KC's downtown apartment vampires
Yael T. AbouhalkahWant more proof that KC developers are hooked like addicts to public subsidies?
Check out The Star’s weekend article about downtown apartment developers putting their hands out for millions of dollars in incentives before they will build more units there.
So let’s take a look:
People want to live downtown.
Apartment occupancy is near 100 percent.
But instead of rushing to meet that demand the old-fashioned way - you know, by building more units - developers are sitting on their cash, waiting for handouts from City Hall.
Why, if they invested private dollars into their private developments, they just wouldn’t make the kind of investment return they want.
These developers have just become used to taxpayers subsidizing their profits, and their returns, with millions of dollars.
To his credit, Mayor Sly James didn’t say he’d open the spigot to the developers. It’s more of a wait-and-see approach, it appears.
Fine. Let’s wait and see how much private money the developers want to plow into building more apartments downtown. Then let’s see whether any of these projects warrant a nickel from the public.
Kevin Carlyle
9 months, 2 weeks agoIf anything, the city needs to go for sure projects with more benefit to the city.
A density rule, for example. Like increased density gets more help per dollar.
George Birt
9 months, 2 weeks agoYael–- First of all, developers will be putting substantial amounts of cash into these projects as the “gap” financing is predicated on developer’s also contributing equity. The dilemma for downtown KC, unlike many of our peer cities in the Midwest, is that land prices and construction costs don’t match up with rental revenues and expenses in order to attract the full amount of risk capital needed for a reasonable return on invested capital. This equity “gap” while not overwhelming, is nonetheless real and a hindrance in meeting the goal of doubling our downtown population within the next 5 to 10 years. As more projects come on line and downtown’s appeal increases so will rents, to the point where the equity “gap” being experienced in today’s market closes. Along the way the downtown economy will grow attracting more and more retailers and businesses to serve a growing population, all the while increasing the City’s employment and resultant tax base. See how this works?
George Harris
Kansas City
9 months, 1 week ago“The dilemma for downtown KC, unlike many of our peer cities in the Midwest, is that land prices and construction costs don’t match up with rental revenues and expenses in order to attract the full amount of risk capital needed for a reasonable return on invested capital.”
Mr. Birt is a real estate development professional, which may mean that he is highly knowledgeable and/or that he has an incentive to get city money into development projects. The sentence above, simply translated, is that, in a free market, there isn’t enough demand for the product (downtown residences.) Only with tax dollars can the development projects guarantee a return on investment. Well, you can make a river run up hill if you spend enough money, but is it a good idea. The point of most tax abatement is to jump start development in blighted areas. Downtown no longer fits this description.
It could be argued that tax dollars could spur development in many parts of the city and attract residents. But why favor downtown over any other part of the city. I suppose density is one argument, but density also increases prices. I’d argue that it makes more sense to spur development where costs can remain low enough for people to afford the product.
Kent Mueller
9 months, 1 week agoI was about to respond to Mr. Birt, and then I read Mr. Harris’ comments. I deleted mine as they would have overlapped considerably with Mr. Harris’.
Can anyone…anyone….show that the city has a track record of picking the right projects to subsidize? Don’t cherry pick, lay them all out on the table. I don’t know what those numbers would show for sure, but I have very good idea. If the city has a history of subsidizing projects that worked, you can bet the developers would be holding those numbers up for all to see. Instead, all we see are the projections for the current planned project. If there is a history of success with tax abatements, don’t you think we would see the wonderful results documented? Yeah, I thought so, too.