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Hartford Revitalization: Case Study In Bad Policy

By DON POLAND

March 25, 2013

Last month, Hartford announced its latest attempt at urban revitalization: a $78 million conversion of 777 Main Street, a vacant office tower, into 286 apartment units along with 35,000 square feet of street level retail. Of this $78 million, $41 million of the cost will come directly from state agencies. The other $37 million involves a private loan backed by the U.S. Department of Housing and Urban Development and offset by a city tax abatement deal that could be worth millions.

Since the 1950s and '60s, the Hartford city government and Connecticut state government have spent hundreds of millions of dollars on less than successful downtown Hartford revitalization efforts: Constitution Plaza, Bushnell Tower, the Hartford Civic Center, the Connecticut Convention Center, Hartford 21 (the second time around for the Civic Center site), and Front Street, among others. For all the hundreds of millions they have spent, Hartford and Connecticut taxpayers have been left with a downtown Hartford that has 30 percent Class A office vacancy and more 200,000 square feet of vacant storefronts.

The newest plan is to provide massive government subsidies to convert this vacant commercial space into residential units. Unfortunately, this effort is ill conceived and will likely amount to yet another waste of taxpayer dollars.

The first problem with the 777 Main Street subsidies is the cost. Even leaving aside the city tax breaks, the $41 million in direct state subsidies for 286 units works out to $139,800 per unit, or $108,108 for each of the 370 possible new renters. At this rate it will cost Connecticut taxpayers $350 million to increase Downtown Hartford's population to 5,000 persons, the goal informally cited by government officials. With Connecticut facing zero job growth in the last year, a $1.2 billion deficit, and the highest per-capita debt in the country (which the state spends $2.3 billion each year servicing), housing subsidies of this magnitude are simply not sustainable.

Even more importantly, the addition of new, heavily subsidized housing supply is likely to hurt, not help, Hartford's revitalization. The most recent round of subsidized downtown housing construction (2003-2005) added over 700 housing units. Since that time, Hartford's housing market has weakened. The housing vacancy rate has increased from 11.1 percent in 2000 to 15 percent in 2011. Since 2007, only 84 new multi-family housing units have been constructed in Hartford. And with lagging population and job growth, Hartford's housing market is unlikely to see a substantial change of fortunes in the near term.

Subsidizing the construction of new housing supply in a market where demand is weak and lagging makes no sense. It threatens to further increase vacancy rates, drive down housing prices (and, by extension, homeowners' wealth), and drive away unsubsidized private developers, who will have no interest in competing with subsidized properties in a weak and limited niche market. Housing may be a reasonable option and opportunity for the reuse of vacant downtown buildings, but the government cannot force this transition any more than it can force a revitalization centered on office space, entertainment facilities, conference space, or retail.

This is not to say there is no appropriate role for government in housing policy or urban redevelopment. But reinvestment strategies need to focus on policies that cost taxpayers less, target Hartford's neediest residents, and organically build demand over time by making Hartford as a whole a less impoverished and more desirable place to live. Once that happens, the right mix and critical mass of residential, commercial, and retail that will make downtown vibrant and successful will take care of itself.

House Hartford, the city's homeownership program, provides one example of an effective program. The program provides up to $14,999 in down payment and closing cost assistance to low and moderate-income homebuyers. An additional investment of $10 million in House Hartford, strategically targeted in stable neighborhoods that can and do attract homeowners, would help to add 650 new homeowners to Hartford (nearly twice the capacity of 777 Main Street) and would not flood the market with new supply. This would help grow wealth in the community and reduce, not increase, the city's vacancy rates. All at one quarter the cost of the 777 Main Street boondoggle.

With more strategic investments to stabilize neighborhoods, like House Hartford, and fewer sensationalist government construction projects, Harford might actually have a shot at a real revival.

Don Poland is a professional urban planner and a Fellow at the Connecticut Policy Institute.