Suburban communities add business district taxes but what are developers doing with the money?

A number of Chicago suburbs have instituted business district taxes that partially funnel money to developers:

The business district tax is becoming more common as municipalities struggle to recover from the Great Recession and loss of shoppers to the Internet. Leaders in both Roselle and Villa Park initiated 1 percent business district taxes within the past year, the maximum rate on districts that cannot exceed 1 square mile. In some suburban locations, the additional business district tax can raise the sales tax to 9.25 percent, equal to the sales tax in Chicago…

Bloomingdale has two such districts. One adds a 1 percent sales tax to purchases inside Stratford Square and another adds the same percentage at Indian Lakes Resort, where it’s used to help pay off $4.8 million in village-issued debt that went to the resort for improvements…

Last year, the village paid the owners of the mall $1,199,151, which is more than 95 percent of all the money generated by the business district tax. Since the tax was implemented, the village has paid the mall owner more than $8 million. According to village finance records, the mall owner still is owed more than $11 million…

Lombard has a similar deal with its mall owner. The village instituted a 1 percent business district tax almost a decade ago. It helps push the sales tax rate at Yorktown Center mall to 9.25 percent.

Lombard’s deal allows up to $25 million in business district taxes to be rebated to Yorktown’s owner through 2024, in exchange for an addition that was built onto the mall where an abandoned Montgomery Ward once stood. So far, the mall’s owner has received almost $4.2 million from the business tax…

Taxpayers in Oakbrook Terrace are the ones with skin in the game. The city borrowed nearly $8.2 million to spur development of the Oakbrook Terrace Square Shopping Center. City officials did not return calls seeking comment about the city’s stake in the shopping center. However, according to the city’s budget documents, the investment has yet to pay off.

Given the problems facing the American shopping mall as well as the financial difficulties facing many suburbs, perhaps these suburbs think such taxes are necessary to help keep sales tax generators in the community. Yet, if the extra money generated is given to developers who then line their own pockets, how much is the local taxpayer helped? This raises similar questions to giving corporations tax breaks to locate their headquarters or facilities in suburban communities. Few politicians or residents want to lose a potential tax revenue generator – especially a large shopping mall, even if they are relatively ugly and detract from local businesses given their reliance on chain stores – but there is often little public discussion of the trade-offs involved with the tax breaks.

Are there suburban shopping centers that don’t have such a tax and if not, do they advertise to this effect?

Is smart growth inevitable?

A piece titled “Why Are Developers Still Building Sprawl?” explores the fate of smart growth in American urban areas:

It may be surprising to hear that so little has changed in the homebuilding industry since the recession, especially in Las Vegas, one of the epicenters of the housing bust. After all, low gas prices aside, surveys suggest that both Boomers and younger generations are interested in living in more urban places where they don’t have to spend so much time in the car getting to and from work. They also don’t mind smaller homes, especially if they’re close to public transit or retail or restaurants. And studies have shown that sprawl has negative health impacts: People who live in far-out suburbs walk less, eat more, and exercise less than those who live in urban environments.

Urban planners and “smart growth” advocates argue that builders should eschew the practice of buying empty land further and further out and building on it, and should instead build more compact, walkable communities near public transit, rehabbing existing land to fit new projects. Doing so is important for the environment, they say, and will save valuable resources and money in the long run…

“Exposing” sustainable development might seem laughable, but it points to a growing divide about how different people think Americans want to live in the future. Do they want to continue to live in spread-out, single-family homes with lawns and garages and spare bedrooms? Or do they want smaller, compact houses where they can easily hop on a train or walk to the coffee shop, without even needing a garage, or a car to park in it?…

Other areas may continue to eschew ‘smart growth,’ and just as America is divided politically, it could become a more divided country in the way its residents live. People in cities such as Washington D.C., Boston, and Seattle, will want more walkable developments, while consumers in what Leinberger calls “the laggards,” including Phoenix, Dallas, and Las Vegas, will continue to live in sprawling suburbs.

But it’s also possible that Boomers and Millennials in the laggard cities will come around. After all, even in Las Vegas and Atlanta, some builders are starting to shift their mentality. Zappos founder Tony Hsieh has poured $350 million into downtown Las Vegas, creating a shopping center built from shipping containers, mixed-use residential development, and a host of walkable amenities like a donut shop and a bookstore. And in Atlanta, a developer is in the midst of converting a former Sears building near downtown to a mixed-use community of apartments, restaurants, and retail.

