People are asking – why are we pushing for housing in the Davis Downtown? That’s a good question. There are several answers to that. The first is that a lot of people think that housing is a critical need – especially, at this point, workforce housing.
From my perspective, going into 2016, the clearest and most immediate need was student housing. We had increasing enrollment at the university which was only going to increase further over the next five to ten years. We had no new housing built off-campus for students since 2002. And the university itself was lagging behind other UC campuses in off-campus housing.
But right behind that housing need are other needs, including the need to provide housing for those young people who graduated from college, and are looking to join the workforce, possibly looking to enter the high-tech field.
This is the point made by Dave Nystrom and Jim Gray with regard to the University Research Park’s mixed-use proposal. Mr. Nystrom pointed out that “one of the challenges (businesses in the park) face is hiring people because it’s so difficult to find housing in Davis.”
Why the downtown? For one thing, the opportunities to build on the periphery are limited. Moreover, the need is for dense, smaller condos and apartments rather than single-family homes. The downtown has some of the best available space to accommodate such housing.
Last fall, the Downtown Plan Advisory Committee made their view known, as presented to council by Vice Chair Michelle Byars. She said that “we believe that the addition of residential opportunities in the downtown will serve our community and the adjacent neighborhoods well.”
The DPAC “is generally in support of increasing building heights in appropriate parts of the downtown to allow more residents.”
This was clearly a view the majority on council also supports. Councilmember Lucas Frerichs stated that “additional housing in our downtown is important for economy.” He also noted it was important for our environmental goals.
Dan Carson also argued that, by bringing housing into the downtown, “you bring people, you bring economic activity.”
However, the key question is whether the city can make such housing pencil out for developers. Thus far the economic analysis is not promising. Matt Kowta looked at ten scenarios for dense redevelopment – only one of those penciled out so far.
That’s an important consideration that may limit the ability to add housing. However, the feasibility is a separate issue from the need to build the housing or advantages of doing so in the downtown.
The city’s Community Development Director Ashley Feeney told the Vanguard that we need to look for ways to build that minimize costs.
He said, “We should focus on putting together a land plan that allows for scale and density on parcels where we have the greatest ability to achieve viable results.”
Mr. Kowta said, overall, they “are seeing challenges to feasibility.” But this problem, he noted, is “not exclusive to Davis.”
The biggest problem can seen looking at the trendline showing the construction cost inflator. Their estimates show about a 36 percent increase in construction costs between 2008 and 2019.
“We think that’s actually understated,” he explained. “There is a very steady upward trend in these costs.”
Looking at the data, Mr. Kowta described several takeaways: small lot residential projects are not feasible, economics improve with density, for-sale residential may be feasible on larger lots and at higher densities, office over retail may work in unique circumstances, parking and affordable housing further challenge feasibility.
Finally, a key point: “In the current environment, owner-users may develop but returns are unattractive for investor/developers.”
He makes some suggestions that could help: increasing certainty, lowering additional and controllable costs, eliminating extra requirements.
There are some ways he suggested to mitigate feasibility problems. One strategy would be to modify projects to optimize economics. Here small condo projects may not be practical, but more density will hold land costs constant while improving the ability to generate revenue.
Second, he suggests leveraging publicly-owned land. By the city contributing public land, it would reduce costs and therefore improve feasibility.
Third would be to take stake in the project, either by the city becoming an anchor tenant or partnering with developers “to obtain subsidies for catalyst projects that meet state and federal objectives.”
The city could also invest in public improvements and prioritize ones “that can help private projects.”
Finally, the city can take steps to reduce time and risk for developers. They can do this by providing clearer planning guidelines, limiting discretionary decision-making, clearing the way for environmental approval through a Specific Plan EIR, providing a fast-track path to entitlements, and following through with streamlined and efficient building permit and inspection procedures.
Matt Kowta noted, “This is the one we really heard over and over again in the public stakeholder meetings.”
One thing that was not discussed is the loss of RDA (Redevelopment Agency) money. RDA money could at one time have helped to offset the high land costs and construction costs, but that money has now gone away.
A key question is whether that money will return and whether it will go simply for affordable housing projects – or whether cities can use it to develop higher density, mixed-use projects that contain things like workforce housing (and perhaps affordable housing as well).
Will higher density improve feasibility? Matt Kowta says yes. Higher density of course keeps land values constant, but it might increase construction costs.
Why do we keep looking toward housing in the downtown even if the feasibility is in question? Some of it boils down to – if not there, then where? I don’t see a lot of peripheral development. I see dwindling numbers of infill sites in town. And there is a clear need for housing, especially for younger entrants to the workforce.
But it is clear from these numbers, at least at this point in time with high construction costs and no RDA, that such housing will be challenging to build.
—David M. Greenwald reporting