Council to Weigh Changes to Downtown Development Incentives

The City Council will decide in September whether to approve modifications proposed to two development incentive policies that have contributed to robust housing and commercial development in the downtown area in recent years.

Some of the modifications are aimed at ensuring that more affordable housing projects are incentivized by the programs.

The Center City Housing Incentive Policy (CCHIP) and the Inner City Reinvestment and Infill Policy (ICRIP) have spurred investment in dozens of projects since they were started. Both policies have offered incentives – in the form of tax reimbursements and rebates – to developers who choose to build in defined areas close to downtown, helping the City toward its goal, City leaders say, of creating a vibrant urban core, which they believe will help attract a high-quality workforce.

CCHIP specifically focuses on incentives for adding housing downtown even though ICRIP has been more successful toward that goal, according to information reviewed by the City Council’s Economic and Community Development Committee at its meeting this week.

CCHIP was paused in January at the request of Mayor Ron Nirenberg so that city officials could examine how it was functioning. Nirenberg said then he was concerned about subsidizing housing projects that brought to the market units that much of the public couldn’t afford.

For example, the Can Plant and Cellars at the Pearl projects received more than $13 million through CCHIP, but have rental rates starting at more than $2 per square foot – some of the highest in the city.

The CCHIP program expired in June, but the Center City Development and Operations (CCDO) department presented its review and proposed changes this week to the  Economic and Community Development Committee. The proposals included extending the CCHIP program two more years from Oct. 1 until Sept. 30, 2020. The committee voted to forward the proposals to the full council at its Sept. 20 meeting.

Veronica Garcia, interim assistant director of CCDO, said the CCHIP program has led to $1.2 billion in investment in the 5.4-square mile area to which it has been confined in the downtown area. It has created more than 6,200 housing units, but only 20 percent of them are considered affordable housing, which appeared to confirm Nirenberg’s concerns about affordability.

In presenting the review of CCHIP, Garcia said the program wasn’t intended as a means to provide affordable housing. But the changes being proposed could address the need for more affordable housing downtown and are being proposed after consultation with the mayor’s Housing Policy Task Force, Garcia said. However, incentives will continue to be offered for projects that are not considered affordable housing, she said.

Another proposed change includes a reduction in the area in which CCHIP would be offered, to 2.64 square miles from 5.4 square miles. It also shifts to a tiered system, with Tier One near greater downtown and Tier Two in areas around downtown with more single-family neighborhoods.

Some higher-cost housing near The Pearl has been developed in recent years with the benefit of incentives under the CCHIP program. The Pearl falls into a Tier Two area under the proposed changes but would remain eligible for incentives for developers, though any development in Tier Two must include at least 20 percent affordable housing if it is less than six stories tall.

“I’m very happy about all this work that we’ve done,” Councilwoman Rebecca Viagran (D3) said. “I’m glad that we did stop and take a look at this and reanalyze this because we needed to get ahead of this before too much more was happening.”

Larger projects that used to be eligible for a 100 percent tax reimbursement grant over 10 or 15 years could receive 75 percent reimbursement, with the other 25 percent going into a new affordable housing fund for projects in the downtown area.

Additionally, projects in the Tier One area seeking an infrastructure grant must include at least 10 percent affordable housing.

The most significant changes being proposed to the ICRIP program are to expand it citywide, renaming it as the City of San Antonio Fee Waiver Program.

The program will offer fee waivers to projects creating affordable housing. Fee waivers will also be available for owner-occupied rehabilitations, historic rehabilitations, and business development that meets certain criteria.

“We’re proposing that any project within the City of San Antonio limits qualify as long as it meets the program criteria,” Garcia said.