A 31-story historic office building downtown that has been mostly empty for years could soon be home to 262 apartments. A spot near Cincinnati’s riverfront could see 344 apartments and commercial space after years of failed attempts at development. Another eight-story building further north on Main Street will be rehabbed to host 60 apartments. And a number of smaller rehab and new construction projects could soon launch in Mount Auburn, Price Hill, Walnut Hills, the West End and Columbia Tusculum.
What do all of these projects, both huge and not-so-huge, have in common? Their developers all say they need some level of property tax relief from the city of Cincinnati, and Cincinnati City Council approved those requests today.
But not everyone is happy about every one of those deals. Some activist groups have objected to the foregone taxes and the lack of affordable housing in the projects. Boosters, however, say they represent valuable opportunities to spur new construction and efforts to rehabilitate significant buildings in the city.
The largest and most ambitious of the projects before council was the $103 million effort by Chicago-based City Club Apartments to convert the 31-story PNC Tower at 1-9 Fourth Street downtown into 262 apartments, including 26 that will go at a somewhat reduced rate designed to be affordable to a two-person household making $56,000 a year — 86 percent of the Greater Cincinnati Metropolitan Statistical Area’s median income of $65,000 a year for two people.
When it was completed in 1913, PNC Tower was the second tallest building in the world and easily the tallest in Cincinnati. Architect Cass Gilbert also drew up the plans for the U.S. Supreme Court building in Washington, D.C. Today, the tower is more than two-thirds vacant, however, and its facade needs a full restoration.
The city has offered a forgivable $2.5 million loan — $1.5 million upfront and another million that will be released later, after the developer makes $9 million worth of facade restorations. Instead of property taxes, the developers would pay into a tax increment financing district created around the building. Eventually, the city would return more than $11 million from that TIF to the developer. The city would keep another $7.75 million. The project has also received federal Historic Preservation Tax Credits.
City Club would pay Cincinnati Public Schools roughly $10 million over the course of the 30-year deal and would contribute another $5 million to the streetcar’s operating budget under the Voluntary Tax Incentive Contribution Agreement program.
The deal won praise on city council, but some groups skeptical of the city’s commercial abatement programs have questioned it.
“One more deal,” the Cincinnati Federation of Teachers tweeted yesterday about PNC Tower. “Millions more in tax abatements, further shifting the burden of local services to the shrinking number of taxpayers paying ‘retail.’ “
CFT and others have argued that the city’s commercial property tax abatement policies — set by an agreement with Cincinnati Public Schools in 1999 — are too generous to developers, many of whom critics like CFT President Julie Sellers say could complete projects without them. The rich tax incentives cost tax payers and Cincinnati Public Schools money, say the teacher’s union, the district and other critics of the city’s current abatement policies.
The city’s Department of Community and Economic Development, which writes up those deals, disagrees, of course, saying that the tax breaks incentivize development that would not happen otherwise. According to the city, the deals actually increase — not decrease — money going to CPS and into the city’s coffers.
The PNC Tower project’s below market-rate provision is unusual for a downtown redevelopment project, but it doesn’t meet a need for low-income housing some critics point to as they question the city’s abatement policies.
And other projects seeking abatements don’t have any non-market-rate housing at all.
There are no affordable units among the 344 apartments and 400-space garage proposed by Indianapolis-based Milhaus in its seven-story project at Pete Rose Way called The Artistry. The city is offering a 30-year TIF deal on that $77 million project worth approximately $787,000 a year to the developer.
Like PNC Tower, The Artistry presents a long-awaited and difficult project. A $93 million, 25-story luxury apartment tower at the location called SkyHouse was scrapped last year after Atlanta-based developer Novare Group couldn’t make the numbers work. The site is in a flood plain near the river, developers say, making the project more expensive and financing harder to secure.
“I attended a news conference about a project at this site in 2002,” Mayor John Cranley said as council approved the deal.
Other incentive deals for big projects also got council approval, including a $17 million, five-story, 62-unit apartment building in Columbia Tusculum seeking an abatement worth roughly $339,000 a year for 11 years and an abatement worth $195,000 a year for 15 years on a $7.3 million rehab of a historic building at 830 Main Street downtown that will result in 60 residential units.
