Georgetown Current

‘Inclusionary Zoning’ Sales Remain Skimpy

April 15, 2015

By Katie Pearce
Current Staff Writer

For the past few years, agent Suzanne Des Marais has been crafting specialty knowledge on an emerging niche in the D.C. market — selling “inclusionary zoning” units.

Though only seven such affordable units have sold in the District since the law mandating them took effect six years ago, it’s an area demanding more attention as hundreds of new units become available.

“We have a pipeline into 2017,” said Des Marais, whose 10 Square Real Estate firm has worked to represent developers on the often-tricky sales of these units in new residential buildings.

Under the city’s inclusionary zoning program, developers of new buildings (both rental and condos) with at least 10 units are required to set aside between 8 and 10 percent of those units for certain income thresholds. The program got off to a sluggish start, but housing officials and advocates are pointing to recent progress, with 116 total rental and for-sale units created so far, and another 1,100 in the works.

The vast majority of those, however, have been geared toward renters. Between the program’s slow implementation and the sizable challenges of selling the units, not many buyers have been able to take advantage so far.

The latest figures — though difficult to track and verify — show that the program has produced 13 for-sale units total, including the seven already sold and two that are under contract.

“We’ve been working on this since 2013, and we’ve only sold four units, so you can do the math,” said Des Marais of 10 Square’s work in this area. “It’s a very specialized niche for us, and it’s required a significant amount of investment both in time and labor.”

There’s maybe no one who understands the complications more than developer Art Linde, who has struggled since 2011 to sell off two inclusionary zoning units in his project at 2910 Georgia Ave., losing thousands of dollars in the process.

Though Linde reported that one of those units finally settled for purchase just last week, his troubles inspired him to pursue a lawsuit against the District — a case that remains pending.

“In [the city’s] haste to implement the program, they essentially took two units from me,” said Linde, who said his firm processed 1,000 names of interested buyers over four years through the city’s lottery system — none of whom were deemed eligible to actually purchase the units.

Linde vows to “never develop real estate of this size in the city again,” referring to his medium-sized buildings. The current inclusionary zoning system, he said, makes sense only for boutique buildings with under 10 units, or larger projects that can shoulder the burden. “I guess that’s what they want, big-box condos,” he speculated.

But Cheryl Cort of the Coalition for Smarter Growth warns that focusing on the complications of the for-sale units underplays inclusionary zoning’s growing list of success stories, particularly in the rental market.

“We’ve produced thousands of affordable housing units in the city,” she said, pointing to examples like the Cafritz project under construction at 5333 Connecticut Ave., which includes 19 inclusionary zoning units for rent out of its total 261.

“That’s exactly what IZ is intending to do … to provide more affordable housing opportunities in amenity-rich neighborhoods where there would be little hope of providing them in any other way,” Cort said. “It’s a strong tool in a strong housing market.”

Advocates — and now D.C. Council members — are also striving to clean up the existing law so more units can become available more easily.

Just yesterday, at-large D.C. Council member Elissa Silverman introduced a resolution encouraging the D.C. Zoning Commission and Mayor Muriel Bowser to make tweaks that would increase the number of units produced, and to set lower maximum prices and eligibility thresholds to ensure affordability for a broader pool of applicants.

Currently, the threshold applied for most of the city’s available inclusionary zoning units is 80 percent of area median income, which comes out to about $86,000 a year for a family of four or just under $70,000 for a two-person household.  

Advocates are also pushing the D.C. Department of Housing and Community Development to move forward with proposed new regulations that would require inclusionary zoning buyers to complete pre-purchase training and secure a pre-qualification letter from a lender, to ensure that the process can move more quickly.

For Linde, the absence of a “list of verified eligible buyers” sufficiently educated in the process proved to be the biggest sticking point for his Georgia Avenue project. “If they had all of these people pre-approved … then the program would certainly run more efficiently,” he said.

The purchase that finally went through last week, he said, happened only after the buyer received multiple extensions and exceptions.

