Luxury high-rises capture the wow factor, but we’re missing a need for affordable housing

Millennials — some of them, anyway — are ready to move out of apartments and buy, and empty-nesters are are looking for a carefree lifestyle where they can rent or maybe own in an urban setting and still be responsible adults for visiting children and grandchildren. 

Those interests mean that a range of housing choices needs to be offered, especially in the growing neighborhoods that have defined themselves in downtown Des Moines. That fact has not been lost on developers, according to panelists who participated in a video roundtable discussion about land use and development at the Business Record.

Participating were Eric Burmeister of the Polk County Housing Trust Fund, Justin Doyle of Blackbird Investments, Hollie Askey of the city of Norwalk and Davis Sanders of RDG Planning & Design.

Sanders said planning and designing is being done in the context of what already exists. There is isn’t a lot of space, downtown at least, that is left for freewheeling one-off projects.

His firm is involved in master-planning several neighborhoods; one is the new Gray’s Station that would fill an area between Martin Luther King Jr. Parkway and the Raccoon River with a range of housing types, and that’s for a reason. People who participated in focus group discussions as Hubbell Realty Co. were interested in everything from owning to renting in a range of housing styles.

The use of development incentives also was at the heart of much conversation. Doyle, whose company is behind a planned 32-story luxury high-rise at the site of the former Younkers Building, believes that cities should use the weight of their tax increment financing and tax abatement programs as a way to shape projects to community standards.

Burmeister said those incentives should be used to encourage the development of affordable or workforce housing. He cautioned that if the promotion of retail is the focus of an economic development agenda, it should contain a workforce housing component.

Burmeister has paid close attention to what appears to be a collapse of retail at Nicollet Mall in downtown Minneapolis. Major tenants Macy’s and Barnes and Noble are pulling out of the 13-block heart of the city’s retail and entertainment district.

“I see a couple of concerning or growing trends coming together, and that is the kind of construction that we’re seeing in terms of retail ... in terms of some of our entertainment districts that we’re looking at and understanding how we’re going to house that workforce,” he said. “The fact is that I think if you ask folks in the C-suites in Des Moines right now, what their biggest concern is is finding workforce.

“Right now, I think the biggest opportunity that we have in Des Moines of attracting the kind of workforce we need is the built environment. The fact is that we need to start having those conversations in tandem with one another … otherwide we’re  trying to fix it later or respond to it later or not worry about it at all and all of a sudden we’re realizing that we can’t attract the kind of workforce that we need.”

Affordable housing is needed for that workforce, yet that option is getting attention from just a few developers at the moment.

Doyle and Burmeister said the city of Des Moines should use the “bully pulpit” provided by development incentives to extract a commitment from developers to provide affordable housing units as part of their projects.

“I think one of the greatest mechanisms we could use as a community in order to motivate developers and investors to do that is to use the strong arm of municipal (incentives),” Doyle said. Other cities do it, so should Des Moines, he said.

Askey pointed out that a chief concern for the city of Norwalk as well as other communities along the southern ring of Greater Des Moines is the ability to attract retail.

“They’ve gotten to the point where they’re very healthy in their industrial, commercial, manufacturing, warehouse and residential,” she said. “They are very strong, they’re growing. They have a need for retail.”

Issues Discussed
Affordable housing needs to catch up with retail development.
Des Moines doesn’t fit old stereotypes.
Incentives should send a message about community expectations.

 


 

Panelists:

Hollie Askey, economic development director, city of Norwalk
Eric Burmeister, executive director, Polk County Housing Trust Fund
Justin Doyle, principal, Blackbird Investments
Davis Sanders, principal, RDG Planning & Design

Moderators:

Chris Conetzkey, Business Record publisher
Kent Darr, senior staff writer

Watch the Video
Want to watch the roundtable in its entirety? Go to businessrecord.com/AREM

 


 

What do you see as the dominant themes going forward this year?

