Whose fair share?

Turns out 123 West Franklin’s parking spaces and grassy courtyard weren’t for the public after all. In trying to defend its miserly contribution to affordable housing in the face of several council members’ criticism, developer Cousins Properties pointed to the courtyard green space and the pool of 150 to 200 metered spaces in its parking deck that the public could use on a pay-per-minute basis without worry of being towed for walking off the lot. (The town wouldn’t contribute to the construction cost, and Cousins would keep the parking revenue.)

Those perks were contributions to the town, Cousins said, and should offset any contribution to affordable housing.

So Mayor Mark Kleinschmidt called Cousins’ bluff. Link those perks to the SUP, he said, so when Cousins sells the development, which it will at some point, the new owner can’t take away those benefits.

That was a deal-breaker for Cousins. But when council held firm – and for a good part of the discussion, you would have been so proud of council fighting back for workforce housing – Cousins said, “Give us a minute.”

Team Cousins crunched some numbers with UNC Chancellor Holden Thorp, who had come out to stump for 123 while underscoring it was not a UNC project. His role got a little muddy when he then took the mike and said he could go as high as $250,000 for affordable housing.

Kleinschmidt replied, “Give us a minute.”

The amount still fell far short of Jim Ward’s ideal, but he demurred with, “I’m no horse-trader.” We should be as unhappy as Ward with the deal. Thorp telling council that $250,000 was all he had indicated that those of us who pay state taxes have just agreed to contribute $250,000 toward affordable housing on Cousins’ behalf.

Donna Bell turned out to be the surprise hero of the night. After chamber of commerce president Aaron Nelson chastised town residents for expecting developers to help solve the affordable housing problem, Bell pointed out that Cousins was bringing hundreds of low-wage jobs to downtown; the people who fill them will have to come from out of town because a job paying $8-$12 an hour can’t support someone paying the “market rate” rents Cousins will charge in its 300 dwelling units. Developers contribute to the problem; they should contribute to the solution.

Expect more of that trenchant insight and outspokenness from Bell without the distraction of Penny Rich sitting next to her, whispering to her throughout the meeting.
– Nancy Oates

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50 Comments

  1. Bonnie Hauser

     /  February 12, 2013

    A creative new taxpayer subsidy for UNC?

  2. Fred Black

     /  February 12, 2013

    Can you give us a source on what will be the source of the money?

    If “Developers contribute to the problem; they should contribute to the solution” is the thinking then we need to move beyond asking for a “contribution” and do something a lot more structured. Why do we want a “pay to play” approach?

  3. Nancy

     /  February 12, 2013

    Speculation only on where the money comes from. Thorp used the personal pronoun “I” in saying $250,000 is the most “I” can do. I interpreted it as the most UNC could do, but it is possible it is his own personal donation. After all, he has been very well compensated these past 8 years, and come fall, he will be a $420,000-a-year chemistry professor. He would have the means to show that kind of altruism to further a project that will benefit the town. But if he’s making the contribution personally, it puts more shame on the corporation developing the project that it refused to do more.

  4. Fred Black

     /  February 12, 2013

    Come on Nancy, let’s be serious.

  5. Nancy

     /  February 12, 2013

    I am being serious, Fred. In this legislative client, it is far more likely that $250,000 would come from a private donor than the state. Thorp has earned more than $3.3 million over the past 8 years, and he strikes me as philanthropically minded. It’s conceivable he wants this to succeed for the town, and he’s backing it personally, at least in part. If he can make the donation to the property owner, a nonprofit, it is a tax deduction for him.

  6. Many

     /  February 12, 2013

    Perhaps Thorpe is an investor?

  7. Many

     /  February 12, 2013

    I should have put a smiley behind my previous post. It is meant as a slight dig to Chapel Hill Foundation Real Estate Holdings Inc lack of transparency. Obviously Chancellor Thorp is a principle in the CHFREHI but then how is it that 123 West Franklin is “not a UNC project”?

