Durham skyscraper construction is a go; traffic in some lanes could stop
Scrutinizing our schools: A decade later, spending and enrollment up, but fewer teachers

Durham CAN's public subsidy tour: a beginner's guide to tax incentives, diversity and affordable housing downtown

Fayetteplace_1_032214

Photo by Gary Kueber; courtesy OpenDurham.org

 

This post has been corrected to reflect that the option on Fayette Place expires in August 2017, not this year.

It is only 1.2 miles from downtown Durham to the old Fayette Place, the former housing project at the gateway to the historic Hayti neighborhood. Last Saturday morning, about 40 people took a three-minute bus ride to see what many view only from the highway.

“It looks like an archaeological dig,” a man said.

“This is the saddest thing I’ve ever seen,” added a woman, who was trying to photograph the desolation with her smartphone.

But a camera cannot capture the blightscape of the 19 acres at Fayetteville and Umstead streets, near the Durham Freeway. Encased by a chain-link fence, the property is scarred with dozens of concrete slab foundations and crumbling brick steps that once went to front doors and now lead to nowhere.

From the highway, the land looks like it has been flattened by a bomb. From the street, it is a constant and embarrassing reminder of the neglect in this predominantly African-American neighborhood.

“If this were in any other neighborhood, there’s no way it would have been allowed to lay like this,” said the Rev. William Lucas, pastor of nearby First Chronicles Community Church. The group had disembarked the bus at Grant and Merrick streets, an eerily isolated block embedded between the abandoned property and the freeway. “This area can go from one to 100 in a second,” Lucas said of the crime in the neighborhood. “It’s real serious here.”

The occasion for the bus ride to this and other prime real estate in and near downtown was the Durham CAN public subsidy tour. About 200 people gathered to learn about the evolution of downtown development, its opportunities for affordable housing, and the market forces and the public subsidies and tax incentives that shape its future.

That future, everyone agreed, should include a downtown made vibrant by racial and economic diversity.

“This is not a protest against downtown or capitalism,” said Ivan Parra, lead organizer of Durham CAN. “If you are here for that, you’re on the wrong flight. 

“This is an explanation of what’s happened in downtown and what it can become. If we don’t work together, it could become unaffordable and very white. But this is not an effort to blame elected officials. There’s not a single person here who doesn’t enjoy the amenities of downtown.”

So with Parra’s advisement that the audience tuck away any copies of Das Kapital, Mel Norton of the Durham People’s Alliance and Durham CAN outlined economic data that shows the enormous growth that has occurred downtown over the past 15 years. 

In 1993, the year Downtown Durham, Inc. organized to advocate for an economic revival of the central business district, the Old Bull building at Blackwell and Pettigrew streets was slathered in aluminum siding. Empty storefronts created dead zones along Main and Chapel Hill streets. The old tobacco warehouses were abandoned.

Like many U.S. cities in the mid-20th century, Durham was reaping the karma of poor planning (the Downtown Loop, one-way streets), white flight and a job exodus to the suburbs, on top of a disinvestment in its urban core.

But, as Norton said, “The landscape of issues has changed since 1993.”

  • According to DDI data, in 1993, 3,800 people worked downtown; by 2015, that figure had increased to 16,500.
  • Over the same time period, the number of residential units grew from 112 to 1,700.
  • Likewise, 1.1 million people visited downtown in 1993, compared with 2.3 million last year.
  • There was less than 1 million square feet of commercial space in 1993, and only 70 percent of it was occupied; in 2015, there was 3 million, with an occupancy rate of 93 percent.

Downtown boundaries have expanded to reach Buchanan Avenue and Golden Belt to the west and east; the Durham Freeway and Trinity Avenue to the south and north. That explosive growth, Norton said, requires us to “advocate for an inclusive central city.”

“We are at the end of the beginning,” said Geoff Durham, president and CEO of DDI. “The next wave becomes a lot more complex.”

Those complexities came to light last year, when DDI held public input sessions for the next iteration of its master plan, due out this spring. The obvious concerns — parking, walkability, green space and connectivity — were trumped by the smoldering issue of racial and economic diversity, particularly as it relates to local businesses and housing. “This is what we received the most feedback about,” Durham said. 

