Show Me the Rooftops: Housing and Economic Development With a Redevelopment Perspective
by John F. Shirey
Housing and economic development are inextricably connected. Housing brings construction-related jobs and economic activity, attracts and retains permanent jobs, and draws retail and entertainment opportunities. Housing may not be the only factor in economic development, but it has a powerful influence.
According to Bruce Kern, executive director of the East Bay Business Alliance, “The availability of housing is essential to California’s ability to retain and attract business and jobs. Housing is consistently among the top factors cited when industry is considering a new location.”
“A Retail Strategy Is a Housing Strategy”
Housing increases the demand for retail and other services. Kelly Kline, downtown manager for the San Jose Redevelopment Agency, believes that, “A retail strategy is primarily a housing strategy. Retailers tell the city, ‘Show me the rooftops.’ Retail development needs residential development to draw [from].”
Kern points out that “It’s time to increase redevelopment’s usefulness as a tool and resource, not decrease it. Redevelopment is instrumental in dealing with infill. It levels the playing field [for disadvantaged neighborhoods].”
Redevelopment agencies harness tax increments and use them to leverage private and other public investments in community infrastructure such as housing and streets. They use their housing set-aside funds to make affordable housing available to those who need it. A redevelopment agency’s holistic approach — whether it’s tackling street improvements, re-energizing commercial zones or convening public meetings — enables a community to utilize redevelopment tools and resources to tackle the challenges of revitalization and to build a better community.
The cities of Anaheim, Brea, Long Beach, Pinole and San Jose share how they used redevelopment to integrate housing and retail, improve access to affordable housing and revitalize their communities.
Jobs and Housing
Anaheim recognized that the need for workforce housing is a serious threat to its ability to attract and retain desirable companies. Gary Augusta, director of the Orange County Technology Action Network, a privately supported resource for information technology and medical device innovators, commented, “Innovative companies have to look at the cost of living — especially housing in Orange County. We’re starting to see some signs that manufacturing and commodity-type technology businesses have left the area.”
To ease the area’s shortage of affordable workforce housing, the city’s leaders adopted an affordable housing strategic plan as well as updated its general plan and zoning code.
Anaheim’s economic development programs consistently include neighborhood improvements. Streetscape improvements, expanded parks, public safety facilities and traffic enhancements have all been made possible because of increased property values, including tax increment, sales tax and municipal utilities. In the Canyon Industrial Area alone, the agency has invested more than $100 million in infrastructure to support 2,645 contiguous acres of industrial land and 2,600 businesses.
San Jose’s past land use policy reflected an outdated approach to workplace environments, limiting most workplaces to no more than four floors and curtailing support services and housing. To retain and expand its job base, the city updated its policies to align with workers’ needs. That meant transforming North San Jose from a traditional industrial park to a district with opportunities for new jobs and more homes near those jobs. The city’s Department of Planning, Building and Code Enforcement, the Office of Economic Development and the redevelopment agency facilitated and supported a general plan amendment in North San Jose to allow rezoning that added space for research and development offices, housing and retail.
The city council also approved an update to the North San Jose Area Development Policy that allows for increased densities of industrial, residential and retail space within the Rincon de los Esteros Redevelopment Project Area.
“Strategic land use planning is essential to our economic development strategy and enables us to meet our goals to sustain economic prosperity and provide a higher quality of life for our community,” comments Ru Weerakoon, San Jose’s director of industrial development. She adds that these changes can happen now that manufacturing is not occurring at the same level as it was. However, she noted that extreme care must be taken when permitting industrial and residential uses in close proximity to each other to avoid any potential problems. “Parks and other features may also be used to buffer the industrial redevelopment project areas from residential neighborhoods.”
Retailers Follow the Housing
San Jose’s efforts to revitalize its downtown with retail development were inconsistent until the city built high density housing along with it. Since 1990, San Jose has added 9,904 residential units.
Each residential project has had a nearly immediate impact on the nearby resident-serving retail. “Downtown’s grocery store, Zanotto’s, reports it realizes an immediate increase in sales every time a new housing project opens and tenants move in,” says the redevelopment agency’s Kline. Retail leasing activity has been spurred by housing growth, with 280,000 square feet of new stores and restaurants opening in the last two years in the downtown redevelopment area.
