fbpx

Sewer Master Plan:

The move to shift the cost sharing from city based infrastructure spending to the ultimate owners of the property developed has created pressure on building more housing and getting additional commercial development in the areas of the city that are easiest and most readily developable. While I agree with the precept that development should pay for itself, I believe that the city’s own numbers already demonstrated that it did. Back in February of this year, city administration calculated the cost of road infrastructure for a hypothetical new housing development. The taxes generated directly from that project clearly paid for itself with excess funds, even at price points that new developments cannot simply be built at, at this time.  I think if there is really an issue with how sewer infrastructure gets funded, the city needs to look closely at how it prioritizes infrastructure spending citywide.

Affordable Housing:

Housing affordability is vitally important and the way we as a city can truly affect change is by putting our money where our mouth is when it comes to support new units for ownership. There was recently a discussion at the city council regarding affordable housing incentives that serve only rental units. The city owns a lot of land within our boundaries. Rather than just cataloguing it for our own budget and maintenance purposes, lets look hard at putting that land to good use. Housing ownership remains one of the largest drivers of family wealth and having policies in place that ensure people remain lifelong renters involuntarily only serves to perpetuate those same societal structures that negatively effect housing access for everyone in our community.

New Development Regulations in General:

Before we make any change that would increase the cost of new buildings for their ultimate owners or tenants, we need to determine what the actual cost will be and then analyze whether we believe that costs fits the mission and pillars of what we want to be as a community. From tree preservation, to sewer fees, to added permit fees for different aspects of development, each of these items need to be discussed in the broader context of making more housing and development possible for our community. We have continued to grow in spite of ourselves with the single largest economic engine in the state of Minnesota driving that growth and the associated private development that supports our community.

The net of the points made above? We DON’T want to become the Minneapolis of the south.

By nearly every measure, new homes in Minnesota cost more than comparable homes in all other Midwest markets.

The Twin Cities is home to one of the highest gaps between new and existing home prices in the nation.

The disparity in homeownership rates between white and non-white Minnesotans is the highest in the nation.

Up to one-third of a new home’s price in the Twin Cities is due to regulations and policies from the local, regional and state level.

The same home in the eastern Twin Cities costs $47,000 less in Hudson, Wisc. — this same home in Wisconsin will be paid off almost seven years faster than its twin in Lake Elmo, Minn.

A new home in the Twin Cities costs up to 25 percent more than a similar home built by the same builder in the southwestern Chicago suburbs, a difference of $82,000.

Two teachers, with an average salary of $60,000 each, would be unable to purchase an average newly built home

More broadly, 85 percent of Twin Cities households are unable to afford an average newly constructed home.

Here is a statement from city plans, for justifying massive high-density focus downtown:

“A growing number of households seek to live near where they work, decreasing commute times and increasing quality of life. A range of housing types can be supported including apartments of various sizes, along with town homes for those seeking a house-based home.”

We DO need higher density downtown, but not in the quantity AND verticality proposed. Too much, too dense, high land costs, and expensive construction costs are going to continue to make the rents unobtainable for the very people we claim to be servicing. It also significantly hurts the poor and low income living near downtown. We must develop housing of all types to satisfy a growing need, but it must a balanced approach all across the city. Development is important, and it will occur, but we do not want to create an imbalanced ecosystem.

Studies show that professionals, young and old, want single-family homes, or at minimum lower density and elbow room. And they want to own:

https://www.businessinsider.com/personal-finance/millennials-buying-homes-how-can-afford-real-estate#:~:text=According%20to%20Clever’s%20data%2C%20about,buying%20to%20get%20more%20space.&text=Millennials%20are%20making%20homes%20in,later%20than%20their%20parents%20did.

https://www.washingtonpost.com/realestate/millennials-now-represent-the-largest-cohort-of-home-buyers-heres-what-they-are-looking-for/2019/12/11/99e0e386-eeb9-11e9-89eb-ec56cd414732_story.html

One regret younger people have in owning a home is having to buy bigger, more expensive houses due to a lack of starter homes. A lack of affordable starter homes is now the case in Rochester – by design, to force those that move here into an urban center. People don’t just leave city centers to suburbs to get want they want, they move to the ex-burbs and don’t care about the commute.

https://www.cnbc.com/2019/02/28/63-percent-of-millennial-homebuyers-have-regrets-heres-why.html

This is happening here: young professional and working men are moving out of town, creating bedroom communities and commuting to town.

Why better balance our plans between high density and low density growth?

The upside to urbanization: the greater the high density development and dwellings, the more it centralizes infrastructure, creates walkable neighborhoods, which de-emphasizes the use of cars. This is why you here some say “sprawl isn’t the answer”, because of its costs and lack of centralized infrastructure and transit. This is true and some density is needed in the city center. But we must not go too far.

The literature is clear about high density; the more you “constrict” a city the higher the property taxes become, the greater the rents, with a commensurate increase in the cost of living. We squeeze out those at the lower end of the socio-economic ladder and skew the choices to multi-occupancy dwellings. This naturally leads to “sprawl”, or an exodus from cities as many big cities have experienced. People want to buy homes and reap the rewards of building equity. Singles and young couples without children will eventually want to move into single-family homes, as the get married and have children.

Our development plan is significantly deemphasizing low-density housing, even suggesting changing zoning laws to curb the development single-family neighborhoods. For new neighborhoods the mandate is that they be a mix of high and low-density, skewed toward high density.