“Without this diversity, downtown becomes generic, a downtown in a box,” Durham said. “It needs to be affordable for people — where they work, live and the goods they buy. A sustainable downtown has a wide array of options, starting with free events all the way to fancy restaurants. If you have only a certain type of experiences, then you have a moat around downtown.”

The doling out of tax incentives to high-end projects and out-of-town developers has concerned many social and economic justice advocates. However, incentives are a state push as much as a city one. In the past, Durham, like many North Carolina cities, negotiated with outside companies from position of weakness, as the textile and tobacco industries folded. The state pushed economic incentives and tax breaks as a way to lure new, high-wage industries, particularly biotech, to its cities.

On that point, the strategy succeeded. Since 2000, public and private investment in downtown has totaled $1.2 billion. Tax credits and incentives, the latter granted only after the projects are complete and generating additional property tax revenue —helped Durham and the private sector upfit old tobacco warehouses, which became the American Tobacco Campus — a life science and technology hub — and West Village. 

In the past three years, the city and county have awarded tax incentives — to be paid only after the projects are finished and achieve certain project-specific benchmarks — to six additional ventures: 

  • The 21c Museum Hotel (Cost, $48 million; tax incentives, $5.7 million, city; $2 million, county)
  • Durham Hotel (Cost, $11 million; incentives, $1.2 million, city)
  • Residence Inn at Marriott (Cost, $29.5 million; incentives, $1.3 million city; $400,000 county)
  • City Center, skyscraper and Jack Tar motel (Total cost, $85 million; incentives, $3.9 million, city)
  • Durham Innovation District (Cost, $87 million; incentives, $5.25 million, city)
  • Chesterfield building (Cost, $80 million; incentives $6 million, city; $1.2 million, county)

Durham of DDI said several questions factor into whether a project receives incentives.

“We have to ask, When is right time to incentivize something? Does the project meet the goals of the Downtown Master Plan? Does it ensures racial and economic diversity downtown? Does it make sense for taxpayers? And is the incentive necessary for the project?”

Those questions become more critical in the city's negotiations now that “Downtown is holding some cards. Commercial developers are salivating,” Durham said. “There’s feeding frenzy and we have to stay ahead of it. We have a position of authority, and we should get something invested back into the community.”

~ ~ ~ ~ ~

While commercial projects have received generous local, state and federal tax credits incentives, the city nor the county has awarded these subsidies for downtown residential projects; state legislation prohibits or restricts each from doing so.

Nonetheless, local governments have become creative in wooing developers to building affordable housing. For example, an affordable housing density bonus — allowing extra units to be built despite  lower density zoning  — is pending for a development near Duke Street and I-85.

In addition, the city and county have subsidized several affordable housing developments,  if not in downtown, then on its edge.

The city contributed $11 million in tax incentives and land acquisition costs for the first phase of redevelopment of Southside neighborhood, which is less than a half-mile from downtown. Here, at the Lofts at Southside, 80 of 132 apartments are affordable for people earning 60, 50 even 30 percent of the area median household income, which is $50,000.

That partnership with McCormack Baron Salazar on the Lofts, formerly known as Rolling Hills, was funded in part by tens of millions of dollars of city and federal funding -- a number that, based on pre-project conversations, could exceed the amount of the downtown incentives in recent years combined.

Another $4 million in city funding is slated for Phase II.

The city awarded $600,000 in incentives for the Whitted School redevelopment, an affordable housing complex for seniors, plus a pre-K site. The county kicked in $2.3 million, and Durham Public Schools, another $5.8 million.

Durham Community Land Trustees, aided by city funds, rehabbed several affordable rental homes at Scout and Piedmont streets. Deed restrictions mean the homes will remain affordable. And the city recently issued a request for proposals for the construction of 19 additional homes in the neighborhood. 

Some of the property tax revenue from six market-rate houses built by BW Wallace, which are selling for at least $265,000 on Enterprise Street, an area called "the tipping point," will be used to build four affordable homes nearby.

Incentives are available for other homes in the neighborhood. While those properties sell for the same price, subsidies offset some of the cost, helping prospective low-income homeowners buy a house. Elizabeth Gregory purchased a house in Southside this way. “I could not have afforded a home without it,” she said.