  8. Nancy

     /  February 12, 2013

    OK, I resorted to checking the facts, which are far less interesting. Holden Thorp is a member of the board of Chapel Hill Foundation Real Estate Holdings, which is why he used “I” in making the offer. The money will come from Cousins, not taxpayers.

  9. Fred Black

     /  February 12, 2013

    Thanks, Nancy, because that’s the homework that should have been done up front rather than you and Bonnie putting out there that it will be State money.

  10. Terri Buckner

     /  February 12, 2013

    BTW, when administrators step back into a faculty role, their salaries are typically adjusted downward. Don’t know for sure if that’s what will happen with Chancellor Thorp, but Chancellor Moeser is making less than $250,000 in his faculty role. Still high, but not the same as his chancellor’s salary.

  11. Nancy

     /  February 12, 2013

    Terms are that he’ll retain his full chancellor’s salary for one year, six months of which will be research leave, then drop down to 60% of his $420,000 salary.

  12. Deborah Fulghieri

     /  February 12, 2013

    http://www.dailytarheel.com/article/2012/02/chapel_hill_approves_shortbread_lofts

    Shortbread Lofts plans to make it a priority to hire Northside residents for the jobs it expects to create. There is a relevant observation about affordable housing in the article, too. Go Heels!

  13. Mark Marcoplos

     /  February 13, 2013

    I blame Penny Rich for all the confusion on this.

  14. Nancy, you say:

    “Turns out 123 West Franklin’s parking spaces and grassy courtyard weren’t for the public after all.” as if you were surprised. This was a “known” issue from the beginning that I’ve highlighted several times (to the point that Cousins stopped referring the greenspace as a “public” plaza akin to Peace Plaza [which isn't as public as when the Feds controlled it]). If you look at Counsins’ other properties, you’ll see that access is restrictive – worse in some cases than Southpoint. I’ve asked several times for Council to get – at minimum – a template of the expected rules governing access to this space. I haven’t revisited the issue lately but the last time I brought it up Cousins seemed to tentatively agreed to allowing foot traffic to traverse the property unimpeded 24/7.

  15. JWJ

     /  February 13, 2013

    I read in these postings concern about affordable housing. A stab at a definition is housing that has a price LOWER to the housing occupant than the existing market rate. The difference between what the occupant pays and the market price is paid by a third party. Or affordable housing is housing that has a market price that an occupant that makes 150% (125% or 175% or ?) of the poverty level can afford.

    Why don’t we increase the property taxes in Chapel Hill and earmark funds (similar to paying for the buses) to buy more houses/apartments? What I can tell from the City budget, about $2M is spent now, and most of that is federal HUD funds.

    Or let’s do this guy’s idea (http://www.dailytarheel.com/article/2013/02/orange-county-homes-need-to-be-affordable) of progressive property tax rates? The more expensive the home, the higher the property tax rate. Take all of that property tax money and subsidize rental rates or have local govt buy more housing and use that to increase the number of families over the current 336 (? number from the city budget) that are getting subsidized.

    How many more units (ballpark) should there be? I would say at least 10% of the roughly 22,000+ units that we have now in Chapel Hill.

    Or, folks could get together and pool some of their investment dollars and buy some local real estate stock. They could then charge as little rent as they want to.

  16. Chris Jones

     /  February 13, 2013

    “This was a “known” issue from the beginning that I’ve highlighted several times”

    Why?
    What obligation is Cousins, UNC RE Property Holdings, or any other developer/property owner, under to take property they paid for, they developed, and turn into unfettered public free space? Particularly when you damn well know that the “public” won’t absolve them of the liability attached to that site.
    Here’s a novel concept: if the town (or you) wants public, unregulated, plazas and greenscapes or parking, then the town (or you) should buy the property, raze the building on it, and do whatever they want with it.

  17. Chris, It’s interesting how you always seem to see these projects as a one-way transfer of value from the community to business (like 3Birds subsidized parking [have they met their local hiring target yet?]).

    I didn’t say that there was an obligation to provide free public space but considering the large variances granted on behalf of the community by Council to UNC Foundation making the project economically attractive, the cost to taxpayers of enhancing nearby infrastructure and the hassle (and, if West140 is any indication, lost revenues) other Downtown merchants will see when construction begins, providing true public space would be somewhat akin to asking for affordable housing and affordable business space.

