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