However, the goals for racial diversity have failed in some of these developments, which raises concerns for future projects downtown. On the Southside, the renters are majority African-American, but the homeowners are not. At last count, 24 of 25 homeowners in the new Southside houses are white.

Ray Eurquhart has lived on the South Side for all of his 67 years. He was born near Merrick Street, where the remains of Fayette Place lie. “We’re concerned about the lack of diversity,” he said. 

The city should have enlisted community leaders to reach out to the churches in order to court more prospective African-American homeowners, he said. "Why didn’t we reach out to them?” There are 12 African-American churches in the area, “and young people want to live close to them.”

A nationwide cultural shift has whetted the public’s appetite to live downtown, which in turn, has sparked the local conversation about the need for affordable housing in the city center. Although local governments have few options to encourage developers to build affordable housing on private land, local officials can place stipulations on city- or county-owned property.

Downtown, three city- or county-owned parcels provide opportunities for affordable housing, either alone or as part of a mixed-use development.

  • A county-owned parking lot on East Main Street between First Presbyterian Church and
    St. Philip’s Episcopal Church;
  • Four acres owned by the county near Dillard and Pettigrew streets;
  • A little more than an acre of city-owned land adjacent to the Durham Transportation Center, likely to be opened up to an RFP this year;
  • And though it’s still in private hands, potentially Fayette Place.

Built in 1967, Fayette Place was supposed to be replacement housing for those displaced by the construction of the Durham Freeway. Eventually it became public housing, run by the Durham Housing Authority, for low-income households.

But in the mid-2000s, DHA became saddled with a $1 million debt to the federal government because of several unapproved financial transactions regarding Fayette Place and DHA’s for-profit development offshoot. Most of the residents left or were relocated, and by 2007, only a few squatters remained in the abandoned buildings.

That year, DHA sold the property to a private developer out of Birmingham, Ala., Campus Apartments. The company razed the buildings in 2009 with plans to build housing for nearby North Carolina Central University students. Instead, the company did nothing, invested nothing, and the property has languished, even after the recession.

City Councilman Steve Schewel was among five elected officials — council members Don Moffitt and Jillian Johnson and county commissioners Wendy Jacobs and Ellen Reckhow — who went on the subsidy tour. He explained that Campus Apartments’ option expires in August 2017. If it has made no movement on the property by then, DHA can buy back property for either the sale price — $4 million — or the market rate, whichever is greater. 

But, Schewel said, “DHA doesn’t have the money. It needs help from the city. Our ability to get this is uncertain. But you can see what an opportunity this is.”

Fayette Place  is near a proposed light-rail stop, and close to downtown, social services, a branch library, a JobLink Center, N.C. Central and the Lincoln Health clinic.

Pastor Lucas pointed to the slabs and broken brick behind him. “This is a wonderful opportunity to take the land and build up Hayti.”

 

Comments

Ram Neta

No artisan sells their goods cheaply: it would put them out of business. That's why you go to Costco or Walmart for lower cost goods. If it's going to be in anyone's interest to invest money in developing low cost downtown real estate, then the real estate has to be developed in bulk: hundreds of $50K apartments on a single small footprint (built up, not out, to save on land cost). If we want that kind of real estate in downtown, then we can have affordable real estate. If not, good luck convincing property owners to sell or rent their properties way below market value.

Erik Landfried

The edge of downtown, indeed.

Southside: "Look over there! Downtown - it's only 1/2 mile away. How do we get there?" https://goo.gl/maps/v1PpTjAx7B52

Fayette Place: "This is great! We're near downtown. Right? Isn't that downtown? Where am I?" https://goo.gl/maps/g6b4NWoYU1k

Kevin Davis

@Erik: Do you think it's a stretch to think of Southside (5 minute walk to American Tobacco) or Fayette Place as being a part of a "greater" downtown? I certainly include Ninth Street in my conceptualization of the city's core. Not downtown per se, but living there makes downtown highly accessible.

There are some opportunities to add affordability downtown; many more on the outside of downtown, in places like these. If we treat those as unnecessarily inferior, I think we discount valuable opportunities to add equitable options in the central district.

