Residential development is once again booming downtown, successfully attracting new downtown-dwellers into market-rate properties. But a smattering of recent news has given hope to those would-be residents who have been priced out.
A transformation is underway Downtown where residential developers are coming out of recession hibernation to deliver projects of various sizes and types.
The 2015 population of the Central Business Improvement District is nearly 25,000, a 26 percent increase over the past 15 years. And that will continue to grow as some $450 million in new investments is in the works from Beale Street south to Crump Boulevard.
But as residential properties are developed throughout Downtown, one thing has been rare in all the growth: affordable housing.
Not that Downtown real estate is expensive when compared to other cities, but much of the apartments, houses and condos built throughout the CBID have been of the market-rate variety. There is nothing wrong with that. In fact, as the economy was stuck in neutral for much of the past seven years thanks to the Great Recession, there wasn’t a whole lot of growth, particularly in the South Main Historic Arts District. So construction of any kind is a positive.
The economy seemingly has recovered with developments popping up throughout the neighborhood, the latest being the redevelopment of The Chisca on Main. And as those market-rate properties continue bringing in new residents, a smattering of news lately has given hope to those would-be residents who want to call Downtown Memphis home but maybe have been priced out.
South Main Artspace Lofts
, a live-work development that is intended to provide affordable housing for artists and creative professionals, is moving closer to reality. The 58-unit complex at 138 St. Paul Ave. will include adaptive reuse of an existing warehouse as well as new construction.
Artspace recently announced a $500,000 challenge grant that will help secure financing and possibly see construction begin in the first quarter of 2016.
The South Main Artspace Lofts development technically will be considered affordable housing. Developers are using low-income tax credits, meaning residents will need to earn below 60 percent of area median income to qualify.
In a community like Memphis, with its high poverty rate, quality affordable housing is vital. Artspace won’t exactly take care of the need, particularly since the development is targeted to a select part of the community – artists. But every little bit helps, particularly Downtown where market-rate housing is in the vast majority.
“Artspace is like an eye dropper trying to drop a little spot of affordable housing into an area that is doing great,” said Kerry Hayes, Principal at Key Public Strategies
and consultant to Artspace Project Inc. “But just because South Main is doing great doesn’t mean the whole city is. Our city’s economic picture is still very dire. Artspace won’t fix that. But it will provide some great opportunities for artists in our community.”
Downtown’s residential revival over the past 15 years primarily has been the story of market-rate rental units and single-family homes. But there are pockets of affordable housing, and a couple of other recent developments making headlines.
Crescent Bluff Apartments Phase II
recently opened 172 units ranging in size from 575 square feet to 1,030 square feet at 25 E. Virginia Ave. on the southern edge of the South Main neighborhood. The rent-restricted development is designed for low-income individuals and rents are set at $450, $550 and $665.
And on the northeastern border of the neighborhood the city’s last large housing project, Foote Homes, will be transformed. Word came in late September that the city and Memphis Housing Authority were awarded a $30 million federal grant for the conversion into 700 units, up from the current 400. The new development will be home to a mix of residents who pay subsidized rent, affordable units and market-rate units.
Wanting to have affordable housing and being able to make it work often are two ideas that don’t reside in the same area code. Artspace, for example, had high hopes last year for a low-income tax credit from the state that would’ve been a major piece of the project’s financing. However, other projects scored higher in this year’s Tennessee Housing Development Agency's allocation competition, and Artspace was not awarded funds.
For financial institutions, working with developers on low-income tax credits comes with its own risks. There has to be trust that the development will remain an affordable property. In the instance of Crescent Bluff Apartments, it must remain in compliance for 15 years.
“It has to be compliant or they can claw back and take the tax credits back,” said Frazer Gieselmann, Senior Vice President for Magna Bank
, a division of Pinnacle Bank, one of the financiers of Crescent Bluff. “If in year 11 they take it to market rate we lose our tax credits. There is a lot of risk there. But when dealing with the right people with experience that helps.”