Note that the plan says that new development in established, core neighborhoods will “enhance the integrity of existing neighborhoods”. Not “preserve” but “enhance”, a subtle but very important distinction. Core neighborhoods should prepare for more and more “in-fill” development to higher density. Empty lots and increased numbers of houses converted to rentals will likely create a slow, incremental conversion of many core neighborhoods into mix-used, high density dwellings. The character of our neighborhoods will see a huge shift, and not at the edges, but more deeply as more people move into the city center. This will drive up property taxes significantly. People have begun to leave urban centers in droves because of these very reasons.

Without greater balance in our future development, we’ll go down a path where we actually mandate creating “sprawl”, the very thing we wish to prevent.

The recent pandemic has shown us is high-density can lead to greater infection rates, as we have seen in New York. Rochester city planning will have to be adjusted to take this into account. We live in a new world, and outbreaks like this may happen again. Click on the picture to read an article from the New York Times on this

High density is New York’s “big enemy”

Add a line item in the budget, and have transparency in reporting city revenue gain by permit and regulatory fees

$78 million in regulatory fees were collected by cities. The reporting on true cost vs profit by cities is either absent, or opaque at best. Clarity in reporting on fee profits in Rochester is very hard to understand even by those who develop properties! The fact is this is on purpose, because the fees collected (water, sewer, RPU, administrative, etc.) represents a “cash cow” for our city. We must include in our line item on housing exactly what the excess collection of permit and service access fees are, so that we can help put a dent in fund housing units that are 60% and less AMI, by reducing regulatory fees to be a nearly zero-sum game.

When the city allows for development of lower density (duplex, four-plex, town-homes, condos, etc), with ownership options, and single-family homes outside the city center, people will buy and settle, and they will add to the tax roles and overall economy. By over-developing the city center, there will be wasted gap financing that could have gone to lower cost, work-forced priced housing that there is a demand for. Instead the millions in TIF that will go toward too many high-end units. Occupancy rates in those that have already been built show that we are already out of balance.

Embrace Moorhead’s Property Tax rebate to keep new housing affordable

A quote from the following article:

Keeping housing starts going and staying competitive in the marketplace are big considerations toward approving the program, particularly since Fargo and West Fargo have had similar incentives far longer than Moorhead, the city’s Governmental Affairs Director Lisa Bode said Friday, Aug. 21

“It’s one of those things, if we grow the tax base, then we have those homes providing tax revenue for the community in perpetuity. It’s always a question for the policymakers as to: Would homes be built without the tax incentive? I think some (homebuyers) will and some may not. Some may build a bigger home or better home because of the incentive. Some may give Moorhead a more thorough review, if they’re new to the community,” Bode said.

“I do think it’s an important tool in Moorhead’s toolbox. It does provide a good start to people investing in our community, both move-up homeowners and people new to our area.”

https://www.inforum.com/business/6627492-Moorhead-property-tax-rebate-program-up-for-council-vote-Monday

Link to actual rebate and incentive details:

https://www.hbafm.com/buildremod/incenti

Use TIF to our mutual advantage

We must step back and and why are small businesses suffering? Why are rents already so high downtown. Why are property taxes soaring? Part of the reason was the dash to collect $200 Million in private investment to unlock the $575 million state funds for DMC. Clearly a very good thing to unlock. However, to keep private investment flowing, the city began issuing tax-increment financing (TIF) to developers as an enticement. Too much, too fast.

TIF was invented to improve blighted or economically declining areas by attracting development. Lets start using TIF what it was invented for: fixing blight. We must help those who are living in appalling conditions in Rochester.

It’s also a mechanism to spark further development. It works by raising our property-taxes to give to developers as an incentive. Developers then receive a 6 year moratorium before paying property-taxes, and during that time period it falls on the citizenry to pay for this incentive through. The return on this investment is predicated on raising property values. TIF also suffers from inflation, as the dollars decrease in value that are being used to pay back the “loan”.

TIF must continue to spark development in Rochester, however we must be smarter about how we award it, or we’ll have even larger increases in our taxes.

In many large cities where TIF has received criticism, leaders have instituted collaborative agreements with developers to “share” the TIF awarded. This is a win-win for everyone, as developers continue to receive their subsidies and the city can use those monies returned for needs. It also insures a more immediate return on investment and reducing the affects of inflation. It also reduces the risk that rising property values may not increase, and significant dips in the housing market. These monies can be used for infrastructure, transit, and for helping our public school system.

One of the knocks on TIF has always been that public schools are often left out of the growth equation, and then need to play catch up. This has happened in Rochester! So this is a way to make up for such oversight.

Finally, before we award any TIF the developers must agree to create units that are “affordable”. This is called inclusionary zoning. We are way too far behind the 8-ball on that score, and I see a lot of talk and no action. This is one way to ensure we being to address this issue.

Our city growth must be better balanced by allowing for the creation and expansion of traditional neighborhoods and utilizing TIF to our advantage.

Here are some articles if you would like to do some more reading:

https://www.house.leg.state.mn.us/hrd/issinfo/tif/mech.aspx

https://www.citylab.com/equity/2019/10/tax-increment-financing-explained-tif-economic-development/597313/

https://www.lincolninst.edu/publications/articles/hidden-costs-tif

https://www.citylab.com/life/2019/03/density-population-growth-cities-why-mid-size-fast/584890/