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Housing Near Transit Drives Economic Prosperity

By Thomas P. Healy

Housing costs gobble up the largest share of Americans’ household income. Adding transportation costs to the mix takes an even larger bite. In Indianapolis, combined housing and transportation costs average 45% of the family budget, which limits economic mobility.

A broad-based coalition of community development organizations, local government officials, philanthropic groups, neighborhood leaders, and fair housing and transit advocates are collaborating on ways to stabilize costs. They want to leverage the massive investment in the Marion County Transit Plan to spur widespread community prosperity.

As an organization committed to creating conditions for working people to be self-sufficient and meet basic needs without public or private assistance, the Indiana Institute for Working Families (IIWF)  sees access to affordable housing near transit as a way to increase economic mobility. “If we can build out our transit system and build housing in a more strategic way, we help maintain self-sufficiency,” said Jessica Fraser, IIWF director.

Fraser is concerned that many families are being stretched too far. “Forty-one percent of renters in Marion County are spending more than 35% of their income on rent,” she said. “Almost 10% of households in Marion County have no vehicle available to them.” Adding transportation costs on top of housing costs can create more economic hardships. “Families need to find affordable housing, transportation to work and school, and make sure they are near access to food,” she said. “It’s important to get both affordable housing and reliable transportation.”

INCLUSION AND AFFORDABILITY

Metropolitan areas around the country have leveraged investments in transit by making changes to land use and zoning regulations to encourage—and in some cases even mandate—that multi-family residential developments include a percentage of affordable units. Called inclusionary zoning, such regulations are seen by advocacy groups like the Center for Transit-Oriented Development as a way to “enhance community stability and sustainability and ensure that low-income households are not isolated in concentrations of poverty.”

However, this tool is not available in Indiana. In 2017, the Indiana General Assembly passed legislation that precludes local units of government from establishing equitable housing requirements without prior authorization from the legislature.

Amy Nelson, executive director of the Fair Housing Center of Central Indiana, said that because the General Assembly made inclusionary zoning difficult to achieve, “We’re missing affordable housing from being created. We don’t get an opportunity to say ‘it is a priority for us as a community to insure there is housing availability for people who are working and can’t afford the cost of being near their jobs.’”

The Indianapolis Neighborhood Housing Partnership® (INHP) has taken a creative approach to circumventing Indiana’s legislative roadblock. On February 5, INHP announced it had joined with Cinnaire, a Michigan-based community development financial institution (CDFI), to establish the city’s first equitable transit-oriented development (ETOD) fund to insure that affordable housing is available near transit stops.

“Inclusionary zoning is something we cannot be distracted by,” said Joe Hanson, executive vice president of strategic initiatives for INHP. “We have the ability to create environments for private and public sectors to work together toward a common goal and find a way to help the City leverage private-sector resources.”

The INHP/Cinnaire $15 million ETOD fund does just that. To build the $3 million equity portion of the fund, INHP pledged $1.5 million of a 2015 Lilly Endowment grant. The City of Indianapolis committed $1 million in federal Community Development Block Grant funds, and JPMorgan Chase’s PRO Neighborhoods program contributed $500,000. Hanson added: “It doesn’t happen without Cinnaire.”

Rick Laber, Cinnaire executive vice president of new ventures, is in charge of assembling $12 million in lending capital from banks as well as for managing the fund. So far, First Merchants Bank, National Bank of Indianapolis, Lake City Bank, and First Financial Bank have committed a total of $5 million as lines of credit. “Community banks are motivated to give back to their communities,” Laber said. This is part of their corporate culture, and it also helps banks meet federal Community Reinvestment Act (CRA) requirements. “Essentially what the CRA is saying is, if you’re taking deposits from folks that live in your community, you need to also make investments and loan products available as well,” he said. That makes the fund a powerful CRA tool for banks. “They might lose a little money on it or break even, but they get CRA credit and that helps them with the regulators,” Laber said.

Such enlightened self-interest will likely help the fund reach its goal of acquiring properties within a 15-minute walk radius of a transit station, either to preserve or to spur the development of 1,000 affordable housing units. INHP’s Hanson said, “We’re looking for sites that can sustain mixed-income and mixed-use like first-floor retail that provides resources to the community.” INHP won’t develop the sites, he said. “We will sell to anyone that can deliver the affordable housing.”

Two properties have already been acquired along the Red Line—one near Garfield Park and the other just south of Fall Creek on Illinois Street. Hanson said INHP is optimistic ETOD will help reduce transportation costs for households and improve their quality of life. “Insuring that low- and moderate-income families have access to safe, affordable housing and high-quality transit provides tools for true economic mobility,” he said. “If they have access to affordable housing and quality transit, it opens more doors to jobs, education, health care, and food.”