Hollie Askey: The dominant theme that I’ve been seeing is the suburban communities on the outlying areas of the metro having such a push and a desire and need for retail. They’ve gotten to the point where they’re very healthy in their industrial, commercial, manufacturing, warehouse and residential. They are very strong, they’re growing. They have a need for retail. Everybody wants the big box. Everybody wants the national chains, but figuring out what is realistic for each community and what they can support and maintain is different.

Davis Sanders: With everything that’s happened in 2016 and maybe even the previous 10 years, it’s not a blank slate anymore, both for planning and for architecture. I think it becomes more of a challenge but it becomes more interesting in leveraging all of the development, all of the great things that have happened, rather than just a one-off project. There aren’t many opportunities for that, and they don’t really fit what we’ve got going here. I say working in context with so much of the success we’ve seen.

Eric Burmeister: As Davis says, we don’t have a blank slate anymore, and I see a couple of concerning or growing trends coming together and that is the kind of construction that we’re seeing in terms of retail, Hollie, in terms of some of our entertainment districts that we’re looking at and understanding how we’re going to house that workforce. The fact is that I think if you ask folks in the C-suites in Des Moines right now, what their biggest concern is, it’s finding workforce. Right now, I think the biggest opportunity that we have in Des Moines of attracting the kind of workforce we need is the built environment. We need to start having those conversations in tandem with one another … otherwise we’re trying to fix it later or respond to it later or not worry about it at all and all of a sudden we’re realizing that we can’t attract the kind of workforce that we need.

Justin Doyle: I’ll take that one step further. What you were talking about is the diversity in the environment that we have, and it can’t be done absent of any type of coordination or workflow for the city. For us to be able to create a really diverse Des Moines metro area requires us to consciously make an effort towards affordable housing, market-rate housing, homeownership opportunities not only for the core but also increasingly for outside the area. All of that does lead very much to the retail side of what we can do in order to grow commerce that’s in close proximity to where people live or work, to create a metro area that is more vibrant from an economic standpoint.

Are you talking about meeting current or future housing needs?

Doyle: I’d argue that there’s a current housing gap especially on the affordable housing spectrum. Matt Anderson at the city of Des Moines has done a good job over the last couple of months in trying to draw awareness to that, especially as many of the projects or the developments that are coming out of their income-restricted (phases) are beginning to burn off, those properties are not going to be replaced with other affordable housing properties. You end up having this effect of people making less than the household (median income moving) out of the downtown core. From the office standpoint, that is a huge issue. That is an issue, I’m sure, for corporations that are looking at relocating jobs across communities and moving downtown. How do they match the desire they have from a corporate standpoint to be in the urban core, but yet they have to rely on their employees who can’t afford to live in the downtown to drive from 10 miles away to find a job?

Burmeister: Most of the projects that have been built downtown, and I’m always the guy who reminds all of the downtown developers that downtown housing started with affordable housing, if we didn’t have affordable housing downtown, places like Elsie Manor and Ligutti Tower, we wouldn’t have downtown housing today. Those units are built with federal subsidies like low income housing tax credits, for instance. Those have 30-year covenants on them of affordability, and when that 30 years is up, the developer has the option to say, “I’m going to turn these into market-rent houses.” We actually have seen some projects that have turned over or had the opportunity to turn over; frankly, they haven’t. Elsie and Ligutti were recently renovated and kept by Newbury Living as affordable.

We’re sitting next to the Rumley, which was the last low-income housing project built downtown, and that’s now, I think, either 6 or 7 years old. What happens when that really nice old warehouse building turns over? These are long-range plans. These aren’t plans for six months from now or a year from now. These are 20-year plans.

Is there a challenge to building affordable housing downtown? Is the challenge that while it carries a known margin, it’s less profitable?

Burmeister: Sure, your rent is certain. The fact is that you see in our community, all you have to do is take a look at Hubbell’s annual apartment report to see what the average increase is on downtown market rates for apartments and compare that to the average increase in the area median income which is what controls the rents on affordable housing. We know that almost instinctively that the rents are moving up faster than the average income in the county. It’s happening all over. In fact, two years ago, there was actually a drop, at one point in the recession, there was an actual drop in the area median income for the county. It was a blip but it was a drop. People were lowering their rents in those instances.