    In my comment I was pointing out that Cousins used to broadly characterize the space as “public” when it really wasn’t.

    They’ve been firm in saying it’s a commercial venue and that they will have rules restricting its use. Cousins had proposed early on increasing the “porousness” of the property – a good thing – without establishing there would be 24/7 access for crossing the property – which would undermine the utility of tying the project more closely into its surrounding. Council was well within its rights to explore that issue though I’m not sure if they really got to the bottom of it.

  18. Name Withheld By Request

     /  February 13, 2013

    Why doesn’t the town buy a tract of land and build its own affordable rental housing?

  19. Good question. Raleigh teamed up with several NPOs and built a solid chunk of workforce housing Downtown at the same time the West140 project was on the table. Chapel Hill could’ve spent far less money, housed more folks Downtown (including teachers, fireman, etc.) but decided instead to go with a disastrous (at least for the taxpayers of Chapel Hill) public/private deal with RAM Development.

  20. Name Withheld By Request

     /  February 13, 2013

    If the town went into partnership with a developer and some nonprofits and identified a tract of vacant land along a major transit route in town, it seems it would be fairly simple to create a number of work-force housing units in return for favorable zoning for the rest of the property. Is there a reason no one has ever floated this idea before?

  21. DanB

     /  February 14, 2013

    “Name Withheld By Request / February 13, 2013
    Why doesn’t the town buy a tract of land and build its own affordable rental housing?”
    Others have done that; they’re called the Projects and one could speculate on how successful they have been. The secret to success is education, training, and decent jobs.

  22. Bonnie Hauser

     /  February 14, 2013

    Aren’t you describing Winmore?

  23. Bonnie Hauser

     /  February 14, 2013

    Consider this – the economiics of a “project” in Chapel Hill would be the same as a middle class community in Mebane.

    Why would a working class family want ot live here when they can buy a nice home in Mebane for $150,000 , and after taxes and insurance, have enough $$ left over for a car, groceries, clothes, maybe even dinner out in a family friendly restaurant.

  24. jason

     /  February 14, 2013

    Bonnie – The developers of Winmore, Claremont, Ballentine, Larkspur, Legands at Lake Hogan, etc have worked with the Community Land Trust to build affordable homes in these neighborhoods. These homes sell for between 100-150,000 and house social workers, teachers, firemen, etc. There are many reason these families choose to live in Chapel Hill – the school system, close proximity to their employment, etc. The towns of Chapel Hill and Carrboro create the guidelines for developers to work from but they have not subsidized these projects at all.

  25. DOM

     /  February 14, 2013

    But who wants to own a home (and a mortgage) today, especially if they’re finding it tough to make ends meet? It seems to me that creating affordable rental opportunities would make more sense for the community.

  26. Bonnie Hauser

     /  February 14, 2013

    I think we’re talking past each other.

    My point about Winmore and you mention others – was in response to a comment about including affordable housing as an incentive for development, Increasing density (requiring more infrastructure) is a form of subsidy.

    My comment about Mebane – was that maybe its not just about housing. The data suggests that the local”:workforce” (police, fire, teachers, etc) are leaving town to live in more affordable and family-friendly communities, like Mebane. So building “affordable housing” may not atract a diverse community if we don’t affordable stores, recreation and other amenities, The school system may be great – but less so if you’re a minority family or your kid is on the wrong side of the achievement gap.

    I’m not taking a for or against position- just trying to open up the discussion to options that familes are chosing

  27. George C

     /  February 14, 2013

    Bonnie,
    I don’t think I’ve ever met you and if I have, I apologize for not remembering. And, based on your positions on certain issues, I certainly didn’t expect to be agreeing with you anytime soon. But I do now. It isn’t just affordable housing that’s the issue – it’s affordable living. If we can’t figure out how to make our community more affordable, for everyone, we’re going to lose any chance of having the scope of diversity that is necessary to develop the relationships that our future generations are going to need to succeed in an environment that is becoming increasingly more and more divisive.

