Downtown Raleigh boom leaves less affordable housing

Downtown Raleigh’s population has nearly doubled since 2010, and thousands more people will move in by the end of 2015. Its new demographic is younger than 30 and affluent, drawn in large part by the area’s new tech offices.

These are the people that the city has been courting for a decade. Collectively, they’re the demand that supports dozens of new restaurants – $7 hot dogs, anyone? – thousands of new apartment units and millions in new tax revenues in the city center.

Yet new arrivals inevitably consume a crucial supply: housing. Rental rates have crept up for years, and developers are demolishing older, cheaper rentals in favor of more expensive digs.

“We’re losing more affordable housing now than we’re gaining,” said Gregg Warren, director of the nonprofit developer DHIC Inc.

While some 2,000 apartment units are under construction in downtown Raleigh, the additional supply hasn’t yet slowed the increase in housing costs, and few if any have units set aside for people of moderate or low income.

Furthermore, as the downtown boom marches east, neighborhood leaders and advocates of affordable housing are asking whether Raleigh’s center will soon be out of reach for much of its population.

“How are we going to accommodate a family of four that has 2.5 minimum wage jobs? How are they going to be able to live in the city of Raleigh, and more specifically along the transit corridors and the urban core?” asked Danny Coleman, the citizen representative for Southeast Raleigh.

“That’s going to decide whether we’re going to be a great city or cannibalize our own selves.”

The next few years may be crucial for advocates of affordable housing, and momentum is gathering for a change in the city’s policies, according to Mayor Nancy McFarlane.

“The development pressures are only going to increase,” Warren said.

“Land is finite, and vacant land is particularly finite, so there’s a relatively small window of opportunity.”

What does it look like?

Hester Walker, 44, is waiting for her home to be destroyed. She lives in Brookview Apartments, a cluster of rental homes near Historic Oakwood Cemetery.

Known locally as Tiny Town, the collection of 53 houses and duplex units is convenient to downtown and Capital Boulevard, she said.

She’s not sure anything on the market can match her current rent, much less its location.

“I don’t want to go, but I have to at this point,” said Walker, a lifelong resident of Southeast and East Raleigh. “It’s crazy – it’s expensive out here.”

The real-estate changes near downtown are the result of two factors: Lots of people want to be downtown, and downtown historically has had little room to house them. That’s stoking intense competition among developers for downtown lots and leading some to venture farther out, to places like Brookview.

“I can’t see that as Raleigh continues to prosper and grow, that anything that’s close to the city center isn’t going to be affected,” said Ann-Cabell Baum Anderson, owner of The Glenwood Agency, a real-estate services company.

The effects of gentrification on the housing market – namely, increased rents and land value – now stretch to Raleigh Boulevard, the eastern edge of the downtown grid, according to Coleman.

Walker thinks she might have luck farther out, but she’s not counting on it.

She planned to apply for public housing Monday – and she’ll face a wait list of two to four years.

What’s up for discussion?

Currently, city and state policies offer only a few reasons for developers to build affordable units in the city’s core.

The state’s incentive program does give preference “points” to developers who put affordable developments near transit stops, but it gives still more points for communities near groceries and other shopping.

As a result, developers have tended to take those incentives and build on cheaper, vacant land at the edge of the city.

“Land prices are so high in and around downtown right now – that in itself would be an obstacle to coming into the downtown area with a tax-credit project,” said Larry Jarvis, the city’s new director of Housing and Neighborhoods.

“If we wanted that, then there must be a mechanism for reducing the land cost. … There is going to be a price that one’s going to have to pay for the affordability.”

If the city chose to push for affordable housing downtown, he said, it might sell city-owned land at discounts for lower-rent developments. The city hasn’t mentioned any such incentive in its efforts to sell its 301 Hillsborough St. lot.

The council also will consider other rewards for affordability, according to McFarlane. She considers housing prices a city-wide issue but sees special challenges downtown.

“Do we have the ability to ask for affordability and grant more density?” she asked in an interview. In other words, Raleigh might allow more floors in a building, if some of those floors included limited-income units.

Both the mayor and several council members have said they want to see affordable housing near the transit lines that might soon develop under a regional rail plan.

Warren, of DHIC, wants the city to consider setting aside some of the tax dollars from downtown development to foster affordable housing.

“The city doesn’t have the authority to stop developers, nor does it have the inclination – but maybe at least it could … commit that we’ll set aside a portion of additional tax revenues,” he said.

The city also could follow Chapel Hill’s lead. The smaller town requires that residential developments set aside 15 percent of their units for people making less than 80 percent of the area’s median income. (The policy doesn’t apply to rentals, such as apartments.)

What’s available now?

Local governments have long tried to offer relief to low-income renters and buyers. In Raleigh, those programs come in three forms.

All of these local programs are going through a period of change.

Steve Beam, the Raleigh Housing Authority’s director of 18 years, retired on Dec. 1; he hasn’t been replaced.

The city of Raleigh also recently hired Larry Jarvis in November to head its reorganized Housing and Neighborhoods Department, which manages city-owned apartments and aims to “revitalize” communities. One of his first tasks is the creation of a five-year plan for affordable housing.

“A lot of that need has become even more acute as we’ve had fundamental shifts in our economy in the last 20 or 30 years … toward the service economy,” Jarvis said. “People earn less. It only exacerbates the need of more affordable housing.”

Meanwhile, members of Raleigh City Council have raised questions about the city’s affordable-housing priorities several times in the last year and plan to discuss the topic broadly at their retreat at the end of January.

This story was originally published December 7, 2014 at 6:59 PM with the headline "Downtown Raleigh boom leaves less affordable housing."