Doyle: While there’s a large amount of equity available from the federal government to help make those projects real, the underwriting time for those is measured, often times, in years as opposed to months. I’ve been in the trenches and waded through it. It takes a year’s worth of perseverance to be able to get an affordable housing project toggled over. The third item that I would throw in there is the political support and the neighborhood level reaction to what affordable housing actually is versus what the perception is. I think that could be solved through education. It’s almost a weekly process of having to have some neighborhood meeting or a sit down with elected officials or whomever to bring them up to speed as to what this actually means.

Sanders: What Justin says is absolutely true, there’s a real stigma. One thing that we haven’t really touched on here that has been part of (the challenge) and that is the increase in construction costs locally. It’s running 3.5 percent, 4.5 percent. The only way to respond to that is to drive up rental rates. That makes it all the more difficult with all the other associated things.

Burmeister: I think, as Justin says, a lot of it is education, not only of our political leaders but also of the neighbors and employers as well because the fact is that if our economic development strategy, our larger economic development strategy is in the retail area and I’ll use Ankeny as an example, if Delaware Avenue is your economic development strategy then you need to figure out where those retail folks and those retail employees are going to live. Altoona, with the new outlet mall coming off the ground, is another place where that workforce housing strategy needs to be in place.

Are we as likely to see affordable housing offered as part of a development in suburbs such as Ankeny and Altoona?

Doyle: There’s a few that are percolating.

Burmeister: I think that there is. I think our biggest advocate for affordable housing is our business community. It’s those employers who are saying, “Hey, listen, we need folks to work these shifts.” You literally see (workers) go to Home Depot, to Lowes, back to a different Home Depot ... and it’s just this constant cannibalization of employees. Part of that is that if we were to say, “Hey, listen, we’re going to put some affordable housing within walking distance of some of these large retailers or large entertainment centers,” then you’re more likely to see those employees stay.

Doyle: I’ll take it one step further. I think one of the greatest mechanisms we could use as a community in order to motivate developers and investors to do that is to use the strong arm of municipal (incentives) to do this.

At Blackbird, we’re working in a variety of different cities but it’s not uncommon of other metro areas to state that if you’re going to be receiving economic assistance in the form of (tax incentives, then they will) require a certain portion of that project to be allocated towards affordable housing at various different levels. If the city and the county and the communities each come up with their own strategic priorities, my general counsel to any elected official on this is use the bully pulpit. ... People are expanding. Employers are moving to Iowa. This is the time that we can start having a demand of our development and investment community to make sure that the projects that are being built are consistent with the common core values of that community.

Is that coming out of the city of Des Moines now? You have Connolly Lofts, you have the Market Lofts that TWG Development is talking about; both have an affordable component.

Doyle: I know the city of Des Moines does support (the affordable housing component) of those projects, and that’s a big item. I don’t know if it’s necessarily turned into a quid pro quo.

Burmeister: For Connolly Lofts, for instance, the affordable component of that, a large part is Polk County Housing Trust Fund. To the extent that part of our strategy as an organization, going forward, is to pick out individual units in market-rate projects and literally buy the affordability through subsidy, it’s a slow way to do it and it’s an expensive way to do it. I think what Justin is saying is that, right now, it’s kind of tough to dip your toe into that water just a little bit. Right now, I think the city of Des Moines has some places, locations, that are so hot that if you went to a developer and said, “You know what? If you want the necessary permitting to get this done, we want to have two units of affordable set aside in this project.” I don’t think people are going to turn and run away.
Hollie, I’m just curious how affordable housing might fit into the mix in Norwalk?

