Downtown’s housing incentives are changing. Here’s why you should care.

Editor’s Note: This is the first in a series of stories and analysis examining proposed revisions to the Center City Housing Incentives Policy, made at Mayor Ron Nirenberg’s behest, which are intended to aid affordable housing efforts in San Antonio. The City Council was scheduled to vote on the changes Oct. 11, but the item was pulled until a later date.

Read the second part: “Are developers receiving incentives they don’t need?”

If you think you don’t care about San Antonio’s Center City Housing Incentives Policy, also known as CCHIP, you’re probably fooling yourself.

CCHIP is a dense piece of municipal policy, and no one in their right mind would read it for fun. However, every time I post a story on Facebook about luxury apartments receiving tax breaks worth a few million dollars, many of you aren’t shy about opining. On The Durango, a 13-story luxury apartment building that’s due to receive an estimated $2.4 million in city tax rebates over 15 years:

Why are taxpayers subsidizing developers of “luxury” apartments? — Keri Hillyer

So many haters! I think this is going to be great for the neighborhood! More people, more restaurants, more shops, more walkability. This is just what San Antonio needs. — Nicole Nadvornik

The simple fact that you’re reading the Heron means you care about what’s happening downtown. Whether you inhabit it or want to inhabit it but can’t afford to; whether you care deeply about issues such as gentrification or just want to know the latest happening cocktail bar; whether you live paycheck to paycheck or live comfortably at the Pearl, you care about downtown and its transformation.

CCHIP is what is transforming it.

Quick backstory: CCHIP, which began in 2012, is currently on pause. In December, Mayor Ron Nirenberg announced a moratorium on the program. San Antonio’s recent conversation about its own inequality, especially in housing, sparked the suspension, Nirenberg told me while I was reporting for Folo Media. (Side note: Last week, the City Council accepted recommendations by the Mayor’s Housing Policy Task Force, a separate initiative, which Nirenberg formed last year to address housing issues citywide.) Since the moratorium was placed, the city hired Austin firm TXP Inc to conduct an assessment of CCHIP (the results of which are being withheld until “a later date”) and, based on the results, has revised CCHIP so that it benefits affordable housing efforts in San Antonio.

I’ll talk specifics in a moment, but let’s first dive into the arguments:

» On one hand, CCHIP is working, city officials say. The policy was designed as an economic generator, and it has delivered, especially up near the Pearl/Midtown, where a neighborhood is thriving. Sure, rents there have surpassed $2 a square foot — Austin-like prices — but CCHIP was not originally designed as an incentive tool for affordable housing. That said, of the 6,810 units CCHIP has produced, 1,544 of them are affordable (which the city means to be units offered to households making 80 percent or below the area median income [AMI]; the city uses the U.S. Department of Housing and Urban Development’s AMI figure of $66,800 for a family of four).

The policy was intended to build walkable neighborhoods, which beget neighborhood-centric retail, which begets life on the streets. That level of urban vibrancy in San Antonio is key to keeping and attracting millennials, and to luring companies.

Under the old CCHIP, developers received rebates on 100 percent city property taxes (the increment after the first year) over 10 or 15 years often worth a few million dollars. But the properties fully pay all other taxes, such as to Bexar County, the San Antonio Independent School District, etc. As the property value rises, those entities benefit. If you took the 64 CCHIP projects, and assumed they were built in 2017, and looked out to the first year after the tax rebates stopped (the 16th year) the owners of the developments would pay $10.1 million in city property taxes. Under that same metric, the land owners would pay $39.8 million to all other taxing entities.

If those properties were undeveloped, they would haul in $349,164 in city property taxes, and $1.3 million for all other taxing entities, respectively.

There’s more.

Incentives are necessary in order to overcome challenges housing developers face only in the center city: high land costs, more infrastructure needs, more regulations, and a hotel-driven market. These properties would have been developed, but they would not have been housing. Hotels, probably. So, don’t stop. Keep going. The housing is now just making its way into the core — development inching in from the Pearl to the north, and from Southtown — but we need more. And faster.

» On the other hand, CCHIP is producing large amounts of luxury housing — aka, market rate — in a city which is just now waking up to its own economic segregation.

Neighborhoods that abut downtown are seeing skyrocketing property values each year. In Dignowity Hill, for example, on the near East Side, property values have shot up 210 percent the last five years.) The families who have lived in these communities for decades are seeing gentrification on a home-by-home scale, but are now threatened even more by big apartment developments. All of it hiking up property taxes.

How fair is it that, while some of these households are seeing their taxes go up, that developers are getting rebates worth a few million in many cases? Developers don’t have to pay the increment — the rise in taxes — that their own projects help fuel. Homeowners do. Perhaps people aren’t yet getting foreclosed on for not paying their taxes, but they’re selling their homes when they never envisioned doing so, and at prices way below market value.

What kind message is the city sending to its citizens, through the CCHIP, by subsidizing luxury apartments (the rents at the latest one to come online, called 120 Ninth Street, start at $1,300), especially when 165,000 households in San Antonio, according to the mayor’s task force, are considered cost burdened, meaning they are spending more than 30 percent of their income on housing in 2016? All while incomes are barely rising.

These are the nutshell arguments.

