Inclusionary Zoning

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grovester
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Re: Inclusionary Zoning

Post by grovester »

chaglang wrote:
Wed Feb 03, 2021 8:02 am
Seems like it would be good for the developers to organize and present some kind of PR/lobbying campaign. Just hoping that people somehow start to understand the nuances of the local incentives world and stop believing that developers are just a bunch or rich white guys stealing money from schoolkids and/or taxpayers does not seem to be effective. If they can't do that, I have fairly limited sympathy for them.
^This.

Developers need to try harder/smarter.

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Re: Inclusionary Zoning

Post by Rabble »

normalthings wrote:
Mon Feb 01, 2021 1:22 pm

We have 60 days to convince the council to legalize building density. What is the plan?
You need to convince a city council, that has five black members, that white suburban developers know what's best for the inner city.

Then you need to convince them, that the real estate profession is much less raciest than it was in JC Nichols time or during the post WW2 white exodus.

Then you need to convince them, that when you say the financing can't work with too many low income housing requirements, that this is actually true and not the work of highly paid accountants.

Then you need to realize you're not turning farm land into subdivisions, you're trying to rebuild a city. Serious politics are required along with the ability to communicate with people different than yourselves.

Then you should start practicing, by selling your cause to those on this blog who aren't real estate wonks, in a language we can all understand.

CrossroadsUrbanApts
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Re: Inclusionary Zoning

Post by CrossroadsUrbanApts »

I think the points above about developers needing to publicly make a case are good ones and I for one am trying to take it to heart.

One difficulty is that the development community is not monolithic. What could be good for big developers is often bad for small developers and vice versa. I certainly don't like being associated with the worst abuses of the development profession. So it is tough to coordinate across the whole community. Maybe ULI should do a better job but from my limited experience they try not to get to political and stick to "education". Unfortunately we live in a political world.

I've also only lived in the city for the last 18 months despite doing development projects here for 7 years so am less tied into community politics that I perhaps would like. I've been emailing Councilmembers and school system executives and having good conversations but it is not a particularly public endeavor.

Part of the issue is that I think the whole approach of trying to solve the problem of affordable housing on the backs of new construction is fundamentally misguided. New construction is a fraction of the overall real estate market (though an inordinately high-profile fraction) and by its nature the most speculative and fraught with risk. So adding more complexity and uncertainty makes it that much less likely to happen, especially in a competitive market between cities/towns in a region or even nationally.

If I had my druthers, I would make infill development much easier and more streamlined and make greenfield subject to higher levels of scrutiny. The changes in the TOD implemented along with the streetcar with regard to process streamlining and elimination of parking minimums were a huge success and should be a model for changes across the whole city. Instead, the current mayor and council seem to want to go the other way with new requirements and more public scrutiny.

That said, let me turn the conversation around a little bit. What questions do you have for me? What information would help make you feel informed about the development process and the impact of proposed ordinance changes on it?

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Re: Inclusionary Zoning

Post by Rabble »

Thanks. My question is are the affordable housing requirements intended for the entire city? I see the need more in downtown developments than elsewhere.

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Re: Inclusionary Zoning

Post by CrossroadsUrbanApts »

I understand that the affordable housing requirement applies for any use of incentives in the city.

I agree that there appears to be a more acute need for affordable living options downtown, if that is defined as river in the north to Plaza in the south and east to ~Troost. But those areas also tend to be the most expensive to develop, not just because the land cost is highest, but also because of the age of the infrastructure, pollution issues, and the general difficulty of construction on smaller sites with neighbors on most sides. Tax incentives (i.e., abatements) are very useful in helping offset that increased cost of construction relative to a greenfield site.

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Re: Inclusionary Zoning

Post by flyingember »

CrossroadsUrbanApts wrote:
Wed Feb 10, 2021 12:50 pm
I understand that the affordable housing requirement applies for any use of incentives in the city.

I agree that there appears to be a more acute need for affordable living options downtown, if that is defined as river in the north to Plaza in the south and east to ~Troost. But those areas also tend to be the most expensive to develop, not just because the land cost is highest, but also because of the age of the infrastructure, pollution issues, and the general difficulty of construction on smaller sites with neighbors on most sides. Tax incentives (i.e., abatements) are very useful in helping offset that increased cost of construction relative to a greenfield site.
We need to stop thinking Plaza to UMKC at the expense of other directions the same distance.

There's an empty lot in the 30s block of N. Oak that could hold affordable housing *on a bus line*

It's as close to downtown as Plaza South is

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Re: Inclusionary Zoning

Post by Rabble »

Have developers ever complained about affordable housing requirements outside of the urban core? I understood the concern to be more about damaging downtown housing development.

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Re: Inclusionary Zoning

Post by CrossroadsUrbanApts »

This is a little outside of my knowledge, but I don't know how extensively projects outside of the urban core (Northland?) use tax incentives. Especially those tax incentives tied to remediating blight.

So this ordinance wouldn't really affect those developments. What it hurts are those developments that are infill (just a more expensive process in general because of the added complications when you aren't dealing with a proverbial green field) and rely on the tax abatements and such to close a financing gap.

For example, if I look at a project that would generate, using today's rents and construction and operating costs, a 6% return-on-cost, the project can't get financed. There isn't enough cash flow to pay the construction lender and still have enough cash flow for the equity to see any kind of return. But if there is a 10 year or more tax abatement, that's additional cash flow that can go to the equity holders to make their expected return in the early years of the investment. But the time 10 years is up, cash flow will decline, but by that point the equity holders have made a better return than they otherwise would have.