Des Marais agreed that it’s been challenging “to find a buyer within a very narrow range of incomes who can also qualify for financing.”

“The main obstacle,” she said, “is an extremely complicated program that’s much more complicated than a regular purchase,” particularly for first-time buyers.

Another complication has been a simple fact of timing. Many of the new developments now completing construction and selling units actually got started before the inclusionary zoning rules took effect, so they didn’t have to comply with them. In other cases, developers have gotten exemptions from the rules because of their location — the downtown district has been exempt, as have a handful of historic districts.

In a report last fall on the District’s program, the Urban Institute also pointed to other challenges, such as condo fees that may exceed buyers’ capacities, and the permanent restrictions on resale values that limit the return owners can see on their investment.

But Cort says the program is quickly improving, with the housing department smoothing out “a lot of the administrative problems” over the past year.

And Des Marais — who got involved in dealing with “such specialized sales” at the request of a developer who couldn’t handle the intricacies — sees great potential in the program as more units become available.

She said for buyers, the program’s biggest advantages are the promise of fixed housing costs, allowing for more savings, along with the “psychological benefit of homeownership” that puts them on a path to future real estate investment.

“People call me with great hopes for ownership,” she said, including those “who never thought of owning before.”

This article appears in the April 15 issue of The Georgetown Current newspaper, which includes a Spring Real Estate pullout section.

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Board Says Domino’s Project is Too Large

April 8, 2015

By Brady Holt
Current Staff Writer

A developer’s plan to redevelop the site of a Domino’s pizza shop in Georgetown has sparked hope in the community that the 3255 Prospect St. site can hold something better than a squat brick building and surface parking lot.

In particular, the Old Georgetown Board hopes that a new building from local developer Robert Elliott could artfully transition from the larger building on its east side to the row houses on its west.

But the board — which reviews projects within the neighborhood’s federally protected historic district — isn’t satisfied that the current proposal achieves this goal, according to commission secretary Tom Luebke. Members turned down the plan for a five-story mixed-use building at their monthly meeting last Thursday, saying it’s decently designed but just too big.

“The sense was [board members] were supportive of the project. They’d like to see the redevelopment happen — they think it’s a reasonable idea,” Luebke said. The developer is “just having some trouble getting that envelope quite right.”

The board had approved a similar project in 2007 that was never built, and the developer now plans to incorporate the adjacent row house at 3259 Prospect. The new proposal is about 33 percent larger than its predecessor, and the developer is planning about 25 one-bedroom units instead of five larger ones, along with about 1,300 square feet of ground-floor retail space.

The revived, larger project first came before both the board and the Georgetown advisory neighborhood commission early last month as a four-story building that would wrap around and replace the rear of the row house. The board then suggested preserving more of the row house and making the addition smaller.

In response, Elliott told the neighborhood commission on March 30 that he had redesigned the project to shift its bulk away from the row house. He made the new construction on the Domino’s site 4 feet taller and lowered the ceilings to fit a fifth story, so he would retain the same square footage as before. “This isn’t any bigger than the last time we came in here; we just reconfigured it,” he said.

Commissioners replied that it didn’t matter that the proposal was the same size as the four-story version they reviewed in early March, because they had criticized its scale then as well. 

“It’s a great big monolith, and I don’t think it takes into account the streetscape directly across the street or the transition to the town house next door,” commission chair Ron Lewis said on March 30.

Luebke said the Old Georgetown Board members generally agreed.

“They’re fairly supportive of the design — they just want [developers] to be careful about the property on the west and work on the transition,” he said. “Unfortunately, in redistributing the bulk, some of it got a little worse.”

The board also remains concerned about the rear of the row house, which would still see some demolition and excavation under the latest plans, according to Luebke. And members opposed plans for a rooftop pool and other entertainment, saying rooftop structures other than mechanical equipment are inconsistent with Georgetown’s historic character.

