Residential Revolution

Downtown housing proposals are abundant--but are low- and middle-income buyers being excluded?

A housing revolution is underway in Tucson's central city. But because of high home prices, will the revolution exclude much of the middle class? And will lower-income families be shoved off to separate housing projects, or will they be allowed to live in the same areas as the upscale crowds apparently getting ready to invade downtown?

"It's scary how good downtown can be," foresees homebuilder Michael Keith. "In a decade, downtown Tucson will be every bit as dynamic as those in Albuquerque, Denver or Santa Barbara. But it needs to be diverse to be dynamic."

Not since the 1960s, when "urban renewal" removed hundreds of homes and swept thousands--mostly poor, Mexican-American people--out of the way to make room for construction of the Tucson Convention Center and other government buildings, has the residential face of downtown been poised for such a change. Now an area populated by 20,000 mostly daytime government workers, downtown is on the brink of a real renaissance, supporters insist.

Of course, similar predictions have been proudly proclaimed numerous times over the past several decades. From the glowing prophecies made about the impacts La Placita Village would have when it opened in 1973, to the recent, unrealized dream of building a high-rise condominium project next to the Joel. D. Valdez Main Library on Stone Avenue, downtown's rebirth has had a very long and difficult labor.

Not to be forgotten are thousands of people already living within a short distance of the core of downtown, who shop in the few retail establishments available in the area. In general, many of these people are not financially well-off, with statistics from six years ago showing 55 percent of them earning less than $20,000 annually.

But with hundreds of condominiums and single-family homes either legitimately planned or being built within a few blocks of downtown's center, that situation might be about to change--dramatically.

John Wesley Miller is a 72-year-old Tucson native, and he's been anticipating this revolution.

"The future downtown is not going to be the same as when I grew up here, but it will have a lot of the character of old-time Tucson," he says. "There'll be friendliness and cultural activities with a residential climate, which will result in the demand for services and shopping increasing."

Several years ago, Miller purchased vacant property along Third Avenue in the Armory Park neighborhood. Since then, he has been constructing energy-efficient homes in the Armory Park del Sol subdivision, and expects to shortly complete the last of the almost 100 units.

Miller admits initial interest in the project was slowed considerably by Sept. 11 and its economic aftermath, but he indicates things have recently turned around in a big way. "We sold 31 homes in 2005," he says, "and 20 more are under construction now. If I had 99 more lots to build on, they'd sell out in a couple of years."

Miller's project points out the reality of buying a new home downtown: The average price in the subdivision last year was $450,000, and is rising 1 percent per month. Plus, Miller adds, he has a contract to build a $1 million home in the development.

However, some lower-cost new homes are still available downtown (along with some reasonably priced rental units). Local builder Tom Doucette is putting the final touches on 41 Oaxacan-hued single-family homes in his portion of the Paseo Estrella development, along 22nd Street just west of Interstate 10. With an average 1,600-square-foot house selling for $210,000, all the homes were snatched up long before the project was even completed.

The Martin Luther King Apartments, at Congress Street and Fifth Avenue, are slated for demolition later this year to make room for Tom Warne's residential and commercial project, Depot Plaza. Warne hopes it is completed by early 2008, and says it will have 790- to 1,400-square-foot condominiums ranging in price from $190,000 to $225,000.

Warne is convinced the development can be built and sold for about $240 per square foot. Most other proposed downtown condominium projects, however, won't be that inexpensive. With construction costs exploding and land prices rising rapidly, many developers expect to charge at least $300 per square foot for a new unit in the area.

Chris Walker, a developer of the Lofts at Fifth Avenue, echoes the opinions of several other condominium builders when he estimates his typical unit will sell for between $300,000 and $350,000. In downtown's defense, Walker emphasizes the cost must be compared to the average sales price for a new single family home in Tucson, which in January was more than $296,000.

Ken Scoville, a historian and retired school teacher, notes that it's almost impossible for a one-income household to purchase a home in Tucson today. "A single teacher with a Ph.D. and 30 years of experience couldn't buy a home. It almost requires two incomes to purchase."

A few years ago, foothills resident Scoville was interested in buying a Keith-built home in the proposed Mercado District of Menlo Park, located on Congress Street west of Interstate 10. But eventually, both he and the builder found it impossible to follow through.

"I couldn't build $170,000 houses for lots of little reasons," explains Keith. As far as he knows, no one else involved with the plan has picked up on the idea.

Looking at the future prospects for downtown, Scoville concludes: "We've got to come up with different levels of housing costs downtown, starting in the $150,000 range. If we don't, at first glance, it seems like we'll only have high- and low-income people living there."

Keith agrees about the importance of economic diversity, pointing to the Santa Rosa neighborhood south of downtown as the blueprint of what the entire area should become. "You can't tell income, ethnicity, gender or martial status from the outside of a home," he says of Santa Rosa. "It has truly become a melting pot."