Artspace’s involvement should provide that confidence with what it has in development in South Main. It has been in the works since at least 2009 when Minneapolis-based Artspace expressed interest in Memphis and the South Main neighborhood specifically. It started with a feasibility study that took over a year and was an exhaustive analysis of the market, including a look at demographics and interviews with potential donors and artists.
How South Main was chosen is interesting. Hayes said he has heard from some artists who wish the development would be in one of Midtown’s neighborhoods, such as Broad Avenue or Cooper-Young. As a Midtown resident, he understands the sentiment. But the types of properties available in the South Main neighborhood provide what’s needed.
But timing also had something to do with the decision. When Artspace began looking at Memphis the U.S. was in the middle of a recession, and South Main wasn’t quite what it has become today.
“The district was struggling,” Hayes said. “Merchants were complaining of no foot traffic. At the time it was meant to bring vibrancy to a part of Memphis that needed some. In the past five years South Main is one of the hottest markets in the region. So now the true affordability argument kicks in.”
That might be the most important point in understanding why South Main makes a lot of sense for a development that is focused on providing affordable housing for artists, even though the neighborhood isn’t filled with the art galleries that once called it home.
“Five years ago the conversation was about economic development,” said Heidi Zimmer, Vice President of Property Development for Artspace. “Now the conversation is about creating affordable permanent housing in an area where rents are taking off. Now it’s a bigger part of the conversation like it would be in New York City or Seattle. That’s been an interesting dynamic and shift.”
Future site of Artspace Lofts
Because the development will be owned by Artspace, the affordability element won’t go away. The national development organization has been in operation since 1979 and has been using low-income tax credits since that financing option was created in 1986. Today, Artspace has 38 buildings across the country, a vast majority of which were financed with tax credits, Zimmer said.
“Our markets are quite diverse but the mission is straight forward: create, foster and preserve affordable space for artists and arts organizations,” she said. “It’s that preservation of affordability that is important to us. A secondary but equally important value is creating an economically vibrant neighborhood. So usually the projects accomplish both those goals, but in some communities it’s about the economic development piece and helping boost investment around our project. And in other cases there is a huge need for affordable housing that isn’t cyclical.
“In Memphis it started as a bigger conversation about economic development and has morphed in the preservation of affordable housing. Look at the 800 units being built in South Main and not many are affordable. Having this is what will make South Main more stable long term through the up and downturns.”
Artists who live in Artspace developments apply. It’s a mix of all types, from musicians to writers, painters, jewelry makers or dancers. The greater the diversity of artist the better.
There is an application and interview process. Artists aren’t judged on their work, but they are asked to show a commitment to art. Many of the artists don’t derive a large percentage of their income from art; in fact, Zimmer said, many of the artist residents work multiple jobs to continue their art on the side.
“It’s more about the passion and commitment than success,” she said.
Artspace projects around the country are 100 percent occupied with significant waiting lists. The average resident in properties is seven years, which translates to stability.
Much of the Downtown focus has been in and near the South Main neighborhood, but as the Bass Pro Shops at the Pyramid brings new life to the Pinch District, there is potential for more in Uptown.
Uptown Memphis was a redevelopment project that sits between The Pyramid and Mud Island to the west and St. Jude Children’s Research Hospital to the east. A Hope VI grant provided the catalyst for redeveloping the Hurt Village public housing complex into new mixed-income housing. Other mixed-income housing was created, including Uptown Square.
With vacant land in the neighborhood there is long-term potential for more development.
“It’s a great residential neighborhood full of artists and creative people, but there is also quite a few people from St. Jude,” said Leslie Gower, Marketing Director at the Downtown Memphis Commission. “It’s an interesting population with a lot of young families.”
Back south of FedExForum, as Foote Homes progresses toward a new life, Gieselmann predicted it will open up the eastern reaches of the South Main neighborhood.
“The big question is will development jump Crump or will it go all the way east toward Danny Thomas,” he said. “With the Foote neighborhood, there will be a movement east not south. If you go south and jump Crump it’s a big jump. With these low-income deals it’s interesting. You could have a market project 500 yards from a low-income deal. It will be interesting to see how that evolves.”