  28. Bonnie Hauser

     /  February 14, 2013

    Wow! Thanks George – I appreciate the candor and the agreement. Plus the acknowledgement that our divisive practices may be undermining our ability to create a culturally rich and diverse community. We may agree on a lot. You made my day!

    Special thanks to Nancy for creating a platform for a diverse and engaging discussion that has piqued the interest of many informed citizens.

  29. Name Withheld By Request

     /  February 14, 2013

    Hopefully, the Estes/MLK rezoning process now underway will include a sizable amount of workforce housing to help offset the divisiveness you mention. After all, it’s the last undeveloped area of town where something with that kind of density could become a reality.

  30. Many

     /  February 15, 2013

    One thing Bonnie did not mention in her comparisons between Mebane & Chapel Hill is taxes. To me, that subject is the elephant in the room

  31. Mark Marcoplos

     /  February 15, 2013

    Small houses (and related zoning changes) are also part of the solution. The days of the mini-McMansion are over.

  32. DOM

     /  February 15, 2013

    “Name Withheld By Request”

    Regarding the Estes/MLK area’s rezoning – I believe a high-density student housing complex is already slated for that area.

  33. Nancy

     /  February 15, 2013

    Slated but not approved. And Carolina North is probably five years away from breaking ground. Much can happen in the interim to change market demand.

  34. DOM

     /  February 15, 2013

    According to the latest CN discussions, the University is hoping to break ground on the first office bldg. early next year.

    Also, the undergraduate student housing project to be built on the corner of Estes and MLK has nothing to do with Carolina North so what market demand will be in five years isn’t really relevant.

  35. Bonnie Hauser

     /  February 15, 2013

    any plans for housing for UNC’s and UNC Healthcare’s growing army of low wage employees?

  36. DOM

     /  February 15, 2013

    I don’t believe the Carolina North project has any plans for creating any ‘affordable housing’ at this time. Workforce housing, however, is an entirely different issue since the term is so relative.

    That being said, any residential construction may be several years away since I believe they plan on having the new law school up and running there (along with several hundred thousand sq. ft of office space) before any type of housing is introduced.

  37. George C

     /  February 15, 2013

    Some Specifics re Carolina North:
    A minimum of 25% of the total floor space in the Carolina North Project covered by the Agreement shall be devoted to housing. Of the three million total square feet of building space authorized by this Agreement, no less than 750,000 square feet of building space shall be devoted to housing. Subject to the availability of a certificate of adequacy of public school facilities, at least 200,000 square feet of housing shall be included in the initial 800,000 square feet of total building space in the Carolina North Project.

    After the total built square footage within the Carolina North Project reaches 800,000 square feet, if the total square footage of building space devoted to housing drops to 15% or less of the built floor area, construction of non-housing space shall halt until the housing space is at least 20% of the built space. A preference for housing availability within the Carolina North Project shall be given to students and employees of the University, UNC HealthCare, and persons with an active connection to the Carolina North Project (such as employees or researchers engaged in work or activity on the Carolina North Tract). A secondary priority shall be given to other public employees working within the Town. Prior to the approval of the first individual site development permit under this Agreement that includes housing, the University shall submit a plan for providing these preferences. The Manager shall approve that plan upon determining that it effectively addresses the requirements of this Section. This section shall be applicable to all housing within the Carolina North Project, whether owner-occupied or rental and whether publicly or privately owned.

    The housing provided within the Carolina North Project shall have a full range of affordability. While the University may provide housing opportunities at Carolina North for the full income range of those employed on the Carolina North Tract, a primary emphasis shall be in provision of housing that is affordable for those working on the site and that is not otherwise available in the Chapel Hill housing market. At a minimum, the housing provided shall meet the Town affordable housing goals as set forth in the Town’s comprehensive plan and ordinances in effect as of the Effective Date of this Agreement. Affordable housing units shall be integrated within the full range of housing provided within the Carolina North Project. Prior to the approval of the first individual site development permit under this Agreement that includes housing, the University shall secure the Manager’s approval of the measures the University will use to maintain housing affordability over time. To secure the Manager’s approval, the University shall submit a report of the measures it will undertake and the Manager shall approve those measures if they are reasonably designed to meet the applicable permanent affordability goals. This section shall be applicable to all nonstudent housing within the Carolina North Project, whether owner occupied or rental and whether publicly or privately owned.