In the 1980s, the City of Long Beach built Long Beach Plaza, an inwardly focused mall and parking complex with no interface with the surrounding area. By the 1990s, the structure was out-of-date and losing stores.
The city decided to take a new approach with CityPlace, Long Beach’s award-winning mixed-use development. The public streets that were eliminated when the mall was built were reintroduced, a mix of residential and retail buildings constructed, and pedestrian and public transit use facilitated.
“Retailers want to locate downtown because there are people living there,” says Barbara Kaiser, redevelopment manager for the Long Beach Redevelopment Agency. CityPlace consists of 475,000 square feet of retail, 347 residential units, a live theater and the first full-service grocery store built downtown in nearly 50 years.
The City of Pinole sees residential development as a critical piece of its Old Town redevelopment effort. The recently completed Fernandez Corner is a multi-story building with 24 apartments above 7,360 square feet of ground floor retail. More than half of the apartments are for low- and moderate-income households. In spring 2006, at least three new mixed-use projects will break ground in Old Town, two with apartments over retail and one with office space over retail.
In the City of Brea, Economic Development Manager Scott Riordan says, “Housing increases the demand for retail and other services and even for offices for those who like to walk to work. It’s also important to have a mix of each — loft apartments as well as cottage style homes for all income levels — and a pedestrian-friendly environment conducive to walking.” Riordan reported that their downtown has attracted the expected young singles and empty nesters, but they have also found young families moving in or staying when they start having children.
Redevelopment Tools and Resources
John Weis, deputy director of the San Jose Redevelopment Agency, comments that redevelopment is an effective tool for producing infill development with jobs, homes and shopping. It encourages cities and private investors to develop where they wouldn’t otherwise.
“After the easy sites are taken, cities can use their tools to encourage developers to tackle the more difficult sites, thus ensuring a better quality of life by co-locating housing and jobs,” he explains. One such tool is land assemblage, a process used by agencies to finance and coordinate the acquisition of contiguous parcels in areas that private investors find risky, and prepare them for development (including relocating tenants), thus clearing the way for revitalizing a neighborhood. This is an especially powerful tool in Silicon Valley where assembling land is a difficult and expensive proposition.
In Pinole’s case, the redevelopment agency systematically went about revitalizing Old Town, starting with street and other infra-structure improvements, then moving to commercial and residential rehabilitation. Numerous ongoing cultural and recreational events were initiated, such as movies and music in the park. The gaps in land use were filled with mixed-use development projects.
In addition to putting together the financing package and the development team, the redevelopment agency completed site improvements, including new pedestrian walkways, lighting, landscaping and renovation of the adjacent creek trail. During Pinole’s revitalization of Old Town, the agency constructed 182 new or rehabilitated residential units, 65 percent of which are for low- and moderate-income families. The agency’s Commercial Rehabilitation Program has provided zero- and low-interest loans for facade and other improvements to 44 commercial and retail businesses in the past 10 years.
The Brea Redevelopment Agency invested more than $50 million in downtown projects; the private sector invested more than $80 million. The agency purchased 165 parcels downtown and funded parking structures and parking lots — the infrastructure necessary for redevelopment to occur. They also invested in affordable housing for low- and moderate-income families.
Anaheim’s redevelopment agency uses its housing set-aside funds to support the production of housing that meets the diverse needs of its residents and employers. Among its successes: The rehabilitation of Hermosa Village provides homes for 497 low-income families and includes a community center and playground.
In addition, the redevelopment agency has been the driving force behind the revitalization of the city’s downtown. Twelve new multi-story, mixed-use buildings are currently under construction, including 465 new residential units and 55,000 square feet of prime retail space. The agency provided the land and covered the costs of a public parking structure. The developer’s investment is approximately $100 million. “This is the cornerstone of [our] downtown redevelopment,” says Elisa Stipkovich, executive director of Anaheim’s Redevelopment Agency.
Redevelopment Agencies Bring Everyone to the Table
“Redevelopment is in a position to bring everyone to the table. The redevelopment agency leads in convening the team — council, mayor, department heads, developers and other stakeholders,” says San Jose’s Weerakoon.
Long Beach’s Kaiser advises, “A city has to take leadership. [Redevelopment is] a holistic approach involving everybody.” This leadership involves a strategic planning process that includes an extensive long-term outreach effort engaging all relevant sectors, including local government, business, industry, schools, homeowner groups, churches and other segments of the community.
