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Proposed modifications to incentive programs that stimulated downtown development in recent years are welcome changes for local agencies and some developers working to provide more affordable housing in San Antonio.
The goal in making changes to the policies is to continue the momentum of downtown development while also protecting neighborhoods and increasing affordable housing, Assistant City Manager Lori Houston said.
Houston briefed the City Council’s Comprehensive Plan Committee on Wednesday regarding modifications City staffers are proposing to the Center City Housing Incentive Policy (CCHIP) and the Inner City Reinvestment/Infill Policy (ICRIP). The committee voted to move the proposal forward for Council approval on Sept. 20.
Both CCHIP and ICRIP offer incentives – in the form of fee waivers and tax rebates and reimbursements – to developers who choose to build in defined areas or close to the urban core.
Speaking before the briefing, Natalie Griffith, president and CEO of Habitat for Humanity of San Antonio, told committee members the recommendations they were about to hear were not perfect.
“But I’m going to tell you, perfect is not possible,” Griffith said. “We’re not going to have a program that meets everybody’s needs and solves every problem. What it does do is put more funds available for real affordable housing assistance, not unlimited funds or fee waivers … but this is a huge improvement, and it does provide significant funds.”
The City adopted CCHIP in June 2012 as a housing incentive program designed to encourage economic development in the center city. At the time, there was very little market-rate housing downtown.
The policy was renewed in 2016 and reduced the program boundary, improved administrative operations, and extended the program through June 2018. But in January, the Council voted to suspend the program for six months to fully analyze it due to concern that some subsidized housing projects were pricing many out of the market.
“We want a downtown for all people, and so the benching of the CCHIP is intended to help us refine the policy,” Mayor Ron Nirenberg said at the time the moratorium was put in place.
The program has been working, Houston said Wednesday, with more market-rate rentals and for-sale properties than ever before downtown, added retail establishments, and increasing numbers of employers and workforce housing. The $1.4 billion CCHIP investment is responsible for 6,810 housing units (1,544 affordable), 230,000 square feet of retail development, and 28,000 square feet of office space.
The 64 developed parcels that received CCHIP incentives will cost the City and County less than $6 million in lost tax revenues annually for the first 15 years. The total return on investment, however, in property, sales, and hotel taxes, was more than $30 million during the first year, and will come to almost $50 million in 16 years.
If the parcels had remained undeveloped, Houston said, they would have contributed only $349,000 to City coffers.
Proposed changes to CCHIP include a more limited boundary – from 5.4 square miles to 2.6. That removes low- and medium-density neighborhoods from the area to prevent the demolition of existing single-family homes for multi-family housing. Projects with a hotel component or intended for short-term rentals also would not be eligible.
CCHIP incentives would change as well, creating a maximum waiver amount for San Antonio Water System (SAWS) fees. Tax reimbursement would be limited to 75 percent of the local tax increment with the remaining 25 percent dedicated to an affordable housing fund that would support affordable housing projects in the downtown area.
Houston also presented proposed changes to ICRIP, which was created in 2010 to encourage infill activity and promote sustainable neighborhoods by waiving City and SAWS fees for projects that meet certain criteria.
Since 2012, the City has approved more than 1,600 fee waiver applications representing $4.4 billion in investment and more than 10,000 housing units, with 42 percent being affordable or workforce housing.
The City adopted the current 84-square-mile ICRIP boundary in January 2013 covering most of downtown and other pockets throughout the city. But if the proposed modifications are accepted, ICRIP will expand to the entire city.
The kinds of projects eligible for fee waivers also will change. Renamed the City of San Antonio Fee Waiver Program, the policy would focus only on affordable housing, historic and owner-occupied rehabilitation, and small business development.
The amended ICRIP establishes buckets of funding as well, so one major project doesn’t consume the entire allocation. That will help eliminate the problem of depleted resources for housing incentives, Houston said.
Daniel and Steven Garcia, brothers who own BlueRock Construction Group, participated in CCHIP and ICRIP when they developed the Nopal Street Villas, a 10-unit housing complex on a formerly vacant half-acre lot in the Southeast Side’s Highland Park neighborhood.
Built in 2016, rental rates at Nopal Street Villas are slightly higher than what would be considered “affordable,” Daniel Garcia said, but lower than the market rate. Per the incentive policy, the rent on one unit (10 percent of the complex) will not increase annually.
“Our project was small compared to other large ones going on downtown, so a lot of funds get taken up by big development, and the City is trying to change that and trying to set aside some for small-scale development,” he said. “We see that as a positive. We actually need those funds to make small developments work.
“Without that help, it’s not feasible. When you’re only building 10 units at a time, it’s hard to make numbers work when making rent affordable, too, because the [revenues] are not as high as a 200-unit complex with higher rents, so the more we can get, the better.”
The Garcias are currently working to obtain incentives for a 20-unit residential community of duplexes on 1 acre across the street from the Nopal Street Villas. Fee waivers and tax breaks are critical for these kinds of projects because tax rates are so high, David Garcia said.
“Those programs are great on the development side, but if the City wants affordable rental housing, they need to help more on the taxes side because that can kill it before you even break ground,” he said. “All the numbers just don’t add up.”
At the Wednesday briefing, Councilman John Courage (D9) questioned how affordability was defined using area median income (AMI) within both policies.
“The actual AMI within the city limits is more like $48,000, so by using the higher AMI, you’re not really doing affordable housing that would benefit people who live within the city of San Antonio,” he said. “I’d like to see more of that discussion.”
A representative from affordable housing developer Alamo Community Group (ACG) spoke in favor of the proposed changes prior to Houston’s briefing because the incentives would be tied to rent-restricted housing development, not just income-restricted projects.
ACG is currently planning a 94-unit residential complex near the Pearl for which the organization hopes to obtain CCHIP and ICRIP incentives. The Museum Reach Lofts will offer only a few units at market rate and the rest at 30 percent to 80 percent of AMI ($63,500 for a family of four) as set by the U.S. Department of Housing and Urban Development (HUD).
ACG Executive Director Jennifer Gonzalez said basing rents on an AMI that reflects incomes in a region rather than within a census tract, as Courage suggested, is difficult for a project like Museum Reach Lofts because it is a tax-credit funded development, with the AMI defined by HUD. She said ACG is pushing for support of more rent-restricted affordable housing.
“Unless you have a unit that is looking at really restricting the rent to something that is affordable to somebody’s actual income, then you’re really not reaching true affordability,” Gonzalez said. “That’s why we’re like, this is great.”
In all, the incentive policy changes are a big step forward, she said. “Lori [Houston] made every effort to work with us and try to understand affordable housing and the development costs associated with it and what the amount of subsidy that is required to drive down those rents, what the financial implication is, and how we could work together to get more affordable units, not only downtown but around San Antonio.”