The Missing Middle Housing Around Downtown Raleigh

Land being cleared along New Bern Avenue. March 2017.

Land being cleared along New Bern Avenue. March 2017.

Just outside of downtown is an interesting project that I’ve been following. It delves into the affordable housing discussion a bit as well as showing our council’s interest in the topic.

To be clear, and try to keep things consistent, I like to separate two types of housing with regards to affordability. The first is affordable housing, that being government-subsidized housing. The second being housing that is affordable. This one consists of housing that is relatively lower than comparable supply nearby. The latter is mainly what this post is about.

Raleigh should be striving for housing prices that offer choices to all levels of the socioeconomic scale.

New Townhomes are Being Built Today

With that said, today, land is being cleared to make way for a new set of townhomes along the 500 block of New Bern Avenue. This is right across the street from the New Bern entrance to City Cemetery. Previously, the land contained zero buildings and some of it was surface parking.

The project is called 10 Arros and offers luxury, high-end units with prices starting around $485K. There will be ten, three-story units evenly divided across two buildings.

If you’re a regular reader, townhomes like this aren’t anything new, right? This project has a longer history though and it’s worth posting here in full as a bullet point in Raleigh’s “housing that is affordable” conversation.

Rolling back to 2016, plans to combine a few parcels together along New Bern Avenue were submitted to the city to build two-story townhomes. The plan was for a total of 10 units divided evenly between two buildings. A parking lot would be built behind the units who would have front doors facing the sidewalk.

Here is the location of the project then; it is the same location now.

Map of New Bern Avenue

500 block of New Bern Avenue. Image from Google Maps. Click for larger or jump to Google Maps here.

The developer, Stuart Cullinan with Five Horizons Development, wanted to target starting families with these townhomes. During a South Central CAC meeting that I attended, he reported that the townhomes would cost in the low $300k range. I have emailed with Cullinan about the project a few times in 2016.

While $300k-$350k is not a price point that exists for minimum wage workers, it does go against the trend of new single-family homes being built in this same area. New construction homes in East Raleigh in 2016 were being priced throughout the $400K-$500k range. A few were lower, and a few higher but that has been my experience as a resident in this area.

The Ten at Person Street townhomes

The Ten townhomes, located on Person Street.

In my opinion, I consider Cullinan’s proposal as affordable. This is very similar to the townhome project on Person Street called The Ten, which we’ve covered here on the blog.

The Ten had units priced around $300k. Naturally, they were bought up very fast.

Welcome to the NCOD

Going back to Cullinan’s project on New Bern, there’s a small catch with the location of the property that limits what his company can do. It is located in the New Bern-Edenton Neighborhood Conservation Overlay District (NCOD for short) and the type of townhomes proposed are not allowed.

You can dive more into NCODs here on the city’s website. The New Bern-Edenton NCOD was formed in 1992, a result of a revitalization plan for the area that was worked the previous year. Basically, the intent was to encourage home ownership rather than a high rate of rentals and boarding houses, a big concern at that time..

Here’s where it starts to get tricky and if any readers in real estate are out there, I’m opening up this post to you to explain this in greater detail, with credit.

Map of New Bern-Edenton NCOD

Map of New Bern-Edenton NCOD. Townhome project is highlighted in orange. Click for larger.

The NCOD’s regulations, particularly minimum lot size, 4,000 sq. ft., and minimum lot frontage, 30 feet, basically make it impossible for a fee simple townhome ownership structure to exist. Only condominium ownership can exist under those regulations. A report from the city (source #1) explains it further:

It is important to note that a building form that looks like a typical townhouse could be built today under the NCOD regulations. The key difference is the ownership structure; to meet the minimum lot size of 4,000 square feet and minimum lot frontage of 30 feet, the townhouses would be required to have a condominium ownership structure instead of fee simple ownership. Fee simple means that the property owner would have absolute ownership over both the building and the land underneath i.e., each townhouse would be on its own lot. Condominium ownership means that the property owner holds title only to the air space or building itself, not the land underneath.

The report goes on to say that the built character of the neighborhood today is very consistent with the regulations of the NCOD. No townhomes exist within this NCOD however they are not disallowed. It’s that ownership model that presents a bit of a problem.

Mr. Cullinan, who is also a resident within the NCOD, requested a text change to better align with fee simple townhome ownership. Presented as a compromise, the proposal would affect a subsection of the NCOD, mainly along New Bern Avenue and Edenton Street.

Map of New Bern-Edenton NCOD with townhome study area

Map of New Bern-Edenton NCOD with townhome study area. Townhome project is highlighted in orange. Text change only affects area in yellow. Click for larger.