Three major sets of actors are involved here and it is not clear to me that they all will want smart growth:

1. Politicians. All sorts of zoning policies, tax structures, and other things would have to change to adjust to smart growth. If politicians did want more smart growth, they could adjust policies accordingly. However, they do answer (at least nominally) to voters. While some may talk about this as a free market issue, municipal policies always help dictate housing options.

2. Builders/developers. The short answer is that building larger homes right now offers more profit. Denser projects invite headaches like opposition to redevelopment, bureaucratic red tape, and possible selling smaller units or spaces.

3. Consumers. Would they buy denser, smaller housing if this is what builders provided? Maybe but don’t discount the long-standing American commitments to the single-family home in the suburbs. Many Americans like their private spaces and may not be terribly interested in public spaces or sacrificing for the community. Tastes don’t change overnight though new policies and housing choices could steer people in particular directions.

All together, it would take time, coordinated efforts, and decisions from key actors to truly push smart growth policies. Even then, it is not inevitable that Americans would accept this as the desired outcome, even if it has certain positive outcomes.

Bad building names in NYC

Curbed has put together a list of some of the worst building names in New York City. Here are some of the contestants:

Weird Spellings of Addresses

260N9 leads us into our first category: buildings that are almost just going by their addresses, but have decided to randomly spell out numbers, or abbreviate and/or combine words to create some monstrosity that no one will ever say out loud. 2ND7TH is a recent offender in this category, as is Five FortyOne, and, less recently, Twenty9th Park Madison. These types of buildings also sometimes like to combine a random word with the number from the address, such as Colony 1209, which sounds like it’s on the moon.

Human Names

Another very common approach often taken by building namers is to name them as one would a human child, with a “the” in front. This can result in condos that sound like your grandfather (The Seymour, The Leonard) or a pop star (The Adele, The Robyn) or…just some guy…that you live inside of. (That one, The Nathaniel, gets an additional dishonorable mention for being named after the protagonist in an Ayn Rand novel.)…

Anything With the Word “Mews”

A mews is a row of stables and carriage houses constructed around a paved courtyard. The few that still exist in New York City have, for the most part, seen the stables torn down and replaced by houses which essentially now exist on a private and secluded dead-end street—a rarity, obviously, in Manhattan. This makes them quite coveted. It has also led a number of condo developers to call their buildings, erroneously, Soho Mews, Chelsea Mews, Carlton Mews, etc.

Names That Sound Like Things They’re Not Supposed To

Had no one involved in the creation of Jade8 ever heard of J-Date? Did no one on the development team behind Mantena think to Google that word? Other honorable mentions in this category include BKLYN Air, which sounds like an off-brand sneaker, and MiMa, which sounds like something you call your grandmother. And then there’s the Isis Condominium on the Upper East Side (h/t to commenter newkyz). Though that one isn’t exactly the developers’ fault (it was developed in 2008), it has declined to change its name, unlike the Isis in Miami.

This list suggests buildings suffer from the same name problems that face subdivisions or suburban streets. Builders are looking to brand their construction so the names often deliberately invoke other liked objects, such as a well-regarded address (it’s the location to be in!) or the past (we’re invoking the grandeur of history!). Does the branding itself reveal much about the architecture or design of the building and its units? Probably not. Do the mews buildings have more garden/leisure space? Do the address buildings make a unique contribution to the neighborhood? Of course, more functional or accurate names would have to be longer and wouldn’t be able to quickly invoke such images.

The next step here in this analysis might be to look at the relative values of these different properties by name. Take two buildings in similar settings: does having mews in the title add value or would the owners be better offer with an address name?

Fighting the “King of McMansions”

Some well-known residents of Southampton Village, New York are opposed to plans for a new big house proposed by the “King of McMansions:”

What do commodities trader John Paulson, real estate tycoon Harrison LeFrak, CNN morning news show co-anchor Christopher Cuomo, and  President Dwight D. Eisenhower’s granddaughter Anne Eisenhower have in common?

They share an opposition to the “Farrelization” of their neighborhood in historic Southampton Village, where Joe Farrell has proposed building a 5,531 square foot house on a 1.2 acre parcel on Hill Street according to an article in Wednesday’s Wall Street Journal.

Dubbed “King of McMansions,” Farrell, who was profiled last summer in The New York Times is described as being “a local version of Donald Trump, without the history of debt, the lush hair or the insults.”