In committee this week, council members didn’t object to those deals. Another, much smaller development, however, did draw some scrutiny, becoming a proxy of sorts for ongoing discussions about affordable housing, development and tax incentives.
The debate about housing affordability and tax incentives was triggered by a 12-year tax abatement agreement worth $205,000 for a $1.5 million rehab project at 722-724 E. McMillan St. in Walnut Hills, a neighborhood that has seen swift development and some displacement of long-term residents.
That project by developer Samir Kulkarni will create eight apartments — two of them at “workforce housing” pricing affordable to households at 80 to 120 percent of Metro Cincinnati’s Area Median Income. The project will pay $85,000 to Cincinnati Public Schools and $50,000 to the city’s affordable housing trust fund during the 12-year duration of the deal.
The developer has said units in the building will range from $850 to $1,200 a month. By HUD standards stating that families should pay no more than one third of their income to housing costs, that is affordable to families making between $31,000 and $43,000 a year.
Even that, however, wouldn’t address the needs of a large number of families in the city struggling with poverty or near the edge of poverty. The Ohio Housing Finance Agency has said that the city needs roughly 28,000 units of housing affordable to Cincinnati’s low-income families making less than $24,000 a year.
Council member Tamaya Dennard, who was the only member to vote against the deal, says that such price levels don’t represent real affordability for most Cincinnatians, given the city’s high poverty rate. Dennard has advocated changing the way the city does tax abatements and other deals like TIFs so that housing at rents affordable to those making lower incomes is more incentivized.
“We did a project near Findlay Market that was $1,000 a unit and people were saying that is affordable,” she said of a previous abatement deal. “Affordable for whom?”
Council member Chris Seelbach, however, said that the workforce apartments’ rent was affordable to many people in the city, and that efforts to shore up affordable housing should come in concert with incentives for market-rate development. Other council members, including David Mann, expressed discomfort with pulling abatements from projects renovating empty buildings.
“I feel some concern about saying we’re going to stop here and say no more,” Mann said, noting that the vacant buildings involved in the project would likely be hard to develop.
Council member Greg Landsman said he believes at least part of the answer lies in the city helping developers apply for incentives like Low Income Housing Tax Credits, which are administered by the Ohio Housing Finance Agency. Those federal tax credits can be used to attract investment worth up to 70 percent of a project’s cost. In exchange for getting a LIHTC award, the projects developers build must remain affordable to low or moderate-income residents for as long as 30 years.
“We’re submitting fewer applications because more and more people are doing market rate,” Landsman said of those credits. “I think for any affordable housing opportunity that comes to the city, we should have some visibility on that so we can help along the way… so it doesn’t die or we don’t apply for funding.”
Last year, only one application from a Cincinnati developer — Model Group — won the low-income housing credits worth about $1 million. Those credits will go toward about 60 units of affordable housing for seniors. By contrast, OHFA awarded $4.5 million in credits for 333 housing units to Cleveland and more than $6 million for 513 housing units to Columbus. That had been a continuation of a trend: Over the past three years, developers in Cincinnati have applied for about $12.5 million in credits, while developers in Columbus have applied for $22 million and those in Cleveland have applied for more than $31 million.
This year has been better, though. Three projects in Cincinnati won credits this time around, compared to three from Cleveland and seven from Columbus.
Those credits, however, represent just a small part of what will need to be a much larger solution, many officials acknowledge.
“The data are pretty scary as you can imagine,” Landsman said of the housing gap. “Rental costs are going up way, way beyond the pace of income. The number of people who provide Section 8 is diminishing. The options for people who need affordable housing seem to be diminishing significantly.”
The debate over the abatements summed up a back-and-forth about development policy that has continued to resonate in Cincinnati: how to incentivize rehabilitation and new construction while also addressing a deepening need for affordable housing. Currently, the city needs roughly 28,000 units affordable to its lowest-income residents to meet demand.
“When you have a building that has been vacant for years and you’re trying to bring it back online, it’s hard to say no to that,” council member Wendell Young said in committee. “But when we bring these buildings back online, we’re not really making room for people who can’t afford to pay $1,100 a month for a one bedroom apartment. We have a responsibility to not only look out for those who can afford to pay market rate, but for those who can’t afford it but live in the neighborhood and want to stay there.”
This article appears in Jun 19-26, 2019.