Erik

I think they could both be considered part of greater downtown someday, but until safe access to downtown from both places is addressed, they will never feel connected to downtown in any meaningful way. We need affordable transportation just as much as we need affordable housing. The Freeway and the giant streets that feed it like Roxboro, Mangum, and Fayetteville present an enormous barrier to making these places part of a greater downtown.

Kim

We live in one of the new houses in Southside with our four children ranging in age from 9-15 and walk regularly to the American Tobacco Campus. It doesn't feel far away or difficult to get to at all. From there it again doesn't feel like much of a walk to get into the heart of downtown. I'm confused as to how the access from where we are to downtown is unsafe. It certainly doesn't strike us that way. We have lived in more urban environments than this though so maybe we see it differently than those for whom this is an urban as they have ever experienced.

Eric

I've been reading for some time on affordable housing in Durham and my opinion has changed some as I have educated myself.

That said, the one thing I still don't understand is why there is such a 'push' for the overwhelming majority of affordable housing to be downtown? That makes no sense to me. I would think the entire community would benefit by spreading out the affordable housing across the city and/or county. I am sure the first reply with be transportation but a large number of people that move in these units have cars.

I'd like to see economic diversity throughout the city and not just downtown. What am I missing here?

Jeff Bakalchuck

@Kevin and/or Lisa:

I must be missing something or mis-reading the article. It sounded like the city spent $11 million and we are getting 80 units of affordable housing. By my math that's $137,500 per unit.

Dukie02

Eric – these are great questions. Despite all the rhetoric, affordable housing has always been provided at the fringe of cities. Where cities are allowed to grow, they stay affordable. Where cities are restricted, they become unaffordable. Durham's determination to create affordable housing downtown is a market manipulation, and is certain to have SOME negative effect. At its worst, it is a gross misallocation of very limited resources: should we provide 2 suburban families a house OR 1 childless couple a downtown condominium? That's a legitimate question, and Council needs to be asking itself the same questions you've asked here.

April

I need a home and am willingly to move to an area that would be feasible for me disable w/ dog on section 8 and really need help finding a place to live

Geraldine Conley

I'm happy to see that affordable housing is actually being discussed, at least. I agree with some of the comments that transportation is almost as important as housing when planning. Location can be more flexible than just "downtown", meaning the actual Center of It All. But not sprawl. Infill may be feasible or even preferred.

I am an older woman with a dwindling IRA. I will be living on Soc. Sec., only, in 5-8 years and apartments are very hard to find in the 700/mo range. (That would be 50% of my SS.) Subsidized sr. housing is limited and some of it looks in disrepair to me. What to do?

Erik Landfried

@Kim, I was thinking more about the apartments that were built on the corner of Roxboro and Lakewood - that's the intersection I linked to in my comment. And it's a very difficult one to cross on foot. If you're talking about houses closer to South St, then I agree that walk is pretty good, but that is much lower density than the stuff east of Roxboro, right?

Khalid Hawthorne

Housing is less expensive as you move away employment centers which in Durham is north and east. There are hidden costs to living further out (yes...gas is cheaper now) like needing a personal vehicle for EVERY situation in your life. This is an expense along with emergency maintenance that can stretch any budget and can lead to cycles of predatory lending.

We need affordable (40 - 80% AMI) AND workforce (80-120% AMI...my definitions...not scientific) housing options near employment centers and transit stops. I'm not talking about the typical LIHTC project here that is a mixed "low"-income property but market rate with a certain number of subsidized units.

We are providing less and less subsidy to attract development and investment downtown but we should be using those dollars to create an inclusive downtown. Left to market forces alone...there would be nowhere for people of modest means to easily get to work. There would be high-rent apartments and public housing with a huge gap in between.

BullCityEric

Less than 10% of the jobs in Durham County are located in downtown Durham.

John

@BullCityEric - Can't we just tell the people who live out Hwy 98 - and work out Hwy 98 - that we're going to need them to move downtown? Or is that somehow unreasonable?

Rob

Does anyone have any idea what is proposed for the abandoned lot of Fayette Place? I am looking at a property (restored home) on Umstead St. My motivation for living near downtown is my lifestyle but I would like to see a return of my investment later on if I chose to sell. I get concerned with the failures of socially engineered housing (I.e. Rolling Hills, Fayette Place) and wouldn't want to invest in a home if they're going to be building low income housing projects again in the same place. I would hope if the Campus Apartment deal expires and DHA buys back the property they've learned their lesson. Personally I would rather have a private developer with an option for some affordable units to take over and raise the property value of the surrounding neighborhoods.

