What Is Holding Downtown Down

[ToryGattis]

To me, unless property ownership begins to materialize in Downtown (the lofts noted above are not enough) it will be hard to sustain its recovery. Housing trends come and go as do renters. Owners have a stake in the ground and that stake helps to create a neighborhood.

Does the $15k per unit incentive from the city (paid over 15 years) have an influence here? Is it somehow better for the developer to build apartments and hold them instead of building condos and sell them? How does that $15k over 15 years work if a developer builds condos and sells them all in 2 years?

 

That incentive applies to any residential, so it's the same for the developer whether it's a rental apt or owner condo.

[ArchFan]

A few years ago, I noticed that many developers would build apartments and later they (or whoever subsequently owned them) would (try to) make money by doing a condo conversion and selling them later.  

 

This is just an idle thought.  But, I'm wondering about why so many developers seem to want to build rental units, not condos.  Is it mainly because that's what they can find financing for, as opposed to for condos?

[brian0123]

I don't think the lack of owners Downtown is a bad thing. NYC has millions of renters (many even renting closets) and they have vibrant neighborhoods.

[UtterlyUrban]

That incentive applies to any residential, so it's the same for the developer whether it's a rental apt or owner condo.

Ok, but since the incentive is paid out over 15 years (in the form of reduced taxes, I think), how does the developer of a condo complex get that money when he no longer has a property interest in the building (i.e. After selling all the units)?

Also, for those who are suggesting that it is financing, you might be right but I am not sure about that. There are high rise condos being built around the city right now ( and over the last few years). They secured financing.

I'll continue to dig. Any other voices welcome to chime in.

[Houston19514]

Ok, but since the incentive is paid out over 15 years (in the form of reduced taxes, I think), how does the developer of a condo complex get that money when he no longer has a property interest in the building (i.e. After selling all the units)?

Also, for those who are suggesting that it is financing, you might be right but I am not sure about that. There are high rise condos being built around the city right now ( and over the last few years). They secured financing.

I'll continue to dig. Any other voices welcome to chime in.

The rebate paid out to the unit owners would tend to make potential buyers willing to pay more than they otherwise would have.

There have really been very few high rise condos developed recently. I can think of only 2 quite recently under construction in Uptown and I cannot think of any others started since the financial markets went wonky back in 2008-2009.

[UtterlyUrban]

The rebate paid out to the unit owners would tend to make potential buyers willing to pay more than they otherwise would have.

There have really been very few high rise condos developed recently. I can think of only 2 quite recently under construction in Uptown and I cannot think of any others started since the financial markets went wonky back in 2008-2009.

I am not sure I agree with your first statement for two reasons:

1) it would imply that mortgage companies would finance properties at "above market" purchase prices. I am not sure that they would and

2) does the incentive provided by the city "flow through to" individual buyers and is the incentive "divisible"?

How would that work? Where in the legal structure of this incentive does it allow for the apportionment to individual condo owners? I did not see that part when I read the docs.

[Houston19514]

I am not sure I agree with your first statement for two reasons:

1) it would imply that mortgage companies would finance properties at "above market" purchase prices. I am not sure that they would and

2) does the incentive provided by the city "flow through to" individual buyers and is the incentive "divisible"?

How would that work? Where in the legal structure of this incentive does it allow for the apportionment to individual condo owners? I did not see that part when I read the docs.

 

1.  By definition, they would not be "above market" purchase prices.

2.  I have not looked at the docs and don't know how they payments would flow through.  I briefly looked for the information yesterday but couldn't find it. Can you provide me with a link or directions to the docs?

[UtterlyUrban]

1. By definition, they would not be "above market" purchase prices.

2. I have not looked at the docs and don't know how they payments would flow through. I briefly looked for the information yesterday but couldn't find it. Can you provide me with a link or directions to the docs?

2. Certainly, there is a huge amount of material online. Google "downtown living initiative chapter 380". Here is a good document to start with:

http://www.downtownhouston.org/site_media/uploads/attachments/2012-08-30/DLI_Final_Application_Materials.pdf

It seems that the tax credit refund is based on a "project" level and I cannot find how that would be converted to or flow through to, individual condo owners.

As to "market price" I disagree. Banks will finance against "comps" and the first condo project will not be able to get "more" of a selling price financed simply because of the credit..... It's comps will be the other condos which are not getting the credit....but, leave that aside.... We can simply agree to see it differently.

The main point here, and the one I am struggling with, is even if the incentive flows through to individual condo owners. If it does not, (or, unless there is a mechanism to let the developer "keep" the incentive over the 15 years somehow) I don't think that any condos will be constructed in downtown while the incentive is in place.

I wish I had a friend who was a real estate attorney specializing in multi family development projects in the city. He/she could answer me in 10 seconds, likely!