Askey: Norwalk’s pattern and growth rate and just the style of residential that’s been happening in the last five years is very similar to Waukee, just the expansion pattern from West Des Moines and the types of new houses that are going up. We have that issue too. We don’t have a whole lot of affordable housing. If people were to transport outside of Des Moines or downtown Des Moines, they’d have to go a long way, really. They can’t even go to Carlisle or Indianola anymore, and it just costs them very similar rates. What I see as a parallel issue with that is public transportation, and I think all of this has to be driven by our larger employers. … We have three or four other really large employers ready and waiting to come into Norwalk to build new, but their issue right now, besides just nearby affordable housing, is how are they going to get there? Where’s your public transportation system? That’s a common thread with all of the suburban communities surrounding the metro.

You hit on public transportation. We’re at a time when we’re hearing some grumbling about DART service in the suburbs especially. Carlisle just recently decided to stick it out a little bit longer with DART.

Askey: It’s an issue. I know in Norwalk we just had that conversation. A very large employer who’s looking to come to Norwalk, bring 500, 600 jobs, and an issue was how everybody would get there and it’s been an issue with the existing companies. We have looked into the budget on the DART opportunity and it didn’t pencil out. I know Carlisle had an issue with that and what each resident is charged per capita on that, and it just did not pencil out. I think there is going to have to be an alternative method somehow, some sort of a ride-share system with these larger employers in these communities that will have to come together and figure something out with another provider. Nothing against DART, but for some of these communities it’s just not affordable.

Davis, can you talk at all about what you learned from the focus groups that you did as part of the Gray’s Station planning? What are people thinking?

Sanders: Almost across the board, there’s a demand for a broad range of (housing options). One that we learned that I thought was very exciting was the senior housing thing and (the desire for) senior housing in the downtown area. Certainly, we’ve heard very strongly from the empty-nesters wanting to be located in the downtown area, and with not a lot of two- and three-bedroom units. They may be empty-nesters but they want their children and grandchildren coming back and visiting and spending some time with them. We learned a lot along that line. I would go back to your previous question too, Kent, how we were selected. We also have been doing extra planning for the DICO site for about two years.

Is a resolution at hand for the DICO site?

Sanders: We’re making good progress and certainly much better progress than there has been for a number of years. It’s looking very promising. It seems everybody’s stepped up to the table that needs to step up to the table.

By extension, does it make sense that if you develop athletic fields for Des Moines Public Schools, as has been discussed for the DICO site, does another school go in that area?

Sanders: That’s really interesting that you’d say that because that’s been discussed with that planning. There would be another school, possibly an extension of the downtown school but certainly an interest in both, with that being a school facility in the DICO site with the addition of maybe a substantial amount of housing (nearby).

Justin, you’re running across the empty-nester thing a lot in your projects. Are they going to overtake the millennials?

Doyle: They have very different needs. There are different desires in housing. When I look at our project at Seventh and Walnut and the market studies that we’ve done on the user groups and such to identify that having certain amenities that reflect the young professional, people that are looking for more of that resort-style place, among the folks that responded very positively to that type of amenities set are people who are 50 years old, empty-nesters, kids are gone but they want to still be within walking distance of their three favorite restaurants and that type of item.

There’s figuring out a way in order to meet the particular needs of that group, the younger crowd, the affordable housing crowd, people who are interested in homeownership downtown, which I keep pounding on because I think it’s a big issue that isn’t really coming up yet, all that creates this really vibrant community. In the same way that having an affordable component to housing projects introduces people of a variety of different economic positions but also immigration and nationality and race and family size and all that, creates this interesting mix of people. That’s what makes Iowa surprisingly great. When people that I know travel to Des Moines or businesses come here and they look at trying to expand their operations, they’re surprised at Des Moines not meeting the stereotype of what a Midwestern city looks like.

It’s this really exciting variety of folks. I’ve got a Cuban restaurant a block and a half from my office, a Lebanese restaurant. A variety of my employees are from different countries. It’s a really fascinating thing.

Conetzkey: I lived downtown for a long time. I kept biding my time, waiting and waiting and waiting and going, “If something would open up for ownership ...” There’s six condos, I think, on the market at the moment, and those are probably what I’d be looking for.