    All housing provided within the Carolina North Project shall be in the form of compact, multi-family units. All housing shall meet the energy efficiency and sustainability standards specified in Section 5.10 of this Agreement.

  38. Bonnie Hauser

     /  February 15, 2013

    That is helpful George – thanks.

    I’m sure you’re aware of the growing interest in a living wage policy at UNC and UNC Healthcare – with new questions on whether their employees are showing up on local social service, Medicatd and other taxpayer subsidized programs. It would help if UNC provided local, affordable housing

    At a recent CN update meeting, leaders explained that their land is tax exempt but the buildings may not be. So it’s possible that housing properties will be taxable.

  39. DOM

     /  February 15, 2013

    Wow, some great info, George, thanks for filling us in.

    Do you have any idea what kind of housing/development will occur in the area now being studied by the Estes/MLK committee? There seems to be a lot of open land available in addition to what has already been set aside for the Chartwell project.

    I know the 2020 effort (which you so effectively co-chaired) put forth some preliminary ideas for it. I’m wondering when we’ll know what has been decided for that part of town.

  40. George C

     /  February 15, 2013

    DOM,
    The Central West Focus Area Steering Committee is supposed to discuss ideas and develop a plan for that area. The last timeline I saw was proposing that they would bring a plan to Council in late November.

  41. Name Withheld By Request

     /  February 15, 2013

    “The last timeline I saw was proposing that they would bring a plan to Council in late November.”

    Late November?! That’s forever from now. Will the Chartwell project be decided on by then?

  42. Patrick M

     /  February 16, 2013

    The financial difference between Mebane and Chapel Hill that influences location decisionmaking is not the annual tax bill, it is the cost of housing.

    Look at the math.

    median home, Chapel Hill (Trulia): $321,500
    median home, Mebane (Trulia): $149,500

    Assume 30-yr-fixed mortgage at 4.0%, no PMI, 20% down.

    Monthly Payments:
    Chapel Hill mortgage: $1227.91
    Mebane mortgage: $570.99

    Chapel Hill monthly taxes: $412.70
    Mebane monthly taxes: $58.60

    But how do financial advisors tell people to buy houses? One common rule of thumb is to not buy a house more than 3 times your household income.

    Now let’s imagine for a moment, that there are two identical houses in Chapel Hill and Mebane that are the same price except for the taxes. The extra CH taxes add $4249 per year to the price of the house overall. If the house had a $150,000 base cost, your financial adviser would tell you to wait to buy the house until you earned over $50,000/year. With the extra CH taxes, your adviser would tell you to wait to buy until you earned $51,416 a year.

    But of course, no such houses exist. So let’s return to the median price examples. In order to afford the base-price median house ($321,500) in Chapel Hill, your adviser tells you to earn $107,166 before making an offer, and for the median Mebane house ($149,500), they tell you to earn $49,833.

    To manage the increment between Mebane and CH taxes on house priced at the Mebane median cost, you need to earn 2.8% more. To afford the house itself in Chapel Hill at the median price, you need to earn 115% more!

    This is after putting down a $64k down payment instead of $30k. The difference in down payments alone is 8 years of Chapel Hill’s tax increment over Mebane.

    So, no, people are not about to buy homes in Chapel Hill but then choose Mebane because of the lower annual cost of taxes. It’s a distant concern behind the costs of housing, and perhaps the costs of commuting.

  43. Many

     /  February 16, 2013

    I agree that the cost of housing is a major factor, but taxes are also more that you seem to realize. Look at your own figures housing is roughly two times greater in Ch Hill than in Mebane, while taxes *seven times* greater in Ch Hill.

    Taxes on businesses are higher in Ch Hill (fewer jobs, rents and the cost of goods are greater).

