The current six-month lull in new applications for the city’s downtown housing incentive program may indicate the development wave San Antonio rode from 2015 to 2017, when deals were closed on 41 projects in and around downtown, has nearly subsided.
Or, will nearly subside, depending on how you look at it.
Since 2012, the Center City Housing Incentive Policy, or CCHIP, has catalyzed an estimated 6,800 housing units, either built or under development, in or around the downtown area, according to the city. Some areas, such as the Broadway corridor, have completely transformed largely because of the program.
It’s also the policy critics blame for the rapid change occurring in the neighborhoods that abut downtown and many of these multifamily projects. As areas become more attractive to live in, the single-family communities nearby do as well.
So, the lack of new applications for future developments could be a good or bad thing, depending on how you view the downtown area’s transformation in recent years.
Center City Housing Incentive Policy agreements executed by year:
» 2012 — 1
» 2013 — 11
» 2014 — 8
» 2015 — 16
» 2016 — 14
» 2017 — 11
» 2018 — 1 * Year of the moratorium
» 2019 — 2
The city hasn’t received an application for CCHIP, since it received four submissions on Jan. 2. That’s the date CCHIP was reinstated after a year-long moratorium. More on this a few paragraphs down.
To explain the dearth in new applications, one would have to survey all potential future developers, and also take into account the many factors that go into each potential site.
We can certainly surmise.
“We kind of acknowledge that there is kind of a downturn in the housing market right now,” said Veronica Garcia, assistant director of the Center City Development and Operations department. “We know construction prices have gone up. So that’s a variable.”
Garcia also said developers may be wanting to gauge how well developments currently under construction fill up when they’re completed before pulling the trigger on something new.
However, the elephant in the room is the CCHIP revisions that Mayor Ron Nirenberg and the City Council approved in December after the program took a hiatus in 2018. In December 2017, Nirenberg paused CCHIP for a year and instructed city staff to build into it avenues that would lead to the creation of more affordable housing. This was his way of inserting equity into a program he felt was creating too many apartments most San Antonians couldn’t afford to rent.
The area median income (AMI) for a family of four in the greater San Antonio area (Bandera, Bexar, Comal, Guadalupe and Wilson counties) is $71,000, according to the U.S. Department of Housing and Urban Development. Here’s how it breaks down for lower-income households:
» 80% – $56,800
» 70% – $49,700
» 60% – $42,600
» 50% – $35,500
» 40% – $28,400
» 30% – $21,300
During the discussions late last year, developers warned Nirenberg and the council they may not be able to make the financial numbers work for their projects under the new CCHIP. The revised version reduces the amount of tax rebate developers receive, and also requires developers to include affordable housing (which it defines as rents priced for households making 80 percent or below the area median income, or AMI) if they build on the outskirts of downtown.
“We have certainly made the requirements to qualify for CCHIP more rigorous, and that was based on the feedback we got from the public, the City Council and the mayor,” Garcia said.
The handful of developers I’ve interviewed about CCHIP said the full 15-year rebate on city property taxes, as well as smaller subsidies offered under the program, is crucial to making developments work financially. Or, yield enough profit for the developer and other investors to make the project worth everyone’s time and investment.
It’s worth pointing out that a city-commissioned 2018 study of CCHIP by TXP, Inc., of Austin, said some developments, especially the ones in the four-to-five-story range, the very kind developers seem to only be building, may no longer require incentives to be financially viable.
David Adelman, one of the more active downtown developers, agrees about construction costs rising. He also points to what he calls a “watered down” version of CCHIP.
“It’s a combination of things, but watering down CCHIP did not help,” Adelman said. “I can’t speak for other developers.”
Before the revisions, when CCHIP began in 2012, developers received a full rebate on the increment of the city portion of their property taxes. For a typical project of five stories, many of these rebates were worth roughly $3-$5 million usually over 15 years. There are other components of CCHIP, but the tax rebate is the most lucrative.
Under the new CCHIP, developers receive 75 percent rebate on the city portion of their property taxes. The other 25 percent is fed into a fund for affordable housing.
Adelman believes deals may still emerge, but outside the requirements of CCHIP.
“I think what’s going to happen, people are going to get deals kind of close, and they are going to talk to the city and county and talk about it being more creative and customizing the package, if you will,” Adelman said. “Which is what happened pre-CCHIP.”
[ View the city’s list of executed CCHIP agreements. ]
If you were to drive around downtown, you’d see housing construction all over the place.
The Arts Residences hotel-condo tower on Lexington Avenue, for example, is starting to get its skin. The 260-unit apartment project on Augusta Street by Stillwater Capital of Dallas and the 340-unit apartment project along South Main and Dwyer by Argyle Residential of Austin are beginning to go up in the ubiquitous units-wrapped-around-a-parking garage format. At Broadway and Jones Avenue, the ground is starting to be scraped for the massive Flats at River North by a partnership that includes the San Antonio Housing Trust Public Facility Corp. and NRP Group.