To help accomplish that goal for all of downtown, Keith believes the city of Tucson must be much more aggressive in raising funds to promote moderately priced housing in the area. "With the land the city government owns, they could become more of a market driver of development. They could sell that land at market rates to raise funds to subsidize affordable housing. They can do this."

With "affordable" often employed as a buzz word for government-subsidized housing inhabited mostly by low-income households, "moderately priced" is the term frequently used to describe homes which can be afforded by middle-class families. And it is this category of home which might be in very short supply.

Downtown developer Randi Dorman is highly critical of the way City Hall has approached the central-city housing issue.

She was part of a team that converted the former Arizona Ice and Cold Storage facility into the Ice House Lofts, a 51-unit condominium complex east of downtown. Pointing out no new condominiums have even broken ground since the Ice House opened some time ago, Dorman believes the city must do several things if it wants to see moderately priced housing in the area.

"They need to step up to the plate through either incentives or subsidies," she insists. "Right now, (that's limited) to a $10,000 fee waiver. That's nice, but it's not really much help. Instead, it's kind of a token."

Suggesting additional financial incentives would promote more moderate housing prices, Dorman has a series of ideas. These include additional fee waivers, along with reduction or elimination of impact fees and abatement of property taxes while a project is in the process of development.

"The city has to decide where to promote housing, and I believe it should focus on downtown. These incentives would help to mitigate the (financial) risks, and those risks are great."

Believing most local politicians don't appreciate these risks nor realize how difficult it is to make a residential project profitable, Dorman adds: "I don't know if people know the economics of developing downtown."

Keith agrees there are challenges for developers interested in downtown. "There are underlying problems with the price of land, and hidden costs in doing business downtown."

For proposed condominium towers tucked on small sites, the cost of providing parking can also be an enormous expense. Forced to install parking either underground or as part of a massive, multi-story structure instead of being able to pave acres of vacant flat land, developers have to recoup the extra parking costs through their sales price.

Dorman additionally thinks City Hall should consider making direct, low-interest loans to downtown developers to promote more moderate housing prices. Revising the city's process for selling its downtown land is another item high on her list of proposed changes.

"The Request for Proposal process is tragic," she says. She speaks from experience; her company was not chosen two years ago to develop a prime piece of downtown real estate. Calling the selection committee in that case "incompetent," Dorman states: "It's such a terrible process that we will never propose another project (for city-owned land) unless the process is changed."

One firm which successfully completed the city's RFP procedures is Rio Development Company, acquiring property for 250 homes in the Menlo Park neighborhood. Site preparation for the project is now underway, but it reportedly will only have four affordable units--not the 24 originally anticipated.

Company spokesperson Susan Assadi becomes defensive while discussing the subject. Assadi indicates the firm is familiar with the city's community-wide target of 10 percent affordable housing. Trying to change the subject, she encourages only positive comments concerning her client's development.

In contrast, Menlo Park resident Lillian Lopez-Grant isn't bashful about sharing her opinions about the new westside Mercado project.

"We didn't want low-income housing in the development," she declares. "Folks here wanted to see a little bit better population coming in. We don't want to be ghettoized."

Reflecting on the rapidly rising housing prices in Tucson, Lopez-Grant continues: "All five of my kids moved away from Menlo Park, and it would have been nice to have them nearby. But there's no place in town where people of moderate or middle income, such as teachers, nurses or police officers, can afford to buy new houses."

From her perspective, Lopez-Grant is happy the city wasn't more aggressive in pushing affordably priced housing in the new subdivision. "The city shouldn't be in the development business," she states. "They can't find their way out of a paper bag."

James Brooks, chair of the city's Metropolitan Housing Commission, appears ambivalent about the need to focus on affordable housing downtown. "We'd like to see as much as possible," he says, "but recognize it's not always possible. Forcing (developers) to provide it can be a negative."

On the other hand, Ward 6 Councilwoman Nina Trasoff thinks City Hall needs to push much harder in promoting affordable housing downtown, an area which she represents. Trasoff also believes the city should almost always ask for some affordably priced units to be included within projects built on city-owned land. "Instead of segregating these units, we need to look at ways to build them into projects. I don't think that's impossible."

But that hasn't been done in some of the half-dozen cases of downtown housing proposed for city-owned land. According to a few builders who are attempting to purchase the property to construct condominiums, they have not been requested to set aside any affordable units during negotiations with city staff members. However, others have been: One is David Ollanik, a partner in the proposal to build One West at the corner of Speedway Boulevard and Stone Avenue.

