have also been economic forces. For the decade of the 90s we had the longest uninterrupted period of economic growth in at least a hundred years followed by a relatively shallow recession and then a return of at least modest economic growth. Economic prosperity allows both investment to take place and risks to be taken in downturns that would be otherwise unacceptable. Downtown housing, especially the earliest efforts, constitute both investment and relatively high risk. Why high risk? Because there usually isn’t a locally demonstrable successful example of upper floor housing in fifty years. And it is uncertainty that creates risk, or at least the perception of risk.
But the decade of economic growth was accompanied by rapid advances in technology that allowed there to be greater choice of where to live. Think about three interrelated factors: the growth of the internet, a rapid growth in consulting, and the increased acceptability of “working at home”. Putting those three together also add impetus to the downtown housing phenomena.
Almost twenty years ago when I first started talking about downtown housing I referred to the 1-3% crazy person rule – that in any town of any size, in any part of the country, regardless of economic condition, something between 1 and 3 percent of the population would live right downtown on second floors, if quality housing were available. So even if you lived in a town of only 4000 people that meant something between 40 and 120 would live right downtown and that would make an incredible difference in the health of downtown.
Well, a couple of years ago a great book came out – The Tipping Point by Malcolm Gladwell, if you haven't read it you should. And Gladwell was more sophisticated than I am. He identified research that tracks how change in behavior happens, and he identified five groups of people.
• The Innovators – I think they are roughly equivalent to my 1-3% crazy people.
• The Early Adopters
• The Early Majority
• The Late Majority, and
• The Laggards.
And the "tipping point" – that is the point in time when a trend picks up enough momentum that it becomes self-sustaining – is somewhere in that Early Adopters stage.
I have to tell you that today many towns and cities have not only passed the 3% threshold, but are codifying downtown housing goals of 5%, 7%, 10% of the local population as downtown residents. In more and more towns and cities the "tipping point" in downtown housing has been reached and is now growing on its own momentum.
Demographic patterns have also encouraged the downtown housing trend. There are several germane ones, but I'll identify specifically four.
1. The huge demographic bubble of the baby boomers is now becoming empty nesters, and empty nesters are a significant share of downtown residents. When communities begin downtown housing initiatives they usually think of the new loan officer at the bank, the young stockbroker and her boyfriend the art teacher at the high school, the new law school graduate and the young entrepreneur. And that will certainly be a major chunk of the market. But the sleeper market – the one that at the beginning no one bets on, are the relatively affluent older couple, who maybe want to spend their summers on the Upper Peninsula of Michigan, but keep their home in their hometown in Kentucky. No one expects it, but these empty nesters, between 50 and 70 will make up between 1/3 and ½ of the market. In the Boise study the average age of person interested in living downtown was 47.
2. The second demographic trend however is those 20 somethings. They are delaying getting married therefore delaying having kids. They want the "urban cool" even if their urbanity is a town of 5000 people. And urban cool, at whatever scale, happens downtown.
3. The third demographic trend deals with the same age group but it a separate phenomenon. Those 20 somethings are very independent. Most of their parents began their working careers anticipating long term stability in their jobs in the corporate world or in government. These young people know their career path will meander, not only between different jobs but among entire different professions. They not only know that but wouldn't have it any other way. This independence manifests itself in many ways. Of course some will express their independence as counter-culturalists – the 21st century version of the hippie. But many more will express this independence as very entrepreneurial, very creative enterprise in the business or the non-profit sector, in education or in the arts. Downtown housing provides the ideal venue to express both independence and entrepreneurship.
But there's another important attribute of this group – they hold a core value of tolerance and a core appreciation of diversity. And one of the strongest pulls of the downtown is that it is the center of racial, cultural, economic and social diversity, on often the only place in town where that's true.