So if I can't find a project with at least a 7% return-on-cost, I need to start looking in other areas, either in the wider metro area or different metros all together.

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Re: Inclusionary Zoning

Post by normalthings »

Another incentives restriction ordinance is before council. This one would limit the length and % of incentives. I think a third is still lurking in the background. Lucas has made great strides to reduce and/or stop development. Fantastic

I am really not sure what he’s done bedsides rail against incentives and make some tepid steps towards improving PD.

Economic Development: Cut the EDC Budget, reduced incentives, turned away a massive employeer interested in the east side.

Free Transit: idea was already in progress, passed an ordinance but didn’t fund it (at least in year 1).

Law Enforcement: Worked on an ordinance to announce the city’s support for local control, reduced some fines and punishments, worked on an ordinance to nicely ask PD to stop publishing bookings etc.

Staffing: A ton of the top city staff left under(because of) Lucas.
Last edited by normalthings on Wed Feb 24, 2021 1:49 pm, edited 2 times in total.

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Re: Inclusionary Zoning

Post by smh »

I learned yesterday that in the history of TIF in Philadelphia there have been 15 TIFs. Last one was like 2016 and next newest was 2006.

Not sure what the conclusion is there, but a data point worth sharing I think.

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Re: Inclusionary Zoning

Post by TheLastGentleman »

normalthings wrote:
Wed Feb 24, 2021 1:43 pm
Another incentives restriction ordinance is before council. This one would limit the length and % of incentives. I think a third is still lurking in the background. Lucas has made great strides to reduce and/or stop development. Fantastic

I am really not sure what he’s done bedsides rail against incentives and make some tepid steps towards improving PD.

Economic Development: Cut the EDC Budget, reduced incentives, turned away a massive employeer interested in the east side.

Free Transit: idea was already in progress, passed an ordinance but didn’t fund it (at least in year 1).

Law Enforcement: Worked on an ordinance to announce the city’s support for local control, reduced some fines and punishments, worked on an ordinance to nicely ask PD to stop publishing bookings etc.

Staffing: A ton of the top city staff left under(because of) Lucas.
Can we get some sources for some of this?

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Re: Inclusionary Zoning

Post by DaveKCMO »

smh wrote:
Wed Feb 24, 2021 1:47 pm
I learned yesterday that in the history of TIF in Philadelphia there have been 15 TIFs. Last one was like 2016 and next newest was 2006.

Not sure what the conclusion is there, but a data point worth sharing I think.
Their market rates are probably higher. Wouldn't that make the math a lot different? I would imagine if there's very few that there are more restrictions, possibly at the state level since that's where most TIF authorization comes from.

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Re: Inclusionary Zoning

Post by smh »

DaveKCMO wrote:
Fri Feb 26, 2021 9:54 am
smh wrote:
Wed Feb 24, 2021 1:47 pm
I learned yesterday that in the history of TIF in Philadelphia there have been 15 TIFs. Last one was like 2016 and next newest was 2006.

Not sure what the conclusion is there, but a data point worth sharing I think.
Their market rates are probably higher. Wouldn't that make the math a lot different? I would imagine if there's very few that there are more restrictions, possibly at the state level since that's where most TIF authorization comes from.
They also provide an abatement on all new construction and renovation as of right. Obviates a lot of the TIF need. TIF used here for only very large projects.

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Re: Inclusionary Zoning

Post by flyingember »

normalthings wrote:
Wed Feb 24, 2021 1:43 pm
I think a third is still lurking in the background. Lucas has made great strides to reduce and/or stop development. Fantastic
This logic doesn't hold up

How many miles of rail transit could we have built in the past 30 year that as tied up in incentives? Remember, it's not new taxes that cover incentives, it's existing taxes so for the term of the incentives the city is usually negative on the project. Could the city have done something around crime, roads, funded the entire sewer project, replaced the airport terminal or any number of other projects?

Look at how many developers have located next to the streetcar without incentives since it was built. If the city hadn't squabbled over spending the money in the past we could have seen this same result many times over.


There's tens of thousands of empty lots on the east side. If a few deep pockets can't get money and undercut the market rate for their projects it enables everyone else to complete. The more that compete the more housing we have, which keeps leasing rates down across the market.

We don't want a few 300 unit buildings built each year, we want dozens upon dozens of 50 unit buildings.


Schools are a centerpiece of driving business demand and lowering crime.
The average incentives per student is apparently $650 per kid on average in the city. If we assume 23% in school at 500k people

That's about $74 million lost for all schools per year right now. That's about 5000 kids worth of money.

The city is about 30% that number from property taxes for about $22 million per year. Let's say 1/30th is allocated per year for a new 4 mile streetcar line, or $733k. Let's say it drives $1 billion in new development

1,000,000,000 * 0.32 commercial rate to taxable rate = 320,000,000

using the city's 2018 rate as an estimate to get the taxes the city earns
320 million / 100 * 0.6923 = $2.2 million per year

That's a 300% return


The math would thus say that the maximum incentives the city should spend is $733k per year, for 10 years, for $330 million in new development value. The return for the city is roughly the same (no, this isn't right but it shows the ballpark) Beyond that funding infrastrure that developers will build next to without incentives is a better deal

All our current incentives are way over scaled, handing out too much money relative to the value the city gets.
So the idea of rethinking the process, reducing incentive shopping, makes sense.

The city could come out way ahead with slower growth.

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