Mr. Paulson, Mr. LeFrak, Mr. Cuomo,  and Ms. Eisenhower are just a few of the 85 names who penned letters to a local village review board. The letter writers variously objected to “the size, scale, scope and ‘visual incompatibility’ of a speculative home” proposed for the vacant lot at 483 Hill Street—a neighborhood where ” nearly a dozen nearby residences are more than a century old and roughly half or a third the size.”

And who is this King of McMansions? A developer of big homes in the Hamptons:

But there is no surer sign that the big-spending ways that characterized the pre-financial crisis era have returned to the Hamptons than the blue “Farrell Building” signs multiplying across the pristine landscape here, along with the multimillion-dollar houses they advertise. It is a process some are calling “Farrellization,” and not necessarily happily.

“We’re as busy as we’ve ever been,” said Joe Farrell, the president of Farrell Building, during a recent interview and tour of his $43 million, 17,000-square-foot home here. The estate, called the Sandcastle, features two bowling lanes, a skate ramp, onyx window frames and, just for fun, an A.T.M. regularly restocked with $20,000 in $10 bills…

With a customer base composed largely of Wall Street financiers, Mr. Farrell has more than 20 new homes under construction, or slated for construction, at a time, making him the biggest builder here by far. He has plans for more, many of them speculative homes built before they have buyers.

Some of the biggest controversies about McMansions seem to take place in areas where residents have plenty of money. It is one thing when a teardown McMansion is constructed in an older neighborhood and less wealthy residents are pushed out as the housing stock becomes newer and more expensive. (At the same time, an influx of new big homes could also raise property values and give some options to cash out.) But, this is an example where everyone is pretty well off and it is more about the character of the neighborhood. Perhaps it is about old money versus new money, that an outsider is coming in with new plans and disturbing an area that others paid big money to buy into.

The “King of McMansions” is going to be a negative term for many people yet it also implies a level of success. I haven’t seen too many individuals tagged with such terms and even companies like Toll Brothers who were well-known for building McMansions didn’t necessarily acquire such monikers.

Discussing the dangers of retention ponds in Naperville

Retention ponds are plentiful in suburban developments as a means to handle excess water. But, officials in Naperville may soon look at regulations for retention ponds after a 6 year old recently drowned:

The pond, near the Glenmuir Luxury Rental Homes complex where Amer lived, reaches about 10 feet at its deepest point and is one of more than 200 bodies of water in Naperville — many of them man-made ponds created in recent decades to ease flooding when subdivisions were built, Naperville Fire Chief Mark Puknaitis said.

“Most of the ponds don’t have fencing or barriers,” Puknaitis said. “It’s highly impractical to do that with every pond. Even if you did, there’s nothing stopping somebody from scaling it.”

Several city council members agree that requiring fencing isn’t the best way to prevent future tragedies.

While fencing may seem an obvious way to prevent children from getting too close to retention ponds or falling in, Novack said there is a stormwater management reason not to install them: they block the flow of water during floods and slow the drainage process.

When single-family homes are constructed in the sprawling American manner, retention ponds are a necessity. Developing land and building homes often involves flattening land and disrupting the natural drainage. This is particularly an issue in swampier or low-lying areas where water already collected. They are so common that they are a ubiquitous “natural” presence that are often used as play areas or places to walk dogs. But while these ponds may seem natural, they are a carefully constructed part of the suburban infrastructure.

However, there are means by which to make retention ponds safer:

She said the recent trend toward letting natural vegetation grow along the shores of ponds helps to keep people — and Canada geese — away from the water and could contribute to increased safety.

So could using streams landscaped with native plants instead of large ponds to store water, Brodhead and Novack said.

In other words, it might take a little extra planning or effort but there are ways to “naturalize” the drainage. Communities could require developers to utilize these methods around retention ponds. And even if accidents in ponds are rare, it is hard to argue against safety in suburban settings.

Targeting Santa Monica homeowners in order to build mini-mansions

The housing market in Santa Monica, California is apparently in good shape: homeowners are being targeted by those who want to tear down their smaller homes and build bigger ones.

Santa Monicans are being targeted by real estate agents representing developers looking to turn small homes in desirable neighborhoods into mini-mansions that can be sold for double the original asking price.

The agents tend to single out older homes, often taking up a relatively small portion of the parcel on which they sit, offering a cash purchase and a promise by the buyer to take care of normal closing costs, provided the homeowner does not broadcast their intent to sell.

Residents report notes left on their doors, direct mail bearing a picture of their own home and even direct phone calls soliciting sales.