The Domino’s project is one of two large new buildings planned for the 3200 block of Prospect Street. A commercial building dubbed Prospect Place is in the works to replace the surface parking lot at 3220 Prospect, across the street from the Domino’s site and a few doors closer to Wisconsin Avenue.

Prospect Place has won support from the Old Georgetown Board and now needs Board of Zoning Adjustment relief from on-site loading requirements. Developers are working with the community on a proposal for on-street loading zones that could be used by multiple Prospect Street businesses.

This article appears in the April 8 issue of The Georgetown Current newspaper.

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Jackson Art Center Draws Lease Extension Until 2018

April 1, 2015

By Katie Pearce
Current Staff Writer

It looks like the Jackson Art Center can stay put in its Georgetown home for another two years, though questions remain about a more long-term arrangement.

The nonprofit is negotiating with the city to continue occupying the 3050 R St. property until 2018. Its current lease for the historic public school building, which now features 45 high-in-demand artist studios, is set to expire in June 2016.

Jackson Art Center representatives said no deals have been inked yet, but Kenneth Diggs, spokesperson for the D.C. Department of General Services, confirmed that his agency is “currently extending the lease for two years” for the city-owned property.

This being the art center’s second short-term lease extension, members are looking for a more stable arrangement for the future. They’ve mounted an online petition for this cause, and they’re also drumming up support from Georgetown community groups in hopes of reaching city higher-ups.

“Everybody there wants to stay in the space, certainly,” said potter Eileen Egan, who has rented a studio in the Jackson Art Center since 2011, after a couple of years on a waiting list. Not only is the 1890 school building “a great place to work quietly, [with] a lot of light,” but it’s also a rare resource for the city, she said. “There are so few art studios here.”

Egan added that many of Jackson’s members live nearby — she personally can bike to her studio, while quite a few members live close enough to walk there.

Ideally, the art center would like to sign a 20-year lease with the city, said Simma Liebman, the group’s president. She said that’s the typical timeframe for the city’s leases on public buildings.

Diggs of the General Services Department wrote in an email that his agency is “assessing that option.”

But the prospect might be idealistic, given the property’s high value (it was assessed at over $6.64 million this year) and previous interest from developers.

In 2012, Jackson’s negotiations to extend its lease for five years were suspended due to a developer’s inquiry into purchasing the building, potentially to build condominiums. The city ultimately allowed the center to extend its lease for three more years, until 2016.

It’s also relevant that the art center sits immediately next door to the Hurt Home, a former public building the city sold for $7.75 million a couple of years ago to become luxury condos. According to Diggs, the city hasn’t heard any development proposals for the Jackson site recently and has no current plans to open up bids for it.

In order to sell the site, the city would need to declare it “surplus” through a D.C. Council process, and charter schools would get the first chance to acquire it.

The Jackson School closed around 1970 due to declining elementary school enrollment in the neighborhood, and artists began leasing the space in the 1980s. Those artists and the Corcoran School of Art shared the site until 1998, at which point the Corcoran found classroom space elsewhere and the Jackson Art Center became the building’s sole tenant.

Currently, the rent and membership fees from the Jackson Art Center cover the lease payment to the city — which Diggs said is just over $12,850 per month — in addition to administrative costs. In her email, Liebman also said the art center “is responsible for all maintenance, repair and renovation of the historic building, funds for which come from rent credits provided by the city.”

The center’s pursuit of a longer-term lease has won support recently from both the Georgetown advisory neighborhood commission and the Citizens Association of Georgetown.

In a recent letter to city officials, neighborhood commissioners characterized Jackson as “a significant fixture in the community for over 30 years, [and] home for more than 40 artists who have given back to the community through art workshops, community art programs in local schools, lectures, and workshops in the local senior center.”

The letter urged the city to “renew a long-term lease with Jackson” or make “equivalent arrangements” to keep the Jackson Art Center in place there.

This article appears in the April 1 issue of The Georgetown Current newspaper.

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