"It came up in the discussions," Ollanik recalls of incorporating affordable units in the project. "Because of the steel construction (which we'll use) combined with the huge price increases seen over the last two years, it is very tough to do." As an alternative to including these affordable units on what he describes as a "top corner," Ollanik has instead suggested other sites for affordable housing in the Dunbar/Spring neighborhood, where his project is located.

That idea, though, has been rejected by city staff members. Emily Nottingham, head of the Community Services Department, says she would like to see an onsite "affordability component" be part of the One West project. She also thinks it should be required at The Post, the controversial and long-delayed condominium proposal near Stone Avenue and Congress Street, even though it wasn't part of the original negotiations for that land.

How many affordable homes would be included in these two projects remains under discussion, but Nottingham points out there are several ways of accomplishing the objective. "They could be smaller units," she says, "or not have as many amenities." Plus, she adds, the city could bring cash to the table to reduce the mortgage payments.

Explaining why some downtown projects to be built on land acquired from the city won't include affordable units, Nottingham says: "It's all about timing. Earlier, the market was unsure, but as we move forward with more (residential) projects, it becomes a more feasible component."

From his vantage point, Ollanik offers a different explanation about why he, but not some other downtown developers, is being asked by city officials to include affordable units: "They've got to pick on somebody."

Nottingham emphasizes the city is directly responsible for implementing many other lower-priced units in the area. Paging through a copy of the 2004 document "Affordable Housing in Downtown Tucson," Nottingham checks off the progress made in meeting the report's goals. These steps include building 51 new, single-family homes in the area, along with 11 rental units in the proposed renovation of the Rialto apartments on Congress Street.

"We're continuing to pay a lot of attention to this," Nottingham says of the affordability issue. "It's an interesting challenge, since the more successful we are (in revitalizing downtown) means an increasing challenge of keeping housing affordable."

Affordable housing is not the only concern regarding proposed new developments.

Chris Gans, who owns property near Walker's proposed condominium development, has concerns about the traffic problems the project will create. Gans also expresses regret that the development team didn't stay in closer contact with people in the neighborhood. In the end, though, he supports the project.

"I like the idea of infill," Gans says, "if done with sensitivity for the neighborhood. This project is a lot of density in a small place, but I'd rather see that than (developers) tearing up more desert."

Walker agrees, and states: "If it just continues to sprawl, Tucson won't retain the brightest minds of the UA. Now, the community lacks vibrant culture, but it can build that (downtown) so these people will stay here."

For her part, Ice House developer Dorman stresses that great urban architectural designs can result from building downtown. In comparison, she says: "Too many residential projects are putting up crap in the middle of the desert."

Characterizing those who live in the Ice House as smart, sophisticated, interesting and creative, Dorman indicates most range in age from their 30s to the 50s. "In Tucson," she observes, "there aren't jobs that pay enough for those in their 20s to afford condominiums."

Keith is a big fan of the Ice House.

"I think you can define Tucson history as before the Ice House and after it," he says. "At no other period of time would it have been possible. It showed Tucson as a whole is changing in more dramatic ways than realized. The Ice House illustrated there are a number of micro-markets for housing downtown, which developers and City Hall need to be cognizant of. It's a very unique situation."

According to Walker, the Lofts on Fifth Avenue is trying to tap into one of these markets--people who are interested in living in an existing urban environment. Anticipating that the demolition of the former YMCA building which now sits on the site should be completed by the end of April, Walker says of the future inhabitants: "They'll have the ability to walk to the Fourth Avenue shopping district. That's not a pipe dream, and we're not relying on the Rio Nuevo (downtown revitalization effort) to make the project a success."

Like everyone else building housing downtown, Steve Fenton, the developer of Academy Lofts, located in an existing historic structure on Sixth Avenue, sees his potential buyers and renters as a diverse group. "They'll be downtown workers and UA-related people, along with an older clientele and empty-nesters."

Hoping to open his project shortly, Fenton states renters will pay between $750 and $1,750 a month for the various-sized units. "We're getting a great group of tenants," he says. "I'm excited."

A recently released report on the future of downtown housing shows proponents of the area may have much more to be excited about in the future. Prepared for the city of Tucson by Economics Research Associates, the study concludes that over the next 15 years, between 4,600 and 6,900 new housing units could be built in the greater downtown area, which means thousands of more people living, shopping and possibly working there.

Warne sees a very bright future ahead for downtown. "In 10 years," he predicts, "we'll see more private-sector employment, several thousand more housing units and a retail-service sector oriented to those who live and work in the area. There'll be a collage of entertainment to draw people from across Pima County, and because of the ease of transportation, the area will be extremely interactive with Fourth Avenue as well as the UA."

Dorman is more cautiously optimistic about downtown's prospects. "The city really needs to get its act together," she says. "If it does, (the success of downtown) is a sure thing. If it doesn't, it may happen anyway."

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