That practice is called by many names, including off-market listing, pocket listing or quiet listing, and while it is completely legal, it often is a bad deal for sellers in hot markets like Santa Monica, said Don Faught, president of the California Association of Realtors…

Sosin led the charge in the late 1990s against “McMansions,” homes built to the margins of their property lines. They overshadowed neighboring properties, and led to the death of many mature trees that had to be removed so that the home could be built out.

Her work resulted in new rules around single-family homes, requiring set backs and imposing controls over how much of a parcel can be covered.

The attempts to build to even those restricted maximums are unwelcome, she said, because they only succeed in making neighborhoods more expensive to move in to and replace quaint, well-loved homes with larger versions.

It sounds like the resident quoted above is ready for a teardown battle, should one develop, but the article makes it sound like people are generally unhappy with this approach. The real question in my mind is whether these sorts of real estate tactics are successful. Does this suggest developers are worried about how the community will react to more public plans to build bigger teardowns or is this primarily a way to get real estate at a cheaper price before it hits the open market? Either way, I would want to know how many homeowners actually sell their homes in such a way and how they negotiate the peer pressure in the neighborhood versus the offer from developers.

Also, is the use of the term “mini-mansion” intended to avoid using the term McMansion? I would expect McMansion in this sort of situation, particularly from unhappy residents…

h/t Curbed

How a developer of big homes differentiates his homes from McMansions

Few builders are aiming to have their new big homes labeled McMansions. Here is how one developer describes how his new homes differ from McMansions:

According to brothers Taylor and Milton Chamberlin, the goal for the Georgian style homes is for them to be an alternative to “McMansions.”

“We really take our time to design the homes to fit in the neighborhood. We’re not builders that come in and put this huge McMansion in a small neighborhood where it doesn’t fit. That’s not what we do,” said Taylor. “All of this is really thought through and it’s really livable, usable space. It’s not those McMansions where you walk in and wonder, ‘What do you do in this room?’”

The base model runs around $1.4 million and features four bedrooms and 4.5 bathrooms, with the possibility of another bedroom and bathroom on an additional level. Costs will vary based on the different lot sizes and individual add-ons the purchasers want in their homes…

Another goal is to foster a 1950s sense of community among the owners of the nine properties, in which everybody knows and interacts with their neighbors. The homes will only be accessible via a private road and there will be a small fence around the subdivision…

The brothers noted The Barrett Companies’ effort toward green building and energy efficiency. From better insulation and caulking to installing appropriate outlets in the detached garages for plugging in an electric car, the Chamberlins believe small touches make their properties stand out.

These are big new homes that at first glance might fit several traits of McMansions. But, here is the argument the developer uses to say their homes are not McMansions:

1. The homes will fit the neighborhood. Critics argue McMansions, particularly teardowns, can disrupt the character of existing neighborhoods.

2. The home is not just about space; it is about well-designed and usable space. One argument about McMansions is that they provide lots of square footage but this is often contained in cavernous rooms or in poor layouts that are difficult to utilize in day-to-day life.

3. They are hoping to promote a community atmosphere in their small development. I wonder if this is primarily a function of size; the fenced-in neighborhood with a private road will only contain nine homes.

4. These homes will be greener than normal big homes. McMansions are often said to about excessive consumption and part of sprawl.

5. There will be a consistent design scheme with Georgian architecture and detached garages on the private road away from the streets surrounding the neighborhood. McMansions are criticized for mixing architectural styles.

In the end, I wonder if a majority of buyers and critics would think these reasons are enough to separate these homes from McMansions. These are still big homes in the midst of suburban neighborhoods. They may be more consistent and be less mass-produced but are they different enough?

Honduras moving forward with the construction of three private cities

Honduras is moving forward in allowing three private cities to be built though some have voiced objections:

The “model cities” will have their own judiciary, laws, governments and police forces. They also will be empowered to sign international agreements on trade and investment and set their own immigration policy.

Congress president Juan Hernandez said the investment group MGK will invest $15 million to begin building basic infrastructure for the first model city near Puerto Castilla on the Caribbean coast. That first city would create 5,000 jobs over the next six months and up to 200,000 jobs in the future, Hernandez said. South Korea has given Honduras $4 million to conduct a feasibility study, he said…

The project is opposed by civic groups as well as the indigenous Garifuna people, who say they don’t want their land near Puerto Castilla on the Caribbean coast to be used for the project. Living along Central America’s Caribbean coast, the Garifuna are descendants of the Amazon’s Arawak Indians, the Caribbean’s Caribes and escaped West African slaves…

The president of Honduras will appoint “globally respected international figures” without financial interests in the projects to nine-member independent boards that will oversee the running of the cities, whose daily operations will be administered by a board-appointed governor. Future appointments to the board will be decided by votes by standing board members, Strong said.