Data source: FTA. CLICK TO ENLARGE

INHP’s focus will be on properties in proximity to bus rapid transit lines that are already generating interest from the development community. The Federal Transit Administration has identified a national trend: Once a major transit infrastructure investment is announced, it sends a signal to the development community that prompts private sector investment (see infographic). Such interest drives up acquisition costs that in turn make affordable housing projects less likely. INHP’s Hanson said the timing of the ETOD fund announcement was deliberate. “We wanted to get ahead of the trend so we could ultimately maximize the opportunity to help low- and middle-income families.”

TRANSIT ORIENTED DEVELOPMENT

During his time working with IndyGo on the Marion Transit Plan, Oregon-based transit consultant Jarrett Walker said that one of the goals of expanded transit service is to provide citizens of all ages, abilities, and incomes with improved access for everyday needs. “A complete transit network provides liberty and opportunity to so many people,” he said in an interview. “Transit’s a win-win.”

Walker’s work here focused on encouraging IndyGo to create a complete transit network. “The Red Line is a great thing. You’re getting a lot of federal money to build it. The fact that you’re getting it in Midtown doesn’t mean somebody else loses,” he said. “Transit succeeds precisely because there are other people who benefit from it. That’s what gives it the ridership. Transit achieves high ridership by being useful to lots of people, not to any particular kind of person. High ridership arises from diversity.”

He added that one of the potential benefits of the Marion County Transit plan is that it can spur the development of apartment buildings with fewer parking spaces. “That may sound technical but it makes a huge difference because if you build less parking you can build more density and make those units more affordable.”

Zoning regulations mandate the number of spaces required even if those spaces are unused. According to a report [PDF] by Gary Cudney, senior vice president at the engineering firm WGI, the 2018 median construction cost for a new parking garage was $20,450 per space. That does not include the cost of land and other project soft costs.

Walker observed that this expense is one that tenants end up paying for. “One of the keys to affordability and one of the things the community should be advocating for, if it wants affordable housing, is housing with less parking,” he said. And for such developments to work, Walker said they must be located in proximity to a transit stop.

Sean Northup, deputy director of the Indianapolis Metropolitan Planning Organization, was instrumental in hiring Walker, so it’s no surprise he agrees about parking. “Parking is totally the enemy of affordable housing,” he said. “Around transit, you have an opportunity to make a big impact if you’re not assuming that every unit needs one or two parking spaces and every resident is driving.”

Northup said that early in the Marion County Transit Plan process, a land use analysis informed station placement. “Now the stations are set and it becomes a conversation about what’s allowed to happen,” he said. But to unlock the development potential, it requires making the case to property owners that their properties are more valuable because they’re located in proximity to a transit line.

Making that argument one property at a time is a recipe for frustration. Another route taken by other communities is to introduce an overlay district for multiple parcels. The effect, Northup said, is to change “use by right” zoning in all land within proximity to transit stops to encourage walkable, mixed-income, mixed-use developments. “The great irony of this is that the purple, blue, and red [BRT] lines are all located in historic transit corridors, and what’s built there now is currently illegal,” he said. He noted that if one travels the BRT corridors today there are taller buildings built to the corner with very little parking; lot coverage with no side setbacks; and wide sidewalks. “All of the kinds of things that are really in demand and easy to use if on foot are illegal,” he said. Obtaining the necessary variances under current zoning can add an entire year to the development process and cost thousands of dollars.

THE “D” WORD: DENSITY

EPA graphic. CLICK TO ENLARGE

While property owners might be encouraged by beneficial economic impact, neighborhoods can be uncomfortable with infill developments that encourage density—the mix of uses and population that transit serves so well. The frequent refrain is, “Do we really need more apartments?”

To which Katie Wertz replies, “Really, Indianapolis is not building enough housing overall at every price point.” Wertz is a senior associate at Greenstreet, Ltd., a local real estate development, brokerage, and consulting firm that recently completed a market analysis for the Metropolitan Indianapolis Board of Realtors® and the Builders Association of Greater Indianapolis.

“What we found is that people are now choosing to find housing, and then look for a job. If we’re not building the right kind of housing, they’re going to go elsewhere,” she said. That makes it harder for Indy to attract and retain new residents. “One of the links to transit oriented development is when we build housing in a more compact, walkable place, it not only helps an underserved market, but also saves money for the City and generates higher revenues so we can add streetlights, upgrade parks, and pave roads,” she said.

