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Downtown apartment projects supported by market demand

Jared Chase

April 01, 2013

In his guest column of March 25, Don Poland claims that city and state support for new downtown housing projects is bound to undermine Hartford's efforts at revitalization. As evidence, he points to an increase in the city's housing vacancy rate from 11.1 percent in 2000 to 15 percent in 2011, during which time hundreds of residential units were added to the downtown district. We are led to believe that the housing market deteriorated in spite, or perhaps because, of these previous development efforts.

There are two major flaws in this analysis, one chronological, the other geographical.

Let's begin with the chronological. Poland compares the housing vacancy rate of 2000 with that of 2011, assuming implicitly that any increase must be attributable to the failure of housing policy. He ignores the broader economic backdrop. In 2000, the U.S. and Connecticut economies were much stronger than in 2011. Comparing unemployment rates puts this factor into stark relief. From December 2000 to December 2011, the federal unemployment rate increased from 3.9 percent to 8.5 percent, and the state unemployment rate increased from 2.3 percent to 8.3 percent during the same period. It is difficult to expect housing to remain stable, much less improve, in the face of such a strong macroeconomic headwind.

More importantly, Poland confounds two distinct units of geographical scale by citing the citywide housing vacancy rate while referring to the supposed failure of expenditures targeted in the downtown neighborhood. A tighter focus on downtown proper reveals a healthy and strengthening residential market.

Hartford 21, the 35-story apartment tower completed in 2006, is emblematic of the district as a whole. Five years ago, all 97 one-bedroom units in the building were taken, but a majority of two-bedroom units remained unoccupied ("Young Professionals Try City Living," Hartford Courant, March 15, 2008). When I spoke with the management of Hartford 21 last month, I was told the building is now 98 percent full. Even the once-neglected two-bedroom units have filled in, and in the meantime waiting lists for smaller apartments have grown longer, at Hartford 21 and throughout downtown.

Evidence of this localized phenomenon comes from Michael W. Freimuth, executive director of the Capital Region Development Authority, who last December told the Courant that the overall downtown apartment vacancy rate is "less than 5 percent, and even less for studio apartments." A pattern of downtown-centered resurgence has been evident not only in Hartford over the past decade, but in many cities across the country (perhaps most dramatically in Philadelphia and St. Louis).

Those familiar with Jane Jacobs's theoretical and practical observations would not be surprised by this pattern, as downtowns typically have their city's highest density levels, supporting the kinds of urban vitality Jacobs the late urban activist and author of The Death and Life of Great American Cities documented so persuasively.

Recognizing the strength of demand for downtown housing, private developers have, over the past year, announced half a dozen or more new plans to convert existing buildings into apartments or to build new multifamily towers downtown. City and state incentives surely have played a role in these plans, but similar incentives are regularly thrown at the kinds of initiatives for which Poland advocates in his guest column, namely those aimed at increasing homeownership rates (the mortgage interest deduction alone costs the federal government about $80 billion a year in foregone revenue).

There is no reason to doubt that ownership-based programs like House Hartford will also help improve the city's housing profile. However, it is important to keep in mind the advantages and drawbacks of all prospective beneficiaries of limited city and state funding. In the case of a program like House Hartford, one consideration is the likely cannibalization of current renters already living in the city, minimizing the number of net new residents.

By comparison, recently constructed downtown buildings have drawn both existing Hartford dwellers and new arrivals from outside the city and state. Further development of this kind will address a documented scarcity of apartments, bringing to the city new residents who, as the waiting lists demonstrate, have already signaled their interest in living here.

Jared Chase is a staff writer and editor for the Pension Real Estate Association, a Hartford-based trade association for institutional real estate investors. The views and opinions expressed in this article are those of the author and do not necessarily reflect the position of the Pension Real Estate Association, its employees, or its affiliates.

Reprinted with permission of the Hartford Business Journal. To view other stories on this topic, search the Hartford Business Journal Archives at http://www.hartfordbusiness.com/archives.php.
| Last update: September 25, 2012 |
     
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