I could understand how this would be alluring for governments that are struggling to attract foreign capital and create jobs. However, privatization on this scale sounds daunting and possible problematic. It is one thing to have developers own and run neighborhoods or particular projects; but a whole city? With separate international powers and not having to follow Honduran law? With a future promise of allowing citizens to vote? I could imagine some of the responses from urban sociologists who write about the privatization of public space. What happens when these developers run afoul of citizens or Honduran law and conventions? What kind of free speech rights will citizens have and will they have any say in what happens? It is one thing to have to follow the rules of corporations in private-public spaces in American cities (see these examples in San Francisco) but another when the whole city follows the guidelines of developers or “respected international figures.”

Assuming this moves forward and the cities are built, it will be fascinating to see what happens.

Signs of the “demographic train wreck” in retirement colonies in Florida

One commentator suggests the expansion of retirement in Florida hints at larger demographic changes in the United States:

“There is a demographic train wreck coming that we are not really addressing nationally or in Florida,” says Sean Snaith, director of the University of Central Florida’s Institute for Economic Competitiveness.Over the next 20 years, the number of adults over 62 in the U.S. will double to 80 million, as the largest generation in American history retires. A demographic model that once looked like a pyramid, with a relatively small number of seniors with lots of younger people to support them, now more closely resembles a bobble-head doll. Right now in the U.S., four working age adults support each retiree. In 20 years, that ratio will slip to three to one nationally — and two to one in Florida…

Yet after years of stagnant population growth, Florida is adding new residents again, especially in those areas where it is growing gray. According to projections from Florida’s Office of Economic and Demographic Research, more than half of the five million migrants expected to flow into the state over the next 18 years will be 60 or older. This elderly population boom, fueled by the retirement of the Baby Boomers, the biggest generation in U.S. history, will profoundly change the face of Florida from a state that is simply very old, to a state with one of the oldest populations on the planet.

If it seems like there are a lot of wrinkled faces crowding the aisles at the Publix grocery store in Boca Raton now, just wait. By 2030, one in four Floridians will be older than 65, up from one in six today, with the 85-plus set the fastest-growing group, according to projections…

“Basically you are asking a bunch of old retired rich white people to vote for school bonds that benefit immigrant Latino kids,” says Jennifer Hochschild, a Harvard University professor who studies the intersection of politics, immigration and education. “This is a potential political disaster.”

It will be fascinating to see how this plays out. Currently, it sounds like developers have figured out there is quite a market for such retirement communities. I have wondered why these haven’t seem to have caught on in the same scalein more northern, even considering the weather.

Should retirees have the right or make the possibly wrong choice for the larger society by moving into more isolated communities of people their own age? I’m sure there are class and race differences present here as well – not everyone has the resources to move to Florida in their golden years. What happens when all of these older residents can no longer live in these communities and require more care?

Mayor Bloomberg, NYC want developers to build “micro-units”

Tiny houses may just be catching on in urban areas: Mayor Bloomberg and NYC are pushing developers to build 300 square foot units.

Mayor Michael Bloomberg on Monday invited developers to propose ways to turn a Manhattan lot into an apartment building filled mostly with what officials are calling “micro-units” – dwellings complete with a bathroom, built-in kitchenette and enough space for a careful planner to use a fold-out bed as both sleeping space and living room.

If the pilot program is successful, officials could ultimately overturn a requirement established in 1987 that new apartments here be at least 400 square feet.

City planners envision a future in which the young, the cash-poor and empty nesters flock to such small dwellings – each not much bigger than a dorm room. In a pricey real estate market where about one-third of renter households spend more than half their income on rent, it could make housing more affordable…

Modern-day building codes and improved refrigeration and public health have changed what it means to live small, Bloomberg said. A typical mid-19th century tenement apartment on Manhattan’s Lower East Side might have been larger than one of the micro-units, measuring 325 square feet, but would have typically housed families with multiple children. The micro-units are to be leased only to one- or two-person households.

This could indeed be an interesting adaptation to demographic change. But I wonder: is New York City offering an incentive for developers to do this? Programs for affordable housing often come with some sort of incentive, something like if a developer builds a certain number of cheaper units, they are allowed to build a certain number of market-rate units. The article makes it sounds like there is significant demand for these smaller units in NYC which might negate the need for incentives. However, I haven’t yet seen any indication that developers believe building micro-units is worth it compared to what else they can build.