To the best of my knowledge, a fee simple ownership model allows for cheaper units. Compared to a condominium model, fee simple allows for less overhead and a different financing scheme, which keeps cost down. (Here’s where I’m looking for elaboration from our real estate readers.)

Now comes the fun part. Getting this approved.

The For, The Against, and the Council

We have a few players here in the NCOD including:

  • The South Central CAC, lead by long-time affordable housing advocate Danny Coleman.
  • The North Central CAC, predominantly where the NCOD is located.
  • The Society for The Preservation of Historic Oakwood (SPHO) where a few properties of Oakwood are within the NCOD.

In a June 14, 2016 Raleigh Planning Commission meeting, the text change was under discussion and ultimately passed with a 7-2 vote. The text change now moved on for council approval. Meeting minutes of that planning commission meeting are linked to at the bottom of this post.

The Sept 6, 2016 council video is one to watch for yourself as Cullinan, well Cullinan’s lawyer, makes the case for the text change, along with dozens of residents in and near the NCOD who came out in support of it.

At the same time, those previously mentioned were there against the text change. If the video doesn’t show for you, watch it here on YouTube.

I know it’s almost an hour long but I consider this an important watch for any civic geeks who are reading. We have long established community leaders and historic preservationists up against a new Raleigh citizen that’s looking for something different. Here’s my rundown, with highlights, of the video for those in a hurry.

  • Overview of the text change from city staff presented.
  • Opening of the public hearing.
  • Cullinan’s lawyer introduces the rationale behind the text change, proposes to drop Oakwood from the townhome study area.
  • South Central/North Central CAC leaders claimed the NCOD is in place to protect the neighborhoods, that the text change targets the historically black neighborhoods instead of Oakwood, which they proposed to drop from the NCOD subarea.
  • Citizen in opposition says it would be a “dangerous precedent” that only residents within the NCOD should be allowed to alter it.
  • President of SHPO says that they did not request to be dropped but they do stand with the CAC presidents.
  • Another citizen in opposition, “concern that the NCOD is being eradicated by a developer.”
  • Time given back to those for the text change.
  • Former co-chair of the 1991 task force behind the NCOD offers her recollection of the intent of the NCOD, said that this effort was largely city-led.
    “I believe that the text change actually brings the NCOD within alignment of the original intent of the task force and certainly within alignment with the neighbors that we spoke with when the task force was in session.”
  • 11 different individuals, residents and property owners show support.
  • Executive director of Disabled American Veterans Department of NC (who have a site in the NCOD) supports.
  • Hearing is closed.

After that hearing, the council took it up for discussion.

Council Discussion Summary

To summarize, the council was squeamish on this one and seemed to have a problem with the way a change to an NCOD is taking place. They even had to ask if Cullinan followed the city’s process to apply for this change. It was followed correctly and the council recognized they had issue with that process itself.

Councilor Stephenson showed his concern over this text change and recommended an individual rezoning that was supported by only the immediate neighbors rather than a broad change affecting more than 100 properties. A conditional-use rezoning on the property itself would be better, in his opinion, rather than a large area change.

When Councilor Cox asked a question to staff about how a different NCOD came to be, among other info, it was stated that 51% of the property owners had to approve a rezoning for the NCOD to take affect.

The council then seemed to get hung up on the 51% figure. Councilor Baldwin proposed deferring the entire case so that Cullinan can get 51% show of support, from within the NCOD, before approving the text change.

The rest of the council didn’t buy it and instead denied it in a 5-3 vote. The motion was to deny the text change so the breakdown was:

  • FOR: McFarlane, Stephenson, Thompson, Cox, Branch
  • AGAINST: Baldwin, Crowder, Gaylord

Final Thoughts

After this, the affordable housing advocates may have felt that they won. Neighborhood protection advocates also may have felt they won with Oakwood stating on their website:

We feel the right decision was made. Some of the reasons cited included: the change being initiated by a developer and not residents, parsing out a subsection of the NCOD for the change, pursuing a change for the entire NCOD as opposed to a specific parcel, and the precedent of chipping away at long established NCODs. Additionally, we are pleased because by not changing the lot width from 30ft to 16ft, we avoid the potential risk of tear downs of historic properties not protected by historic district designation.

*New Bern-Edenton NCOD Text Change Request Denied

Fast forward to today and modern townhomes with a higher price tag are being built on the property along New Bern.

Why do I feel like we missed something here?

It’s as if government-subsided, below market rate housing is acceptable as well as high-priced new construction that “maintains character” but nothing in between.

