By Jonathan D. Epstein | Original Article
Aug. 4, 2018
A strange thing happened on Buffalo’s West Side this week: One of the city’s leading advocates for affordable housing celebrated a high-end apartment project.
That’s because the Rochester developer behind the $25 million project to construct a 10-story apartment building overlooking the Niagara River agreed to set aside nearly 15 percent of the 95 units for low-income tenants.
The advocacy group, PUSH-Buffalo, said the decision proved that developers can make affordable housing work as part of a larger market-rate or luxury project.
They argue the project illustrates what “inclusionary zoning” could look like in Buffalo if the city’s lawmakers adopted a rule mandating that new development projects include a fixed percentage of affordable units.
“For years, developers and others in the city have been telling us that inclusionary zoning would not work, that it could not be done,” said PUSH organizer John Washington. “Now we have a developer that has figured out how to make it work.”
What the group didn’t highlight are the added financial hurdles that developer Andrew Crossed of Park Grove Realty said he must now overcome to ensure the project can work.
Under the agreement with PUSH, 14 apartments will be set aside for people earning at or below 60 percent of the area median income. So while one-bedroom and two-bedroom apartments would regularly rent for $1,550 and $2,150 per month, the prices would be reduced by hundreds of dollars for affordable units.
“It creates a challenge to get the economic support to fill that gap for us,” said Crossed, who plans to pursue programs for affordable housing.
While expressing confidence the project will go forward, Crossed now is seeking additional lower-cost financing through the state Division of Housing and Community Renewal to cover a gap of $500 to $750 per unit per month that he now faces.
The project also is expected to receive historic and brownfield tax credits, along with property tax breaks, said Brendan Mehaffy, executive director of the city’s Office of Strategic Planning. “It will be an exclusively publicly-funded project,” he said.
Many developers and some city officials don’t believe mandatory inclusionary zoning would work in Buffalo without subsidies. Adding lower-rent units, they say, would make it harder for ventures to become profitable.
Jake Schneider, whose Schneider Development has done Turner Brothers Lofts, Apartments at the Hub and AC Lofts, said he already has to turn to gap financing to make projects in Buffalo work. That’s without any requirements for affordable housing.
“I have a hard enough time making my projects pencil out as it is,” said Schneider said.
Inclusionary zoning has become a hot topic in Buffalo as rents have risen amid a surge in redevelopment activity.
Advocates say Buffalo rents are rising at the third-fastest rate in the country. That makes it harder for those with moderate or low incomes to afford some neighborhoods, and community advocates fear longtime residents will be forced out of their homes.
“There’s a major affordable housing crisis, and we need to be using every tactic, from inclusionary zoning to rent control, to make sure that people have a decent place to live,” Washington said.
Advocates led by the Partnership for Public Good have been pushing for the city to require all new residential development projects to include a certain number of apartments that will be affordable for those who make 50 or 60 percent of the area median income. They have lobbied for a 30 percent minimum, as part of what would be a mandatory inclusionary zoning code.
Some Common Council members have backed the concept.
“We are beginning to see how gentrification without an affordable housing plan can displace people from neighborhoods that they have lived in for generations,” said Buffalo Common Council President Darius Pridgen. “This is very important. There needs to be a plan sooner rather than later.”
But the Brown administration has been hesitant. That’s because developers have expressed vehement opposition, saying future development would grind to a halt in the city if such a requirement were put in place without ensuring that other sources of funding, such has additional tax breaks or credits, were available.
“If this comes to pass, it’s just going to make it harder for developers to make these projects happen,” Schneider said.
City officials last year hired an outside firm, czb, to study the city’s housing market.
Its November 2017 report found that housing conditions, successes, demand and opportunities vary widely from neighborhood to neighborhood. It concluded that while inclusionary zoning could work in certain areas of the city with moderate to high demand for new housing, it “must be paid for through cost offsets or outright cash subsidies.”
“Not doing so risks reducing market-rate activity to a level that would yield few, if any, inclusionary units as a by-product,” the report said.
Some developers agreed.
“It would just put another layer of bureaucracy into an already difficult process, in an environment when there are so many unknowns already,” said Karl Frizlen, who has converted three former public schools into apartments.
Frizlen said construction costs for some trades have risen by 40 percent to 50 percent in the last year, while tariffs have increased the price of lumber and steel.
Schneider noted that market-rate rents in Buffalo are about 14 percent below the national average, while construction costs locally are about 5 percent above average, creating a gap in financing that developers already have to overcome.
“I don’t think that inclusionary zoning is going to help developers by any stretch. It’s going to make it harder to do something that’s already very hard to do successfully,” Schneider said. “Where’s all this gap money going to come from?”
Pridgen acknowledges the concern, but insists that “there still needs to be some type of zoning policy,” although “whether that is citywide or targeted, I’m not sure at this time.”
“I’m a realist,” Pridgen said. “At the end of the day, I know there are some projects that will not be able to do affordable housing. I get it. It is simply a matter of pushing an issue that if it did not get pushed, we might never have seen affordable housing in market-rate projects.”
Developers insist they support affordable housing initiatives. They just don’t want to be forced into it for every situation.
“We’re not against it. We’re just saying it shouldn’t be mandatory,” said Ellicott Development CEO William Paladino. “Where you can do it, you do it. Where you can’t, you can’t.”
In fact, as the push for inclusionary zoning has gained steam, developers are taking it upon themselves to demonstrate that they can do it voluntarily.
Paladino and Nick Sinatra are planning a 10 percent affordable housing component as part of the redevelopment of the former Women & Children’s Hospital of Buffalo site into the new Elmwood Crossing.
Pridgen said he’s had more developers recently come to him to express interest in such projects.
“Some developers are really trying to find ways to make it work,” Pridgen said, “but I don’t believe as many would be trying to make some affordable housing work in their projects if it were not for this public discourse.”
PUSH advocates note that a city policy would not have to be all-or-nothing with their target of a 30 percent requirement.
“Thirty percent is what we really need,” said Washington, an organizer with PUSH. “If we start with 15, hopefully one day we can get to 30.”
The plan by Crossed and his Buffalo-based partner, Roger Trettel, calls for a 10-story complex at 990 Niagara St., using a long-vacant two-story former train car repair facility and an adjacent parking lot as the site for the new construction. The project would include 95 one- and two-bedroom apartments, plus 4,000 to 6,000 square feet of ground-floor retail space.
Crossed and Trettel would build a 110,000-square-foot tower and would transform the blighted structure and the first two floors of the combined new structure into a 58,900-square-foot garage, with two levels of indoor parking.
The upper eight floors would contain 48 one-bedroom and 47 two-bedroom apartments, overlooking the Niagara River. Each unit would have a private balcony.
Construction is slated to begin in the spring with completion by the fall of 2020, Crossed said.
Developers say they will be closely watching the project to see how the affordable component plays out.
“It’s an honorable effort by Roger [Trettel] to do this, but to really carry it all the way through, that needs to be seen,” Frizlen said. “He’s just getting started. It’s fine that he wants to hit that. But in reality, is this realistic?”