NAIOP’s September Developer’s Summit in Buffalo featured Erie County Comptroller Stefan Mychajliw, who discussed his “Report on Erie County Industrial Development Agency Lower Incoming Housing Component Proposal.”
When Erie County Executive Mark Poloncarz proposed a form of inclusionary zoning in his 2017 State of the Country address, Mychajliw said he took a close look at the data, examining its potential impact on developers who would be required to designate up to ten percent of available apartments in downtown Buffalo as affordable housing.
Mychajliw called it a “very negative proposal.” He said this major initiative blind-sided the development community, which he said the county executive did not consult with developers before raising the idea. “While inclusionary zoning may have a neutral impact in larger cities like New York and Boston, it cannot work in Buffalo.”
The comptroller talked to developers and bankers about how it would negatively impact the local economy. “To force this would be a monumental mistake. It would set back the tremendous progress we’ve made in Buffalo over the past 10 to 15 years,” Mychajliw said.
“Requiring low income units in every development project will not put a dent in the affordable housing problem, but you do put every real estate investment at risk,” said Bob Richardson, president of the NAIOP Upstate New York chapter. “Instead of figuring out how to work together proactively (developers and government), the current proposal will force us to go to government and say, "there is a negative consequence to your requirement" and persuade them to undo it.”
Hamburg Towner Supervisor Steve Walter also addressed the summit, discussing his town’s successful efforts to develop new capacity for business development.
Between 2008 and 2010, local businesses were expanding into Hamburg’s industrial park, which was rapidly running out of space. That prompted Walter and his team to come up with an innovative plan to acquire a large parcel of property for future economic development.
“We created a land development corporation and purchased 170-acres from Middle Steel,” he said. “It’s now known as the Lake Erie Commerce Center. We developed that property as one of the few pre-permitted sites in Erie County and all of Western New York.”
To alleviate potential environmental challenges tenants might face at the industrial park, the corporation completed the SEQR (New York State Environmental Quality Review Act) process for the entire site. “Whoever came into the property would not have to take on the risk of objectors suing under SEQR.”
FedEx is now a tenant at the site, occupying 57 acres. They built a 310,000-square foot main facility and three smaller buildings. Because SEQR approval was already in place, Walter said it took less than three months for FedEx to begin construction once they closed on the sale.
70 acres remain for development on the property. “It’s a great use of a piece of property that was in an industrial section of the town. We took proactive steps.”
With 24/7 coverage of ongoing global events dominating the news cycle, it's easy to lose sight of what's happening with U.S. legislation critical to our industry.
Tax reform negotiations are imminent: House Speaker Paul Ryan has promised to release an outline of a tax reform plan the week of September 25, followed by negotiations between the House, Senate and administration.
This is the first major tax reform in more than three decades, and the stakes for commercial real estate are high. We have been closely working with Congress to ensure legislative programs and incentives critical to our industry are carefully considered throughout the negotiation process, including:
- Deductibility of interest payments on financing.
- Section 1031 like-kind exchanges.
- Taxing real estate carried interest as ordinary income instead of capital gains.
We have been firm that tax reform should lead to economic growth and job creation, and that it acknowledge the long-term nature of commercial real estate investment. (Read our July 28 opinion editorial in The Hill online.)
An informed, engaged chapter membership is one of our best tools. We will keep you up-to-date as information on this critical industry issue becomes available and the need for members to communicate with their elected officials arises.
Watch for regular updates in the weekly NAIOP Source newsletter and plan to attend a special legislative briefing led by our legislative team during NAIOP's CRE.Converge conference, October 10-12 in Chicago.
As always, thank you for your support of NAIOP.
Some directors of the Erie County Industrial Development Agency believe its decade-old adaptive re-use policy — credited with pushing a residential redevelopment wave downtown — be amended to mandate a set aside of apartments priced at a “more affordable” range.
An analysis just completed by Erie County Comptroller Stefan Mychajliw, said such an action would harm, not help, those efforts.
