The dark side of urban renewal: who can afford back-to-the-city prices?

Residential Architect, August, 2002 by S. Claire Conroy

What does your downtown look like these days? In Washington, D.C., we've got an urban renewal boom going full blast. Areas that have languished in decay for 30 years are being transformed. New one-bedroom "loft" (a seeming oxymoron) apartments are selling in the high $300,000s. And townhouse shells in need of total rehabilitation are selling for $350,000 to $600,000--"Bring your architect!" shout the real estate ads.

These properties sell two days after the open house. That's how long it takes for the escalation clauses on all the multiple offers to soar to their caps. Realtors price properties "attractively"--meaning the better side of plausible--and then watch them snap up for $50,000 over asking. For the privilege of overpaying, buyers must present what's called a "clean contract," one with no contingencies at all. No financial contingency; no buyer's home sale contingency; no bank appraisal; and--the greatest folly of them all--no home inspection contingency. Unbelievable, but true.

It's a crazy game, and it takes a lot of money. Despite stock market woes, people are still buying housing lickety-split, fueled by piles of equity in their current properties and rock-bottom mortgage interest rates. Even if they nab the home of their dreams, buyers are battered and bruised, dazed and confused. What just happened here? Realtors, builders, and developers can't believe their eyes. They muse, albeit quietly, about whether we're in a "bubble."

Well, who knows yet whether it's a bubble. But we do know it's a fever, one that feeds on itself. The demand for this close-in housing drives the price of unimproved property up, up, up. And then when it's renovated, subdivided, loftified, it must sell for top dollar to recoup the developer/remodeler's investment. Slick finishes in the kitchens and baths take care of the upscale market positioning, and the thing sells in a heartbeat.

The result of all of this is that Washington looks a whole lot better. The housing boom has brought with it plenty of snazzy supporting retail. You can get a latte on nearly every street corner. Beneath the good looks, however, something sinister lurks. None of this fine new housing is "affordable;" all of it is aimed at the "luxury" tier of the market. The "haves" have a great deal to cheer about; the "have-nots" have even less to call their own. People living on the margin, and even those with decent incomes but no previous homeownership to boost their buying power, are being pushed farther and farther out of the city.

It's such an intractable problem. How do you ask developers to leave money on the table, to turn those expensive, desirable infill lots into less-than-market-rate housing? Is it possible to have the pretty new buildings and make them more affordable?

That's exactly what architect David Furman, FAIA, is doing in his hometown of Charlotte, N.C. He couldn't get any developer to build the kind of housing he had in mind--high-design, high-quality, but lower-cost apartments--so he sold his own home and went into business building them himself. It's a mitzvah--a good deed--and we wish him great success. Now if only someone would step up to the plate here in Washington, D.C.

Questions or comments? Call me: 202.736.3312; write me: S. Claire Conroy, residential architect, One Thomas Circle, N.W., Suite 600, Washington, D.C. 20005; or e-mail me: cconroy@hanley-wood.com.