4. The last demographic trend that I'll identify is the rapid rise of the one person household. Today in America around a third of all households are made up of one person. And this spans the age brackets – young people who haven't yet married, mid-life people whose spouse is gone through death or divorce, and older people living alone. This single person household is a strong component of the downtown market. Philadelphia, Pennsylvania is a city that has lost population every year for the last four decades. But over the last decade downtown housing in Philadelphia has exploded and today numbers 88,000. But 61% of the households in downtown Philadelphia are one person households. You know most of the housing being built in the country is for households with two parents and children at home. But the description fits less than 1 household in four. When you add together 1 person households, and 2 person households without children well over half the households in America are accounted for. Many of those find downtown housing of interest.
Who are the beneficiaries of downtown housing?
Well who are the winners in this downtown housing trend?
Well, first the building owner who benefits from: increased cash flow, lengthening economic life, new depreciation schedules, increased borrowing ability, maintaining existing value, spreading the risk between ground level commercial activities and upper floor housing, enhance existing value, and lowered capitalization rate resulting in increased value with the same amount of income. Commercial real estate does not have value because it has four walls and a roof. Commercial real estate has value, only has value, to the extent that it has the capacity to produce net income. Frankly those empty upper floors have no value – and I don't care what the tax assessor says – if the do not have the capacity to generate income. Turning them into housing taps that latent economic opportunity.
The city is a major beneficiary: through increased property taxes, more intensive use of infrastructure, secondary taxes created by more economic activity generated, and very importantly public safety. Ask your police chief – the single most important element in making a place feel safer is more people on the street, and that's what downtown housing does.
Downtown businesses are beneficiaries as those downtown residents become a customer base for existing stores, opportunity for new businesses and business expansion to meet new demand.
And the downtown overall benefits through increased hours of activity, public safety, consistency with downtown revitalization objectives. You know I work almost exclusively in downtowns. And if you asked me for a hundred indicators of a healthy downtown I could probably come up with them. But if I were limited to one it would be this – people on the street. Independent of any other variable if there are people on the street a downtown is successful and if there are not it is not. And while we love having the bank and the law firm and the real estate office downtown, they don't put people on the street. Four things do: retailing, food and beverage, entertainment and housing. And I have come to strongly believe that the first among equals is housing.
And then the most direct beneficiaries of downtown housing are the potential tenants. They may benefit from: price competitiveness, proximity to work and/or complimentary activities, freedom from maintenance, “urban” living, fill temporary housing need, and reduced automobile dependence.
What are the impacts of downtown housing?
I'm going to make this as simple as possible using my back of the envelope calculations. If a downtown has a variety of goods and services available one new job downtown will add $3500 to $4500 a year directly into that downtown economy. And that's great. But add one new resident and the economic impact is three to four times as much. So we love having more jobs downtown, but one resident has the economic oomph of three or four more jobs.
What are the prerequisites for a successful downtown housing strategy?
Jennifer Moulton was the planning director for the City and County of Denver during most of the period of the early growth of housing. Based on her experience she wrote an excellent paper entitled “Ten Steps to a Living Downtown.” I really liked the paper for a number of reasons. First, anything that’s presented as a list is my kind of document. Second, Jennifer was a long-time friend of mine. Third, her experience in Denver was absolutely consistent with what I have observed elsewhere and applies regardless of the size of the community. Anyway here’s Jennifer’s Ten Steps.
1. Downtown housing must be a priority of the business and political leadership of the community. And this priority and its justification must be clearly communicated to the citizens at large.
2. Downtown must be legible. By “legible” Jennifer means that the “where” of downtown must be clearly delineated, people must understand exactly where we mean when we say “downtown”. Now you may think, “That’s well and good for Denver but I live in a town of 5000 people; we all know what we mean by downtown.” You know what, not so. Regardless of the size of the community one of the first important tasks for a downtown organization is to spell out what is meant by “downtown.”
