ITHACA, N.Y. — We’ll call it the planner’s dilemma. The city of Ithaca has need for certain types of housing, some much more than others. The question is, how do you make it happen?
That’s the question facing the Downtown Ithaca Alliance’s Director, Gary Ferguson. At his disposal, a freshly-published study demonstrating significant demand for downtown housing – an accolade for the high quality of life in Ithaca and its desirable urban spaces, and a challenge because the tight supply and high cost of development makes it difficult to quench the demand.
The study, which was performed by the Danter Company as they concurrently performed the county’s study, notes a very low vacancy rate for properties in Ithaca’s core – 1.8%, well below the 5% that’s considered healthy. By Danter’s analysis and predictions, over the next five years, the growing economy and strong interest in urban living could sustain as many as 1,050 new rental units, and up to 350 condo units. On top of that, the dearth of dorms and existing student housing could drive demand for another one thousand student bedrooms. To put that in perspective, the 9-story City Centre project proposed for the Trebloc site has 254 units, and the entire Chain Works District on the Emerson site could have around 900 units at full build-out.
The big caveat to those numbers is, most of those new condos and apartments probably won’t come to fruition, just as they haven’t since the previous Danter study for downtown was presented in 2012. If you don’t like change or think everything’s moving too fast, you can breathe now. But if you’re in the middle of the market as incomes go, it’s a predicament.
Ferguson says there have been some new developments since the last study, but the same big problems still exist. “The thing that I saw that changed was a more robust demand for for-sale housing. The demand for affordable and middle-income was equally strong in 2012, but in the intervening time, the community, downtown and in the county overall, weren’t able to build any. We’ve had some success with tax-credit projects [Breckenridge Place, Stone Quarry], and there’s still a need for those, but that’s limited by how much state funding you can get. High end product is being built as well, and that’s great. But middle-income housing, we’ve built virtually nothing. The demand for middle-income housing was in both studies, but we did not see any success in that area in the four, five years since.”
The result? Ithaca’s middle class is disappearing. Developers are investors, they seek return on investment, otherwise they’d just put their money into stocks and bonds. If you’re building in an area with high land costs and high construction costs like downtown Ithaca, you recuperate by asking for a high price. If you’re someone looking at the high end of the market, or a group of students that split costs per bedroom, that’s fine.
On the other end, even though most developers actively avoid the complexities of affordable housing development, thankfully there are motivated local non-profits like INHS who can put forward an affordable housing proposal that can earn city approvals and cobble together enough public and private money to move forward.
So the upper income brackets are covered, and even those of modest means can score the occasional victory (even if it’s far short of what’s needed). But if you’re in the middle, it can feel like you’re being ignored in this construction boom.
The potential long-term problem looks like this – an Ithaca where only students and the wealthy can afford to live. A working and middle class that’s been forced out to the towns, with the commutes and traffic to prove it. A few folks will be lucky enough to get into affordable housing, but otherwise feel like strangers in their own community, surrounded by wealthy renters and homeowners, and a market that caters to them.
Maybe you’re reading at this point and thinking, “maybe if we just stopped building luxury housing, we wouldn’t have this problem”. Except that doesn’t magically make the demand disappear, the education and healthcare-driven economy is still adding hundreds of well-paying jobs per year, and students are still coming here to learn. The demand just shifts to what supply is available. Wealthy homebuyers who might go for new units will instead focus even more on buying existing homes in increasingly-fashionable neighborhoods like Fall Creek and Northside. Landlords will smell opportunities and buy more houses in East Hill to rent out. They can spend more than others, and they can pay above asking price. So those in the middle get priced out even faster, and those living nearby watch as their housing assessments and property taxes go up. When people are forced out, whether by gentrification or disinvestment, it’s called displacement. Recent studies have shown that the tighter the new supply tends to be, whether luxury, mid-market or affordable, the higher the rate of displacement.
The solution ends up being a lot more nuanced than “build lots of expensive housing”. A lot of today’s advocacy circles around increasing affordable housing funding, legislating inclusive affordable housing, and encouraging density and flexibility with zoning codes so that developers can subsidize affordable units. Ithaca has been exploring those options over the past couple of years. However, the middle market, between affordable and luxury, isn’t often a part of the conversation.
“There’s demand in all parts of the marketplace, but the strongest segment is in the middle and in the affordable area. Those are the most difficult areas to build as a developer. Most units are built to the high end, or to the tax-credit end. The low-middle and middle-middle aren’t being addressed, not because people have a fundamental problem with them, just that the [financial] numbers don’t pencil out. I suspect it would be easier to meet those numbers in a cornfield development than on an urban block,” said Ferguson.
“As a community, if we want to see affordable, middle-income housing built, we need to come up with a strategy, and perhaps some sort of incentive program to help and encourage developers to build that kind of product. The economics have not proven to be there. Two issues the [Downtown Ithaca] Alliance wants to focus on are condos and middle-income housing. How do you build middle-income housing in a downtown urban environment, when land costs are really high and construction costs are really high? We’re starting from behind the eight ball on the get go, it’s a difficult assignment that probably is going to need some help. If we value for-sale and middle-market housing, we’re gonna have to step up and help make that happen.”