“Why throw a monkey wrench into something that’s working?” Mychajliw asked. “It makes zero sense.”
Mychajliw’s report was filed Sept. 6 with the Erie County Legislature, which is expected to review it when it meets on Sept. 7.
The ECIDA’s adaptive re-use policy, which took effect in early 2008 at the request of Buffalo Mayor Byron Brown and then-Erie County Executive Chris Collins, has a track record of proven results and is widely credited with fueling many of the downtown residential-based projects. Some 53 projects that have collectively created more than 1,100 apartments and turned more than 4 million square feet of vacant downtown buildings into viable structures have come on line in the past decade.
“I’m not against finding a way to have more affordable housing units in Buffalo, I think it is a noble idea but to mandate it in every new downtown project would cripple Buffalo,” Mychajliw said. “Government should not be forcing itself on the private sector in this way.”
Mychajliw’s report follows a suggestion made by Erie County Executive Mark Poloncarz, in his “State of the County” address this spring, that advocated for “affordable” set aside mandate become part of the ECIDA adaptive re-use policy.
Thus far, the set-aside issue has been informally discussed by ECIDA directors.
Steve Weathers, ECIDA president and CEO, said there isn't any formal push to make changes thus far.
“If we do anything, it will be very transparent and visible to everyone,” Weathers said.
Even within the 19-member ECIDA board there is no consensus on whether the affordable housing mandate should be enacted.
Talk of enacting such a policy is not new to the agency. It has been an almost yearly debate among its directors, but aside for board room conversation, no action has been taken.
Many feel Poloncarz’s “State of the County” remark, which came following an ECIDA board discussion, is just a continuation of that conversation.
While there are no direct affordable housing projects set for the immediate central business district, there are several in nearby neighborhoods. Among them:
• People Inc. is also building a 37-unit Linwood Avenue apartment complex.
• Mt. Aaron Baptist Church plans nearly 60 similarly priced apartments on Genesee Street, just a few blocks from downtown Buffalo.
• Hispanics United of Buffalo, this fall, proposed a 40-unit affordably priced apartment complex on Virginia Place.
• Developer Stuart Alexander, this summer, opened the Parkview Apartments near Martin Luther King Jr. Park and hopes to turn the former Buffalo Forge property on Broadway — also just a few blocks from downtown — into a residential complex anchored by affordable units.
Meanwhile, the Buffalo Niagara Partnership and Buffalo Urban Development Corp. are jointly financing a new study to determine the needs and demands for downtown housing units including apartments and condos. The study is expected to be completed this fall.
The Partnership is on record being opposed to creating affordable unit mandates for any project seeking county IDA adaptive re-use tax breaks. Without attribution, many of the Partnership’s members view any such a proposal as another layer of social engineering being orchestrated by some of the IDA’s directors.
Partnership members support keeping the county IDA’s adaptive re-use program in place, with no new mandates or modifications.
“The transformation results of this program can be seen on nearly every block of downtown Buffalo,” said Dottie Gallagher-Cohen, Partnership president and CEO and also an ECIDA director. “Failing to do so will only stymie the successes we have achieved and forfeit the economic opportunities created by this program.”
On average, according to a CBRE study, market-rate apartments in Buffalo rent for $925 per month compared with a national average of $1211 per month.
The Urban Land Institute found that Buffalo apartment renters spend 21.7 percent of their household income on rental rates while in larger cities like Chicago the percentage level is higher at a 28 percent rate and in Brooklyn it is at a 55 percent rate.
Nick Sinatra, whose portfolio of more than 1,700 apartments in the Buffalo Niagara region, has nearly half within the City of Buffalo. Of his 795 Buffalo apartments, 543 have average monthly rental rates between $400 and $800.
“Do we need to find a way to provide more subsidized housing opportunities in all Buffalo neighborhoods? Absolutely,” Sinatra said. “But, to force the private sector’s hand and chipping away at the economics of some projects doesn’t work or make sense.”
James Fink covers real estate, commercial development and government for Business First of Buffalo (Originally published Sept. 7, 2017)