The Raleigh Planning Commission gave a positive recommendation this week to Kane Realty’s proposed 40-story tower on Peace Street, moving the project’s future into the hands of the City Council.
The tower, to be potentially located at the corner of Peace Street and Capital Boulevard, is part of an ambitious three-phase plan by Kane Realty and its development partner Williams Realty to turn the northern entrance of downtown into a hub of office and residential projects.
The tower would be the third phase of the so-called Smokey Hollow project, named after a neighborhood that was the site of a major urban renewal project in the 1960s. The first phase of the Kane project is currently under construction and once completed will be home to a 40,000-square-foot Publix grocery store. Altogether, the three phases will add hundreds of apartments and hundreds of thousands of square feet for office and retail.
The proposed tower, which is currently zoned for 12-stories, is being billed as a signature landmark for the northern entrance to downtown, an area the city and state have poured millions of dollars into in recent years to improve. Along with the Smokey Hollow buildings, the city is developing a new park adjacent to Peace Street and the state is in the process of reconfiguring the traffic patterns for Capital Boulevard.
The tower likely won’t be the tallest building by elevation in the city — because the Peace Street area sits below the downtown core — and it is unlikely that Kane Realty would use all 40 stories if it is granted the rezoning, Bonner Gaylord, managing director of operations for Kane Realty, said Wednesday.
While the planning commission’s positive recommendation on Tuesday came without too much fuss — the 40-story height wasn’t a major sticking point — the issue of a lack of affordable housing units was discussed.
“There has been no offer of affordable housing and I wonder — why?” Bob Geary, a member of the planning commission, asked Kane Realty.
Gaylord, a former city councilman, said that while Kane doesn’t have an aversion to affordable housing, making a commitment now to any affordable housing units could jeopardize the project’s financing in the future.
Thanks to a recent change by City Council, a developer can now offer affordable housing as a bargaining chip in rezoning cases. But the change has caused some to worry it could make other housing more expensive or the council could deny projects that don’t volunteer affordable housing.
Raleigh, like many cities, is facing an affordable housing crunch. The North Carolina Housing Coalition defines housing as affordable if families pay no more than 30% of their income on housing. Nearly one in four households in Wake County pays more than that and more than 55,000 of those households are renters. The city said it wants to add 5,700 affordable housing units over a 10-year period and raised the property tax rate to help pay for those affordable homes and apartments.
So far, no official framework for how the city would accept affordable housing conditions during rezoning cases has been adopted.
“If we made that commitment now and then ... the market does not support financing for a project that has an affordable housing component — if other projects are out there that are more attractive to the financial markets — then that could kill this project,” Gaylord said in response to Geary.
“And with the early phase of the affordable housing framework that the city is working on, we aren’t prepared to take that step not knowing what that eventuality will be. There is just a lot to figure out before we — or anyone else for that matter — could step forward with an affordable housing offering.”
At a community meeting Wednesday night, Gaylord was asked again about affordable housing, this time by a Glenwood South resident. He repeated his answer from the planning commission meeting but added that “we are proponents of inclusionary zoning” if it is required for every developer. Otherwise, he said, banks will be more likely to lend to the projects without affordable housing.
At the Tuesday planning meeting, Ken Bowers, the city’s planning director, said the city must be careful about asking for affordable housing from developers because “the subsidy (for cheaper units) has to come from somewhere and for it to be feasible it has to come from the land.” So far, he added, no land transaction in the city has been done with that in mind.
Geary responded by asking “are we not adding to the value of the land by potentially upzoning a 12-story entitlement to 40?”
Bowers agreed that was indeed the case but added: “You could easily wipe out that value depending on what the inclusionary requirement is because the fact of the matter is the inclusionary units will be worth less, in terms of rental income, than the cost to build them.”
At the end of the day, Bowers noted, you don’t want the developer to be “better off without asking for the rezoning and building no affordable housing.”
Smokey Hollow update
On Wednesday, Kane Realty also provided an update on where things stand on the three Smokey Hollow phases.
Gaylord said phase one and the Publix grocery store should be opening next summer. He also noted that Publix grocery shoppers will be able to validate their parking in the building’s deck — though other visitors will be charged an hourly rate.
Construction on phase two, which would span from the phase one building to the West Condominiums on North West Street, has already started and Kane Realty hopes to wrap up that building’s construction in the beginning of 2021, Gaylord said.
Phase two will be a 200,000-square-foot building and would have more office space compared to phase one, which beyond the grocery store is mainly apartments.
Phase three’s timeline is still up in the air, depending on the result of the rezoning application. The building still hasn’t been designed and the developers still need to apply for financing, Gaylord said.
Staff writer Anna Johnson contributed to this report.