Since the beginning of the suburban era in the 1950s, many American cities have been experiencing an exodus of residents from their downtowns. As urban areas were abandoned for the lure of backyards in the "'burbs," the development of new housing for downtown residents dramatically slowed. At the same time, many cities also witnessed the flight of commercial activity as the population of city centers shrank and suburbs grew. Consequently, the urban core of many cities went into steep decline: property values deteriorated, economic growth stagnated, and job opportunities dwindled.
To counter these trends and redevelop urban areas, many policymakers turn to outmoded approaches that depend almost exclusively on government subsidization of urban housing projects without much regard for the importance of private-sector participation. For example, some city officials focus single-mindedly on the construction of government-subsidized "affordable housing," neglecting the importance of job availability and the need for market-rate housing to help drive commercial development.
Two local approaches have demonstrated that there is an alternative to this outmoded approach. Columbus, Ohio, Mayor Michael Coleman spurred the creation of the Columbus Downtown Development Corporation with his challenge to create 10,000 new units of downtown housing by the year 2012. The corporation controls the Downtown Housing Investment Fund, which solicits donations from private entities in order to provide low-interest loans for new housing starts and renovations in the downtown area. The fund now holds some $10 million in assets from private donations. In the last year, downtown Columbus has witnessed an 800 percent increase in housing starts.While there has been an increase of high-end condos built downtown, city leaders have made a concerted effort to make downtown housing affordable for a broad range of Ohioans. Sixty four percent of all downtown housing is either subsidized or workforce priced housing, and 30 percent of the homes for sale cost under $200,000.
Former Louisville, Ky., Mayor David Armstrong also developed an innovative approach that demonstrates the continuing appeal of urban life. Along with other city leaders, he devised a financial partnership between the public and private sectors that has proven extremely successful in bringing new life to Louisville's downtown neighborhoods. The program continues to thrive under the current mayor, Jerry Abramson
Called the Downtown Housing Fund, the initiative combines both city funds and private investment raised from local businesses and banks to create a pool of $7.5 million available for low-cost loans to developers engaged in new construction or renovation of downtown housing units. The loan pool is controlled and administered by the Downtown Development Corporation, a local nonprofit membership organization composed of many of Louisville's leading downtown businesses. Borrowers pay zero interest on the city-funded portion of the loan and a below-market interest rate on the private loan. Developers may also combine the loans from the Downtown Housing Fund with state and federal tax credits to finance a project.
The evidence of the fund's success is simple and unmistakable -- for the first time in a generation, the city has a significant number of new housing starts, including hundreds of new market rate condos and apartments. The fund's resources helped create four new downtown housing venues in Louisville, ranging in size from a three-unit renovation of an old fire station to the construction of Waterfront Park Place, a $42 million, 23-story residential tower with 78 condominiums and 44 apartments. More importantly, the projects made possible by the fund have demonstrated to lenders in Louisville that there is strong interest in market-rate housing downtown. That business confidence in turn is creating momentum around a number of other projects to give buyers new housing options. With more people -- especially middle-class families -- moving back, these new developments have also been instrumental in attracting new businesses to downtown Louisville and convincing existing businesses to stay.
The first hurdle in forging the financial partnership was to marshal evidence that, in fact, families and individuals did want to live in the downtown area. Having watched residents leave the city for more than 20 years, many bankers did not believe there was a market for such housing.
The second hurdle was formulating a system for reviewing loan applications that would provide sufficient protections for both the private and public dollars going into the fund, without making the guidelines so strict as to mirror the "tight credit" problems developers were already experiencing at local banks.
The third hurdle was to sell local banks and other businesses on the financial and community value of contributing to the fund and participating in urban revival.
Although these problems present a challenge for any state or local leader, the work in Louisville and Columbus offer a proven formula. With comprehensive information about where people want to live, a sound system for determining worthwhile lending, and some political cajoling, other leaders can replicate these successes and fuel their own renaissance in downtown housing and business.
Columbus, Ohio, Downtown Development Office
http://www.downtowncolumbus.com/
Columbus Downtown Development Corporation Progress Report, 2006
http://downtowncolumbus.com/publications/ProgressReport2006-05.pdf
Downtown Development Corporation
http://www.downtowndevelopmentcorp.org/downtownhousefund.aspx
Linda Fischer, "Lofts Seed Downtown Redevelopment," Bridges Newsletter, Federal Reserve Bank of
St.Louis
http://www.stls.frb.org/publications/br/2002/a/pages/1-article.html
Eugene T. Lowe, "Louisville Mayor Dave Armstrong: 'Let's Build One Million Homes Over the Next 10 Years,'" U.S. Mayors, May 2001
http://www.usmayors.org/uscm/us_mayor_newspaper/
documents/06_28_99/louisville_other.htm
Broderick Perkins, "Model Urban Housing Effort Highlights Louisville Redevelopment," Realty Times,
April 19, 2001
http://realtytimes.com/rtnews/rtcpages/20010419_renew.htm
Charles Cash
Director
Louisville Metro Planning & Design
(502) 574-6230
charles.cash@loukymetro.org
Barry Alberts
Executive Director
Downtown Development Corporation
Louisville, Kentucky
(502) 584-6000
balberts@downtowndev.org
Katie Campbell
Policy Analyst
Progressive Policy Institute
600 Pennsylvania Ave., SE, Suite 400
(202) 546-0007
(202) 544-5002 (fax)
kcampbell@ppionline.org
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