Doyle: I’m constantly bumping into people like you who are saying, “If I had an option ...” My brother just recently moved from the Waukee area to Ingersoll Avenue. He has two small children, and he was going through his home discernment process of, “I want to live in the core. I want to live downtown but I just can’t do that because of this reason and this reason and, on top of that, there’s nothing available to buy into,” and he’s too old to rent.

Conetzkey: My point was that, if you think about just the pure number of people who have lived downtown for the past five or seven years now, that number’s got to be dramatically greater than have lived in the previous 10 years. Those are all people who, in the past, would have moved to Des Moines, rented in the suburbs and then just immediately bought a house in the suburbs at some point, as opposed to having the experience of living downtown.

Burmeister: I think one of the things that is interesting about that whole conversation, and it’s going on within the city of Des Moines and it’s a big part of discussion around Capital Crossroads, is how, in some of these first-ring neighborhoods that we have in and around downtown, are we going to be able to get some of those homeownership opportunities ... how are we going to start putting some new construction with either smaller single-family homes on smaller lots or this missing middle that everybody keeps talking about all the time, whether that’s duplexes, fiveplexes, fourplexes but with owned units, and then starting to use some of the inner-ring neighborhoods that are struggling to fulfill that need? I think that has some legs to it because I don’t know, Chris, what you were looking for, but in a lot of places that have been downtown, (people are) not necessarily looking to buy in a high-rise.

I think they’re looking to buy in more of a traditional, either single-family or a very low-density building.

What are you seeing long term in some other areas that are less visible but that are poised development?

Sanders: We have an interesting one right now. If we gave everybody in this room two guesses, nobody would guess that. It’s really rather exciting. It’s staggering information that allows you to come to this conclusion, but the area up around the Grubb YMCA, which is above 13th and College, there’s a significant movement, a substantial amount of planning and inflow of capital to make some things happen. It is a very large neighborhood and a very diverse neighborhood. Actually, at the Grubb Y, they’ve counted as many as, I believe it’s 45 different languages that are spoken but, unfortunately, the average stay per person in that neighborhood is between two and three years. There’s no stability to build on, but there’s an incredible resource.

We talk about needing to attract workers, and we talk about needing to attract diversity, being more diverse. How do we get people to move to Des Moines? I think we’ve got a great opportunity in that neighborhood. The construction industry is just starved right now. It cannot find workers. It’s not as though you have to get a four-year degree. The unemployment rate there is in the high teens. With the right services being provided in a more effective manner, I think that there’s some big development that we could see there.

 


 

KEY POINTS

Search for retail in Greater Des Moines’ southern tier of communities
The attraction of retail shops is important for communities such as Carlisle, Indianola and Norwalk. Those communities are seeing healthy commercial development, but they lack the shopping opportunities that are available near where many residents work. The search is for what might be considered a hybrid big box.

Designing in context
Architects and urban planners are doing their work in the context of what already exists, given that the development juggernaut of recent years has cleared the slate for one-off projects. That could be a good thing. With designers working under existing conditions, they are listening to what is good for the neighborhoods. 

Development incentives should carry a message
A large part of our conversation spun around affordable housing. The city of Des Moines is focused on the lack of affordable projects downtown. Several panelists suggested that Des Moines and other cities should use their development incentives as a means to prod developers to carve out portions of their projects for affordable. 

Parking ramps as office buildings
This one is a head turner. From the realm of adaptive reuse comes parking garages that can be converted to office and apartment buildings. The idea is to build an access ramp on the interior that is built out of flat plates on decks that can be of varying configurations. If the need for parking slows, as is predicted, the garages can be converted.

Retail requires housing for retail workers
Retail as an economic development strategy can be a dicey proposition. The retail rollover at the 12-block Nicollet Mall in downtown Minneapolis is a case in point, but so is the lack of affordable housing near large retail areas in Greater Des Moines.