“We find that the plans, which come out of this process, are something that the investors and developers can take to their bankers and investors, and can count on,” Kaiser continues. “With this confidence and redevelopment’s groundwork, the private sector has made a large investment — $1 billion — in Long Beach.”
Brea also engaged the public in the visioning and development of downtown. City officials encouraged community involvement including a community charrette that resulted in the “Brea Downtown Vision Document,” and throughout the development process, newsletters were mailed to every address in the city. Brea has achieved its goal of revitalizing downtown. Sunset magazine’s February 2006 issue featured Brea as one of the best places to live in the West. Riordan says, “We certainly agree with their assessment!”
Building Better Communities
In order to restore their community’s economic well-being and improve the quality of life for all citizens, these five cities used the tools and resources of redevelopment. In doing so, they addressed their housing shortage, particularly the need for affordable housing. They recognized that residents draw retail, entertainment and other commercial enterprises because they need these amenities, which in turn enhance the quality of life for all. Changed economic circumstances and workforce needs require cities to modify their plans and codes to accommodate these changes more productively. By engaging their stakeholders and citizens, these cities were better able to plan and move forward. They each used redevelopment to facilitate economic development and achieve the city’s goal: to build a better community.
Flexibility Is Key to Good Redevelopment
Communicating with the community paves the way for success. Successful projects were products of open and thorough communication and dialogue with the citizenry that went beyond what the law requires. Both Brea and Long Beach attribute a good deal of their success to the amount of communication they had with their communities.
The communities participated fully in the process and continue to do so. Brea’s agency kept residents up-to-date and involved with periodic newsletters mailed to every address in the city. They looked for stories from other communities that had done similar projects, especially if it seemed unorthodox for a median-sized suburban community; it was important to let their citizens know that it could be done. This level of communication helped build community for the new downtown residents as well as for the entire Brea area.
Long Beach Redevelopment Agency Manager Barbara Kaiser adds, “To help stay the course, reminding the players of the plan and vision becomes an integral, ongoing responsibility.”
Choosing the right developer is important. Successful efforts occur when the developer not only appreciates a community’s uniqueness but is also creative. Brea’s Economic Development Manager Scott Riordan describes the ways in which their developer pushed city officials to look at their downtown differently: “Our developer taught us not to be afraid of density, to find creative parking solutions and anticipate trends. We still built the multi-screen theater but we added features and flexibility so that we could adapt to changes that may occur in the entertainment industry.”
Jim Schutz, Pinole’s assistant city manager, cautions that developers and architects sometimes forget that the physical design of the retail space is critical to a mixed-use project’s success. A good developer understands that housing and retail needs are different.
Schutz points out, “You have to consider ceiling heights, bay depths, how the exterior design stands out from the housing, utilities, servicing, trash collection, and even venting and grease trap locations if a food use is planned.” Pinole is building such principles into its new projects
so it can attract the kind of quality retailers that residents desire.
Being open and flexible are invaluable attributes. The City of Brea was ready to go in one direction with its downtown redevelopment when a stagnant economy slowed everything down. Brea’s Riordan explains, “We were set to follow the downtown pedestrian mall and giant movie theater path when the 1990s real estate downturn hit and our plans came to a halt. When we picked it back up, we had a new developer and a new plan that has worked for us.”
He concludes, “If we had built five years earlier, downtown would look a good deal differently. And I don’t think we’d be as happy with the results.”
Changes in the economy, industry and housing forced San Jose to rethink and modify its ideas about the future. According to San Jose’s Ru Weerakoon, “The challenges we faced included convincing ourselves to go a new way. The learning curves have been steep. But good analysis and thought, as well as openness, have been rewarded.”
The Need for Affordable Housing In California
The California Association of Realtors’ November 2005 report shows that only 14 percent of Californians can afford to purchase a median-priced home, down from 19 percent a year earlier.
A Growing Divide: The State of Working California 2005, a recent report from the California Budget Project, states that “five of 10 occupations with the greatest projected job growth in the next five years pay a median hourly wage of less than $10.” Furthermore, the industries that are expanding pay less than those that are declining. Of the 10 expanding industries, only two pay an average salary greater than $45,000 a year.
According to Housing California’s newsletter, 126*, in 2004 a family needed an annual income of $102,550 to purchase a median-priced home at that time “with a 30-year, fixed-rate ... mortgage and a 20 percent down payment.”