Commentary: St. Louis Continues Poor Development Incentive Policies
Date Posted: November 1, 2019
Posted In: Discussion, Regionalism,
Editor’s Note: Jake Banton was co-founder of the Construction Forum STL Young Leaders Group.
From St. Louis Business Journal:
by Jake Banton, registered architect and member of the St. Louis Planning Commission
At first glance, news that the Koman Group is proposing a 200-unit apartment building in the Central West End is the latest sign that St. Louis’ hottest neighborhood is continuing to show its strength in the housing market. The new, handsome building isn’t being proposed on a parking or vacant lot — it would replace a couple of smaller and outdated buildings close to the neighborhood’s core.
It’s a sign of a strong market if a developer can afford to tear down existing buildings to build new, higher density ones. Unfortunately, when the project came before the city’s planning commission a couple of weeks ago, it was discovered that in reality, the developer could not afford it, at least with all private capital. Koman Group was asking the commission to blight the existing property so that they could receive 10 years of tax abatement from the city. This is deeply troubling for a number of reasons.
Last year, St. Louis Development Corp. released a map detailing the suggested tax abatement for single-family home and small residential projects across the city. Unsurprisingly, they found what many critics have been saying for years; that strong neighborhoods in the central corridor had no need for tax abatement. For a city that is constantly struggling to find revenue, this was an important first step. However, SLDC never released a similar map for larger commercial projects.
While larger projects certainly bring added costs and complexity, the same basic principal of real estate holds true: location, location, location. The same neighborhoods that have a strong market for smaller residential projects also tend to have a strong market for larger commercial projects. So why would the city be giving out incentives for projects in the Central West End at all? Sometimes it has to do with a complex site. Sometimes it has to do with costs of rehabilitating old historic structures, but this wasn’t either of those scenarios. This was demolishing existing buildings that are currently fully on the tax rolls, where people currently live and work, to be replaced with a tax-abated building.
The commission asked what the expected rents would be for these new “luxury” units. The developers responded that rents would range from about $1,200 for a 400-square-foot micro unit, to $2,500 for a 2-bedroom apartment. Park East Apartments, the building getting replaced, currently advertises 2 bedroom apartments for $975. While the quality of units is incomparable, with the city subsidizing this project, it is essentially subsidizing the demolition and replacement of affordable housing units.
In a neighborhood that continues to grow and gentrify, allowing city subsidies to be given to projects that take away affordable units without replacing them is extremely poor and shortsighted policy. While the need for subsidies in the Central West End is already questionable, the need for more affordable housing is undeniable. Despite these arguments, the proposal narrowly passed on a 4-3 vote with one abstention.