    In Mebane, because there is more commerce, less of the tax burden is from property taxes and future tax increases are likely to be smaller on the property owner.

    Arguably, what you get for your tax dollar is more in Mebane than in Ch Hill.

    Your average cost estimate says it all: 115% more income to live in Ch Hill. Because for the same money you can afford a lot more house in Mebane, seven times the taxes with no other revenue source in sight becomes a much larger consideration.

  44. Nancy

     /  February 16, 2013

    Community Home Trust has some Mebane-priced options. But not everyone can or wants to buy. We need affordable rentals, but how do we do it? Sally Greene, when she was lobbying to be appointed to council, said she knows how, but apparently she’s not sharing that information with anyone.

  45. Name Withheld By Request

     /  February 16, 2013

    Rental property becomes affordable only when supply approaches demand. Until the town of Chapel Hill supports higher density, especially along major transit corridors, rental options will remain unapproachable for lower income families.

  46. Patrick

     /  February 16, 2013

    @Many- Housing costs are 75% of the cost ballgame in Chapel Hill *after* you make the down payment, which is 100% housing costs and 0% taxes. Housing costs are 91% of the cost ballgame in Mebane after the down payment.

    There are plenty of good reasons to worry about the growth in residential property taxes, but the affordability of homes to would-be buyers in a town generally isn’t one of them, because the purchase decision is dominated by the price of the home and not the ancillary cost of taxes.

    If you want to bring down the cost of rental or owned property in Chapel Hill, you need to build more units, and lots of them.

  47. Nancy

     /  February 16, 2013

    Withheld — That’s true in theory. All the new apartment hi-rises built in Manhattan in the 15 years since I left have not brought rents down any. Sometimes demand is insatiable and only goes down when the jobs move out.

  48. Name Withheld By Request

     /  February 16, 2013

    Okay then, Nancy. So there’s no solution. Let’s stop talking about it.

  49. DOM

     /  February 17, 2013

    Yes, let’s continue to build expensive, single-family residences on half-acre lots and forget all this silly talk about density and affordability. That noise will go away if we just keep our hands over our ears long enough. We must protect the sanctity and exclusivity of our existing neighborhoods!

  50. Many

     /  February 17, 2013

    @Patrick. Exactly my point. So we both accept that the average Joe & Josephine are priced out of the Chapel Hill market and doomed to rent forever; unless they want to move. Even if someone of moderate income could afford in Chapel Hill, their money purchases so much more elsewhere, (*plus* another $354.10 per month in tax savings) that they are likely to take their contributions to the economy elsewhere.

    Now to rentals. Developers are probably even more aware than the average person of Chapel Hills (and for that matter Orange Counties) tax base problems. As business people, they know spiraling costs when they see them. I am pretty sure you will acknowledge that taxes affect the price of rent, especially *seven times* the taxes. Seven times the taxes scales quickly on the size of the development, eating into any monies the developer might have available for low rent units and taxes are more likely to increase in Chapel Hill than elsewhere.

    Anecdotal evidence suggests even established (fully amortized) low rent housing developments are struggling and the squeezed margins are affecting such things as their maintenance budget. If there really was a business case to justify more low rent apartments, private money would be pouring in. Unfortunately, demand cannot satisfy the rent needed to justify the development cost.

    There is little substitution or oversupply in Chapel Hill, so inside its borders rents are relatively inelastic. Subsidies on development will shift the rent supply curve to the right until it is equal to the per unit subsidy; subsidies on rent will shift the demand curve to the right, decreasing the price paid by consumers.

    At the end of the day, both types of subsidy will increase the income received by developers by the same amount, the lions share of the subsidy coming out of the taxes paid by property owners. Any subsidy goes to either the top line or bottom line of developers in order to justify the business case.

    Needless to say, “If you build and subsidize it they will come” is not a model I am in favor of as a tax payer. When rents are subsidized, the subsidy is higher in Chapel Hill because of factors such as community resistance, land and development costs, additional code requirements and…… taxes. Ultimately what pays for subsidies are ….taxes, the condition feeds on itself.

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