What will happen, however, when these are built?
At least five projects are still in the works.
The 70-unit Durango at 421 S. Presa St., and the 53-unit Floodgate on East Commerce Street, next to The Esquire Tavern, received incentives before the moratorium, but have not broken ground.
Two others, whose applications were submitted on Jan. 2, but whose CCHIP agreements are still pending, are the Cattleman Square Lofts on West Houston Street by Alamo Community Group and The Villas at Museum Reach on Dallas Street by MGS Museum Reach LLC.
Garcia said the city has met with other developers who may be looking for a more tailored incentive agreements, which would have to be approved by the City Council. There’s also the potential for new luxury developments, which would not be covered under CCHIP.
For example, JMJ Development of Dallas is planning a 24-story, 226-unit tower at 126 Villita St., but has not applied for a CCHIP package. The firm has talked to city officials about the project, which JMJ has characterized as luxury apartments.
Under the new CCHIP, a development that charges more than $2.92 per square foot for rent is considered luxury, and therefore would not qualify for the incentives.
[ Editor’s note: When the City Council approved the revisions in December, this cap was $2.75. The city increased the cap to coincide with the increase in the area median income. Both increased 6.287 percent. ]
The current six-month lull isn’t the longest since CCHIP began in 2012. From July 16, 2013, to May 17, 2014, no new CCHIP agreements were signed. Of course, the premise of this analysis is based on applications submitted. There’s a whole process that starts with the application, which leads to a term sheet drafted between the city and the developer. After the term sheet is drafted, it may take several months before the developer decides to commit to the terms of the agreement. At that time, the final agreement is signed by all parties.
There’s also the other black-out period, from Dec. 22, 2017 to Dec. 20, 2018, which was Nirenberg’s moratorium.
Nirenberg did not respond to an interview request for this analysis.
Whether you define development momentum as new applications received, agreements executed or actual construction is entirely up to you.
It will be interesting to see how this plays out—whether the city will receive any new CCHIP applications this year. Another way of putting this: It will be interesting to see whether Nirenberg struck that balance between simultaneously backing market-rate and affordable housing in a single policy.
The council is supposed to revisit the program at the end of 2021.
Some, like Adelman, believe market-rate and affordable housing are two separate issues, and that the city is harming its downtown growth by conflating the two into one policy. Adelman believes affordable housing efforts should be done outside the scope of incentivizing market-rate housing.
On the other end of the spectrum are affordable housing advocates, like COPS Metro Alliance, who argue Nirenberg’s version of CCHIP should incentivize even deeper affordability—60 percent AMI, they’ve argued—because the incentives are city backed, and because of the effects they are having on poorer households in the surrounding neighborhoods.
On the other hand, city officials point to the other taxing entities, such as the county and the school districts, that receive revenue from newly-developed land, rather than land long vacant.
Many of these points were made last year, during the vigorous debate leading up to the council vote in December. For more context, read the articles below. Please note the policy changed throughout 2018, and some of the details in the articles may be outdated.
» Are developers receiving incentives they don’t need? [ Oct. 5, 2018 ]
» Exclusive: In new policy, downtown housing incentives would spread to other parts of San Antonio, exclude ‘luxury’ developments [ Dec. 5, 2018 ]
» Delay sought in downtown housing incentives vote [ Dec. 11, 2018 ]
» City Council reinstates downtown housing incentives policy after one-year hiatus [ Dec. 13, 2018 ]
» A deeper dive into the latest housing projects eligible for incentives [ Jan. 27, 2019 ]
Contact Ben Olivo: 210-421-3932 | firstname.lastname@example.org | @rbolivo on Twitter
Pancho Valdez says
Welfare for the rich is a concept that NEVER benefits low to moderate income people. Whether these corporations are building sports arenas or housing, the folks at the bottom get next nothing.
Funding for truly affordable housing can be sought, but it takes guts to demand money from a bloated military budget. It takes guts to demand that corporations and the wealthy pay taxes to fund needed housing. Otherwise nothing changes and so-called housing experts remain stuck in neo-liberal ideas that don’t work.
David Adelman says
You might be surprised to know how much money already goes to subsidize many different levels of affordability in housing in the United States. That money comes from taxpayers at all levels who produce more in tax revenue than they consume in entitlements. Maybe Blue Heron can help with some of that research.
Who is this David Adelman dude? Sounds like a smart guy. Put him in charge. Way to F up all the momentum, Nirenberg. If this drought goes on to long by the time they revise it on 2021 everyone will have forgotten about San Antonio.
There is an bewitching offers an keep to winning. saheron.com