The change was to allow a different ownership model, not building type. Instead of fee simple townhomes, we now have condominium townhomes. I don’t know the intricacies of the differences but by fighting against this change, you’re supporting a higher priced product in today’s market.

I don’t have the experience or training to be able to think what the change might have caused. There may have been unintended consequences if the text change took place. We may never know unless we try.

However, we now have a real-world example of our city shooting down private sector attempts to fill the “missing middle” housing in Raleigh.

As a side note, this isn’t Cullinan’s first attempt. You should look into his other project, 1335 Courtland, which was shot down by the Mordecai neighborhood. Read more about that on the Raleigh Public Record.

At the end of the day though, the 10 Arros project is the path of least resistance. I place no blame on the developer. I applaud him for all the work he’s done to present this issue and make some noise about it.

To just work within the limitations of regulations presented to you seems easy. To go against it means you have to herd cats and that is awfully time-consuming.

Putting politics to the side, the impact of ten units priced near half-a-million dollars may not seem like much but as more continue to pop up onesie-twosie, downtown loses more of its mixed-income character and limits access to those that can’t afford it.

Is that the downtown we’ve planned for?

Sources:

  1. Built Environmental Characteristics and Regulations Report – New Bern – Edenton
  2. Raleigh Planning Commission Meeting Minutes for June 14, 2016

Stone’s Warehouse and Affordable Housing

Stone's Warehouse

Stone’s Warehouse, photo taken December 2014

Just outside of downtown Raleigh is a site that’s getting a lot of attention lately. The block containing what is called Stone’s Warehouse at 500 East Davie Street could see a major renovation and new development in the near future.

This city-owned property could be sold soon and transformed into a destination for a mix of uses. I wanted to introduce this project as well as dive into the current topic of affordable housing, a criteria the city has listed for potential developers of the site to comply with.

Stone’s Warehouse
An old bus repair shop, the warehouse has been around since about the mid-1920s. The Carolina Coach Garage and Shop outgrew the space and moved out in 1939. After a variety of uses, it was eventually acquired by the city in 2001 and has been empty since.

View on Google Maps

In addition to the empty warehouse, the site also includes the currently open Rex Senior Health Center. The parking lot and some open land rounds out the rest of the site.

The city has slowly acquired the majority of the block, not including a few houses on the southern end. They intend to use it for community development and have put the site up for sale to developers. A long list of criteria has been put together and today we have three developers in the running for the sale of the site based on their proposals.

According to an article in the N&O, here are some of the details of each plan:

  • Transfer Company LLC plans for a grocery store, cafe, and a community hall with space for small food producers. They would build a 13,000 square foot building for additional food/drink space and a row of 16 market-rate townhomes. The proposal states that it would assist with the moving of the Rex Senior Health Center.
  • AACRE plans for a five-story, 200-unit apartment building with 300-space parking deck. The renovated warehouse would have a grocery store in it and the health center would remain although in a smaller space. 10-20 apartments would qualify as affordable housing.
  • Empire Properties plans for an “Entrepreneurs’ Village.” This would consist of the Exploris Charter School (currently looking for a home for their elementary school), a medical office, a museum, and an “intimate acoustic music hall” called The Garage. 49 apartments would be added with 15 qualifying for affordable housing.

As of this writing, Raleigh city staff and the Budget and Economic Development (BED) Committee recommend that the proposal by Transfer Company LLC be selected for the site.

For more reading see these articles:

Affordable Housing and the Scattered Site Policy
The most controversial and discussed topic with Stone’s Warehouse, and sometimes with downtown Raleigh in general, seems to be the affordable housing topic. Take note that the BED committee recommended a plan that does not include affordable housing.

I think we first have to recognize that the term “affordable housing” means different things to various people. The first place I looked for a definition is our city’s adopted 2030 Comprehensive Plan which explains it nicely.

The terms “affordable housing” and “workforce housing” mean different things to different people, and a variety of definitions have been advanced by various groups. For the purposes of this plan, housing is “affordable” if the cost of occupying it does not consume more than 30 percent of household income—the definition promulgated by the U.S. Department of Housing and Urban Development (HUD). HUD defines housing costs as contract rent plus utilities for renters, and monthly payment (mortgage plus taxes and insurance) for owners. Affordable housing refers to housing affordable to households with incomes at or below 80 percent of the HUD-estimated Area Median Income (AMI) for owners, and 60 percent for renters. Workforce housing is generally thought of as housing affordable to essential public- and service-sector employees such as teachers, fire fighters and nurses. It is defined here as housing affordable to households with incomes up to 120 percent of AMI. As of February 2012, the HUD-determined AMI for a family of four in Raleigh is $79,900.