3. Downtown must be accessible. Accessibility means attractive entrance points, updated infrastructure, quality streetscape. Much of the downtown is – and needs to be – the public realm – sidewalks, streets, parks, squares, gathering places. And local government is the property manager of those places. And in the past most local governments have been lousy property managers. You wouldn’t keep living in an apartment complex with as low level of maintenance as exists for many of your downtowns. So unless that property management gets better, downtown housing is less likely to succeed.
4. Amenities. Good downtowns are filled with people. Amenities, whatever they are – arts facilities, sports facilities, cultural facilities, recreational facilities, libraries, theaters – draw people. Some of them also draw additional activities like restaurants, art galleries, shops. And together these things draw people. Jennifer’s point here is reinforced in the Boise study. When asked why they might want to live downtown 90% said because of proximity to arts, entertainment, restaurants and shopping.
5. Clean and safe. In almost every downtown I’ve ever worked at least someone will say, “I don’t go downtown anymore because it’s not safe.” Now statistically that is almost never the case. If you look at the police statistics downtowns are usually low in crime. So why do people think otherwise? Because of almost subconscious messages they are receiving saying, “not safe here.” What gives those messages? Poorly maintained buildings, broken windows, dirty windows, poorly maintained sidewalks, streetlights that aren’t working, graffiti, unkempt storefronts, trashcans that are spilling over. Now part of these messages are because the city hasn’t done their job; but part of it because property owners aren’t upholding their responsibilities. Now I know in Kentucky property rights are a big issue, and I’m sympathetic with that. But I don’t believe property rights extends to allowing you to let your property deteriorate to the extent it has an adverse impact on your neighbors’ properties or the rest of downtown. We ought to have a little less talking about property rights and a little more talking about property responsibilities.
6. Preserve and reuse old buildings. Well, one of the Brookings studies supported Jennifer in this as they noted, “Downtowns throughout the country are capitalizing on their historic character. Downtowns offer a niche market for those seeking a “sense of place.” I can tell you that when the market is firmly established and rents are rapidly increasing in some localities new construction may take place. But in virtually every example I've seen, heard about or read about, the first downtown housing goes into the upper floors of historic buildings.
7. Regulations streamlined to encourage and support residential growth. Often when I go into communities I meet with the mayor or the city manager or the Chamber of Commerce director and they ask, "If we want to start a downtown revitalization effort, what's the first thing we should do." And my answer is always this – find out what you have on the books already that is keeping you from doing what you want to do and change it. Look, I'm willing to wager very few of your towns has a zoning code that was systematically written by the people of your community sitting down, asking what you wanted to accomplish, and then writing an ordinance. It was written, probably 20 years ago, by some consulting planning firm who provided you with what was at least 90% boilerplate from other zoning ordinances. So most of you have a downtown zoning district that discourages mixed use of buildings and has some – and this I can almost guarantee – has some absurd parking requirement like one space for ever bedroom in a residential unit. Go home tomorrow and repeal that. I'm not saying at all we don't need to figure out what to do about parking for downtown residential, but the wrong approach is to mandate that a fixed number of parking spaces be provided.
Another observation I'll make in this regulatory side is that there are two type of building inspectors in the world. You know every one of those building codes is about a foot and a half thick. One kind of building inspector will say, "if the book doesn't say you can, then you can't". And the other type will say, "if the book doesn't say you can't, let's figure out a way to make it work." If you have in your community the first kind of building inspector either fire him or move. Upper floor housing development will not happen if there's not a flexible regulatory environment. Now I don't mean we don't need to pay attention to life safety requirements and build safe places for people to live. But we also have flexibility and a common sense approach or it ain't gonna happen.
Another of Jennifer's observations with which I absolutely concur is the necessity of having good design guidelines. We don't just want housing. We want housing that respects the context of the downtown, which is appropriate in scale, design, and materials. In short we want good housing in good buildings and design guidelines help us get there.