Housing demand in Indianapolis is also noted in Harvard University’s Joint Center for Housing Studies annual State of the Nation’s Housing report. It found that “a growing number of low-income renters are competing for a shrinking number of low-rent units and rapid growth in high-income renters over the last 10 years has outnumbered growth in high-rent units.”

Daniel McCue, a senior research associate at the Joint Center for Housing Studies, worked on the report, which tracked housing stock and demand. “As we looked through the data we saw a story across the nation of the loss of low-rent units,” he said. Another story McCue saw was the growth in high-income renters, which happened after the housing downturn, as well as long-term growth in the number of low-income renters.

McCue said what the data shows for Indy in terms of demand is both high growth in the number of low-income renters and strong growth in high-income renters as well. “I think that is partially explaining why it seems all of the new developments are high end,” he said. “There is demand at the high end and it’s really spurring this rental construction.”


UIndy president makes headway on plan to lift neighborhood

ibj.com
April 22, 2017
rop-uindy-042417-450bp.jpg

 Greyhound Village, with apartments for 487 students, opened in August. (IBJ photo/Lesley Weidenbener)

Robert Manuel has become highly educated in real estate development since arriving almost five years ago as president of the University of Indianapolis.
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Key 38th Street corridor poised for renewal

ibj.com
June 4, 2016
Scott Olson

A prominent Indianapolis developer is pursuing two projects totaling $32 million that would bring a grocery and 200 apartments to a neglected stretch near the highly traveled intersection of 38th and Meridian streets.
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Council OKs putting mass-transit tax hike on November ballot

IBJ.com
May 9, 2016
Hayleigh Colombo

Marion County voters will have another choice to make in November’s election—whether to approve an income-tax increase to pay for expanded mass-transit service.

The measure to put the question on November’s ballot was approved 18-6 Monday night by the full City-County Council. The measure first passed the council’s Rules and Public Policy Committee on April 26.

If the November referendum passes, Marion County could levy a income-tax increase of 0.25 on residents. That would be 25 cents for every $100 of income to pay for increased public transit.

“This is about a system that will not improve if we don’t find a way to fund it,” said Republican Councilman Jeff Miller. “I trust the voters come November will look at the impact to them and make a personal decision.”

Democrat Zach Adamson said he has been “waiting five years” to cast a vote to put the referendum on the ballot.

The tax increase would help fund the IndyGo Marion County Transit Plan, which includes extended service hours, shorter wait times, and the creation of three rapid-transit bus lines.

One big part of the transit plan is the Red Line, a rapid-transit bus line that could eventually run from Westfield to Greenwood at a projected cost of $170 million to $200 million.

In Marion County, the first 13-mile phase, which would run from 66th Street in Broad Ripple to the University of Indianapolis, is expected to cost $96 million to build and another $6 million annually to operate. Construction is expected to start in spring 2017, with routes open for service in fall 2018.

The Marion County portion of the Red Line is expected to receive $75 million from a federal grant, which would cover most of its construction costs. The annual operating funds would be covered by the tax levy.

If the referendum doesn’t pass in November, the first phase of the Red Line would still move forward. There also will be more “real-time” transit information available, such as the arrival times of buses.

But “improvements to hours, service, connections, and wait times will be more difficult to make,” according to IndyGo’s website.

Some opposition to the Red Line has surfaced in recent months, with a petition garnering about 430 signatures saying that the first phase’s construction will “slow traffic, hurt existing businesses and forever alter the character of historic neighborhoods such as Arden, Broad Ripple and Meridian-Kessler.” However, a petition in support of the line has 1,385 signatures.

Not everybody at the meeting was in favor of the proposal.

“Somebody’s got to speak for the voices of people who can’t afford a tax increase,” said Democrat Joe Simpson.

But several council members said they have received “about half and half” of feedback for and against the proposal, so voters should decide.

Councilman William Oliver said he supports putting the question on the ballot because “I’m not saying what they should do; I’m giving them the opportunity to (vote).”

“I’m going to challenge those here and those watching to get involved and take a position and seek out those answers,” Oliver said.

The Indy Chamber released a statement in support of the vote, with President Michael Huber saying the council is giving voters “a voice on mass transit and an opportunity to make us a more convenient, connected city.”

Tim Maloney, senior policy director of the Hoosier Environmental Council, called the plan “ambitious yet practical and realistic.”

“If you make transit a meaningful choice for people, a lot of people will choose to take the bus instead of driving,” Maloney said. “That means cars off the road, reduced vehicle emissions; it’s a positive for the community, but you have to make it work well.”

Indy council sends transit tax hike to voters

The City-County Council on Monday night agreed to give Marion County voters the chance to raise their income taxes to pay for a major investment in public transportation: a dramatic expansion of the city bus service, including a bus rapid transit system.

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