I hear a lot of commenters on this blog, people around town, in the media, all over say that affordable housing is important. But which one do they actually mean? We have:

  • Affordable Housing – Typically using government subsidies to reduce the price of the home below market rates so that individuals/familes earning 80% less of the AMI can own, 60% less can rent.
  • Housing that is affordable – Market rate homes that do “not consume more than 30 percent of household income” according to the 2030 comprehensive plan.

Both may or may not be related. The housing section of the 2030 Comprehensive Plan has a lot more on this and should be your next stop for more information.

Now that we’ve defined affordable housing, what about policies that help guide where affordable housing should be placed in the city? The City of Raleigh’s Scattered Site Policy was created to help guide this. It identifies high and low priority areas where affordable housing is needed. It is a guide in order to avoid clustering too much affordable housing in one area.

As recently as early 2014, the policy was under review. The Raleigh Public Record has a write up, including a map, about the conversations that took place.

Areas of the city are broken up into four priorities: Priority One being areas are those that lack affordable housing; Priority Four areas have heavy concentrations of low-income and minority residents.

*Council Wants More Data for Affordable Housing Policy

*NOTE: As of this writing, the page on the city’s website for the policy has been taken down and I can’t find the policy listed.

The Scattered Site Policy is mentioned several times in the 2030 Comprehensive Plan. Updates to it should certainly be looked at but following it is a strong recommendation of the plan.

How is Raleigh Doing?
We have some figures here in order to make some generalizations. Using the 2012 data point of $79,900 AMI for a Raleigh family of four, we have:

  • 120% AMI = $95,880
  • AMI = $79,900
  • 80% AMI = $63,920
  • 60% AMI = $47,940

I see this as kind of a range here in order to give us some context with the definition of what is and isn’t affordable. At the same time though, more detail is probably needed to account for taxes and of course everyone’s situation is different. 30% of the $79,900 figure is $23,970, or $1997.50 a month. Is the message that a $1900 a month mortgage payment is affordable to a family of four pulling in $79,900? More details are definitely needed. (for a follow up post perhaps)

When it comes to the locations of affordable housing in Raleigh, there is some data available showing the mapped locations. I’ve had a list of sites in Raleigh which include Raleigh Housing Authority developments, HUD subsidized projects, and NC Housing Finance Agency projects. I went ahead and mapped them which you can see below.

NOTE: Data is dated December 2013. City-owned rentals are not included in this map. Some projects may also be paid off and are no longer considered affordable.

Another map to show is this one below, showing subsidized affordable rentals on top of the scattered site policy. This map is dated December 2013 and shows the entire city. For finer viewing, I recommend downloading the pdf.

2013 Raleigh Scattered Site Policy map

Click for larger. Download the pdf for even larger.

So with all this presented, here is the controversy. The adopted Scattered Site Policy is not being followed. The maps show a higher concentration of affordable housing projects in the low priority areas and very few units in high priority areas.

For Raleigh to be a diverse city with as much equal access across a variety of socioeconomic lines, a quality of a true 21st-century city by the way, communities of mixed-income must exist.

Adding market rate housing to an area of low-income is not something that should be avoided especially when it isn’t displacing anyone. Adding affordable housing to an area where there is little or none (priority 1) should be the bigger priority and real controversy.

How can Raleigh find the discipline to push against the trend as the city council approves again and again more affordable housing in priority 3 and 4 areas of Raleigh?

Back to Stone’s Warehouse

Let’s swing back to Stone’s Warehouse.

There’s a strong argument for the need for more housing that is affordable in our city. The comprehensive plan proves the demand and how the amount of residents burdened by housing costs has been rising over the last few decades.

However, demanding that affordable housing be included with all projects at the expense of nearby incomes is short-sighted. To create truly mixed-use, mixed-income communities Raleigh should place higher priority on delivering services, amenities that don’t exist.

Stone's Warehouse on Davie Street

That’s not a blanket statement, sure, but let me paraphrase a woman I heard at a South Central CAC meeting that stood up and kindly commented about the Stone’s Warehouse presentation.

More housing? I feel like we’ve got plenty of housing. We need retail and economic development in our neighborhood.

Stone’s Warehouse is in the middle of a sea of affordable housing projects. It’s also in the middle of a food desert. With a potential grocery store at the site, it’s possible nearby residents would benefit from access to healthy food, a close location, and possibly a nearby job.

With the warehouse being saved, the project should draw huge respect from the neighborhood for the efforts to save the history. Economic development could bring an even more impactful benefit compared to affordable housing at Stone’s Warehouse. Let’s not let a hot, politically-charged topic sway the real need in this location.