Rob G

@Rob-
There's really nothing proposed as of now, except it seems like it certainly won't be the campus apartments as the option expires soon. That site was a proposed location for police dept HQ, but the city chose the area next to the county's human services building instead.

DHA has a large number of units aging out over the next decade, so I would assume that we'll see some form of subsidized housing on the site. Whether it becomes traditional public housing, section 8, or some other form of affordable housing remains to be seen.

In terms of raising the value of the surrounding neighborhood, I think that replacing the 360 unit McDougald Terrace, one of those communities which is aging out, with something in better shape would benefit the community greatly. Maybe DHA could look at building two mixed-income communities to replace the Terraces; one on the fayette place site and one on the existing terraces site.

Rob

@Rob G, do you really think that DHA will put up another public housing community in such close proximity to downtown considering the past failure of such an endeavor? I can't imagine they would undermine the revitalization efforts happening downtown and with the new community built on Rolling Hills?

Rob G

@Rob-
DHA has been trying to spread public housing out a bit now, that's for sure. For example, their replacement for the Club Blvd project has considered a "scattered site" approach. This was covered here in August: https://www.bullcityrising.com/2015/08/more-on-durham-housing-authority-private-competition-for-affordable-housing-sites.html

That being said, a mixed income project the size and scope of Rolling Hills on the Fayette Place parcel would be transformative for the NC Central area. The only question is how to pay for it. Private dollars would certainly help, but there's plenty of projects in the LIHTC queue already. I think we're 5 years away from even beginning to talk about the Fayette Place site in a serious capacity.

Lisa Sorg

If I remember correctly, Fayette Place must contain some affordable housing, or at least that was the DHA requirement for the private developer. That company was supposed to do mixed-use with housing for low-income NCCU students.
I don't know if the entire complex can be affordable housing, though, because HUD regulations are steering housing authorities away from clustering low-income dwellings in one neighborhood. Thus, the scattered sites approach.
Fayette Place might turn out to be something similar to the Lofts at Southside, which mixes market-rate with subsidized housing at different income levels. But I agree, Rob G, it's a ways off. That's sad, because the demand is there -- and the condition of the acreage really drags down the neighborhood.

Rob

I'm not entirely familiar with how HUD and DHA works in this case but my understanding is that the land is owned currently by Campus Apartments, a private developer in PA. The contract between NCCU and them to build campus housing at the site expires next year at which point DHA can purchase the land back. The question is can they? Is there enough revenue considering the shortages to buy back the property? And if not, can Campus Apartments put it on sale to the general market and a private developer at that point pick it up and develop it at market rates? Just curious..

Khalid Hawthorne

That site is the epitome of the downfall of the traditional capital AND LIHTC markets. It is screaming for a DYNAMIC mixed-use and mixed-income development to support a severely underserved market. YES I SAID UNDERSERVED...in every way.

Retail - The Hester's strip center is constantly packed even though it is depressingly maintained and definitely not the prettiest. The middle class communities near NCCU though aging have been largely ignored for years.

Residential - NCCU for years has shuttled students from South Durham apartments due to housing shortages. Upperclassmen have never had a decent option near campus.

Redevelopment of this anchor site would have been a catalyst for the entire Fayetteville 'Street" corridor. The capital markets have deemed it to be too risky because they do not understand the market dynamics. It does not fit within their cookie-cutter models.

It is definitely time for some alternative capital and development options...

Wendy Jacobs

Just wanted to note that the County is a participant in all of the dowtown projects noted in the article. The following information about County incentives was not included: $605,000 for the Durham Hotel over a 7 year period, $3,973,095 for the Jack Tar over a 15 year period, $2.5 million for the DID over a 5 year period.

Lisa Sorg

Sorry, Wendy, I did not mean to omit. The county has been very involved in all of this.

Dee

Fayette Place--Guesses as to whether affordable housing will increase or decrease crime in the area? Looking at a house on Umstead Street. I am a single, white female living alone.

The comments to this entry are closed.