8. City resources devoted to housing. There is a fiscal justification to devoting city resources to downtown housing – the city itself will be collecting the dividends of their housing investment in increased sales and property taxes. And here's a place where the city's participation will be critical. When the first units are being proposed it will be very difficult for the local bank to make the loan. Why? Well, to make a loan they have to have to have an appraisal. My background is as an appraiser, and to do an appraisal you have to have data from the marketplace. And most of the time there simply is none. That means that the earliest units often need a credit enhancement of sometime to enable debt participation in the development. That might be a loan guarantee, or a partial guarantee, or a compensating balance, or a low interest second loan or any number of alternatives. But there does need to be a credit enhancement and that usually means from the city.
9. Edge of downtown surrounding by viable neighborhoods. One of the lessons that I think is agreed to across the political spectrum is that warehousing the poor in concentrated areas doesn't work for anyone, most especially for the poor. We need economically integrated neighborhoods. We certainly need to address the housing needs of those least fortunate among us, but the critical part of the phrase is "among us". Sticking the poorest of the poor in the isolation of large public housing complexes doesn't work. And the ideal, natural place for economic integrated neighborhoods is those older, close-in often historic neighborhoods surrounding downtown. Making those neighborhoods healthier makes the downtown healthier. And the Brookings study noted, “The stronger downtown gets, the more likely it is that the surrounding central-city neighborhoods will strengthen as well.” It is a win-win opportunity.
10. Downtown never “done”. I don't know how many of you own your own business. But if you do and if your business is doing well, you tell me what would happen if today you said, "Everything is going well. I'm going to the Bahamas for a year. The business can manage itself." I'll tell you what would happen. You'd come home to a bankrupt business, I don't care how successful it is today. Well downtown is a business. And the inventory of that business is the buildings, the public spaces and the businesses of the downtown. They need ongoing management. That's at the core of why Kentucky Main Street has been such an effective economic development approach, because it insists on ongoing management. Jennifer was right, downtown never is "done."
What are the elements of success for downtown housing projects?
Well, I'm going to finish now by telling you this. Downtown, upper floor housing always, always, always works if four simple rules are followed:
1. The units are quality units. Now I don't think that there's a town or city in America that doesn't need more low income housing. And close in neighborhoods are a great place to put some of that housing, as long as it isn't concentrated, as long as it represents economic integration. But I don't think then upper floors of downtown buildings are the place for low income housing. And the reason is this – the vast majority of low income households have children. Children need a place to play. And playing on the sidewalk in front of the hardware store isn't it. My rule of thumb is this – find the most expensive rental units anywhere in town and then try to create upper floor units at 80 to 85% of the highest. It isn't unusual to end up with the downtown housing being the most expensive in town.
2. Think in advance about who the tenant is going to be. Again that 20 something will be part of it, but don't forget the empty nester, the temporary house splitter, the intermediate term professional.
3. Use the funky peculiarity of the building. A way to lose money is to go out to the suburban garden apartment complex, look at what people are renting – two bedrooms, a bath and a half, a dining room, a garage, whatever – and then try to cram that into the upper floors of downtown building. No! That's what the 97% sane people want. Your market is the 3% crazy people and one of the things they'll want is the funky peculiarity of the building.
4. Add units incrementally. There's the risk that somebody will hear about downtown housing, say, "That sounds like a good idea" and build 100 units right out of the gate. Well, they'll go broke waiting for the units to fill. How it happens is somebody takes their 25 x 100 foot building and puts an unit in the front and one in the back and it rents in a hurry. Then the guy across the street say, "maybe I can put 4 units upstairs in my building" and it builds from there. Most success in downtown revitalization is incremental success, and downtown housing is no exception.
I'm very excited that the Kentucky Main Street Program is using this year to stress downtown housing.. It's the right thing to do for Kentucky's downtowns. And, best of all, you can make money doing the right thing.
Thank you very much for having me.
© Donovan D. Rypkema, 2008
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