In this analysis, I’ll explain in small chewable bites the new CCHIP rules and how they’re designed to benefit affordable housing. In future pieces leading up to the Oct. 11 City Council vote, I’ll drill deeper into the policy, study its intentional and unintentional consequences, and talk to people on both ends of the spectrum.

Get your rebates

Since its inception in 2012, CCHIP has yielded 6,810 housing units — either completed or in the works — mostly in the downtown area. Under it, developers who build downtown housing received rebates on their city property taxes for 10- or 15-year periods. Just like when you buy a new refrigerator or a set of tires. Except CCHIP rebates, as they were designed, returned to developers the cost of paying the increment of city property taxes.

The program offers other incentives — such as city and SAWS impact fee waivers — but the tax rebates are by far the most lucrative.

A few examples:

» On the lower end, the 17-unit Casa Blanca Lofts on North Alamo Street received a 15-year rebate worth an estimated $234,970.

» On the higher end, The Arts Residences, 66 condos on top of the Thompson Hotel, currently under construction across the river from the Tobin Center for the Performing Arts, received a 15-year tax rebate worth an estimated $9.5 million.

These rebates only apply to city taxes. The developer still has to pay all others taxing entities, including Bexar County, SAISD, VIA Metropolitan Transit, etc. As I mentioned before, in a hypothetical calculation — if all 64 CCHIP projects were built in 2017 — the city estimates they would generate $10.1 million for the city in property taxes and $39.8 million for the other taxing entities. SAISD alone would collect $23.4 million in that 16th year, according to the city’s calculations.

(It’s worth noting the city lumped all of the projects together and gave them the same start year of 2017, rather than calculate the actual property tax impact of each projects, and then add them up together.)

The revised CCHIP would reimburse 75 percent of city property tax increment. The other 25 percent would feed an affordable housing fund. Currently, the city says it doesn’t yet know whether those funds would aid affordable housing in the downtown area, or whether they’d be spent across the city. A projection of 3,259 potential new housing units through 2020 puts the affordable housing fund total at $658,798.

By comparison, developers would receive $1.9 million in tax rebates during that same period.

Redrawn boundaries

See the map. The red dotted line shows the former, 5.4-square-mile CCHIP boundary. The proposed 2.64-square-mile boundary is more scattered and is shown in yellow and pink.

A couple of points here:

» City officials have excluded properties zoned low or medium density — aka the neighborhoods — in response to fears of gentrification.

» Now the boundaries are tiered.

In the first tier, basically downtown proper, developments are eligible for the full 15-year, 75-percent tax rebate. They’re also eligible to receive a waiver on all city fees, and on SAWS impact fees up to $1 million. Also, if a development in this inner tier includes at least 10 percent affordable units, they will receive an infrastructure grant — used to rebuild sidewalks, add street lighting, etc. — priced at $10,000 per affordable unit, up to $500,000 (or 50 units).

In the second tier, the incentives are pulled back some.

Projects are eligible for 10-year, 75-percent tax rebates they only receive if at least 20 percent of the units are affordable — 10 percent at 80 percent AMI and 10 percent at 60 percent AMI — or, if they were taller than five stories.

In both cases, incentives are necessary, officials say, in order to build taller, steel-and-concrete structures, Assistant City Manager Lori Houston told City Council members at a recent briefing.

Incentives are no longer needed in this second tier, downtown’s outskirts, if the projects are “stick built,” meaning they’re built with wood frames and do not surpass five stories in height.

Another noteworthy nuance: Under the revisions, people making 80 percent or below AMI would qualify to live in these affordable units, but then the rent would also be tailored to the tenant so that it does not exceed 30 percent of their income.

Mission Trails

CCHIP’s original boundary, in 2012, mimicked the city’s 36-square-mile Community Revitalization Action Group (CRAG) map. Just imagine a giant square that encompasses downtown.

It spread to areas not even close to downtown. As a result, Mission Trails happened.

In late 2014 and early 2015, more than 100 mostly low-income households, living in the Mission Trails mobile home park along the San Antonio River on the South Side, were displaced for a luxury apartment project that received CCHIP incentives. The developer, White Conlee Builders of San Antonio, received a CCHIP package worth an estimated $1.7 million.

In June 2016, the City Council revised the program, scaled back its footprint.

Nirenberg has made it publicly known that Mission Trails was the impetus for his housing task force and his edict to revise CCHIP.

Note: Changes are also being proposed for the Inner City Reinvestment and Infill Policy (ICRIP), an incentive tool for all types of development, and whose boundaries are scattered throughout the city. Under the new ICRIP, all projects within the city limits would be eligible.

Setting It Straight: Due to outdated information provided by the city, the total number of housing units assisted by CCHIP was incorrect.

Editor’s Note, Nov. 20: When this article was first published on Sept. 11, because of a reporting error, it incorrectly stated that the city was using the U.S. Department of Housing and Urban Development’s area median income figure in its CCHIP revisions. At the time, city officials were using the 2016 U.S. Census American Community Survey 1-year estimate to measure affordability. The CCDO department has since switched to using HUD’s figure of $66,800 for a family of four.

Contact Ben Olivo: 210-421-3932 | ben@saheron.com | @rbolivo on Twitter