COVID-19 Economic Response and Recovery
Use city land-use powers to support more equitable growth
Problem:
Municipal governments have a valuable tool in land-use regulations to support economic development and investment. In the post-COVID landscape, cities can both accelerate development already in the pipeline and ease the project review process to enable development to happen faster. Despite significant debate around the impact of zoning — and whether it is applied fairly — many agree that land-use powers could be better aligned with overarching economic development goals. Cities are currently witnessing a need for more flexibility in their regulatory structures to enable economic recovery.
Action:
Use land-use powers to further economic development by offering fee reductions, fast-tracked permitting/inspections, and amended zoning laws. Redeploy staff towards long term planning so that the city is well-positioned to capture new development when the economy starts to grow again.
There are a few types of land-use powers that cities can leverage:
- Land banks: Land banks provide a mechanism by which cities with high numbers of delinquent or underused properties might be put back into productive use. Land banks require consistent funding streams, solid database management, and mechanisms usually enabled by the state governments to support the clearance of title or other obstructions. States and counties generally need to get involved in establishing the laws that will allow for the collection of delinquent taxes.
- Zoning and Land-Use/Entitlements: Changing zoning laws will enable land-uses to be repurposed more easily in response to sectoral impacts caused by the pandemic (e.g., changing depreciated retail centers to new residential uses). This could include encouraging the development of multi-use buildings and areas in order to reduce the need to travel between traditional single-use districts (e.g., introducing more residential and leisure uses into central business districts). Building flexibility into permitted uses in certain areas would allow for more small business activity to take place.
- Fee Reductions and Permitting/Inspections: As cities are recovering from the economic shutdown due to COVID, municipalities are searching for ways to spur more rapid housing and development as a means of stimulating economic activity. There are numerous trade-offs to reducing fees and accelerating permits for different kinds of development and housing. One of the challenges is the loss of revenue from the reduction in fees levied by a municipality to enable more rapid investment in housing. While fee reductions, in particular, may enable a degree of savings and encourage development, it is not uncommon for the city to levy fees and taxes elsewhere as a means of filling a budget gap left by fee reductions.
Case Study
Houston, TX Land Bank
In 2018 the Houston Land Bank evolved out of the pre-existing Land Assemblage Redevelopment Authority originally established in 1999 with a singular purpose to convey vacant tax-foreclosed land into new affordable housing. The need for a more effective land bank became clear after the city lost 300,000 units of housing as a result of the hurricane, making the lack of affordable housing even more acute. The HLB was strengthened to provide more efficiency in the return of properties to productive use and protect neighborhoods from future disinvestment – and support the creation of affordable housing in underserved neighborhoods in which land values were accelerating.
In 2019, the HLB worked with the Center for Community Progress to revamp its legislative tools to update its legislative framework to increase its reach as well as worked to develop the organization’s human and administrative capacity. The strengthening of the land bank was possible due to the availability of local housing-specific funds (TIRZ) as recovery dollars that came into the city as a result of Harvey.
In order to facilitate the development of affordable housing, the HLB works closely with the City of Houston Housing and Community Development Department (HCDD), Houston Community Land Trust to connect potential homebuyers to the affordable homes being developed since it was established in 2018, also with Hurricane Harvey recovery dollars. The HLB is also investing in the local workforce, developing programs for new start-up builders to become HLB Approved Builders.
The HLB has sold over 712 properties with over $76M property value put back into the market. The team has over 75 properties in development and is working to purchase additional land to support its two programs. HLB is also reimagining how the land bank can best serve the community; for future developments, it is working on an “affordable housing+” strategy that would facilitate investments in neighborhoods where affordable housing is built. This includes building support elements to enhance communities (e.g., attracting grocery stores, innovation labs, etc.).
Since the 2008 foreclosure crisis, the number of land banks in the US more than doubled as a means for local governments to return tax delinquent and abandoned properties to market, as well as secure public policy goals of increased housing and amenities in core neighborhoods. The impacts on homeownership and the COVID shutdown have yet to be seen, but cities are already bracing for a potential wave of foreclosures.
Other examples:
- Zoning and Land-Use/Entitlements:
- Santa Monica recently passed several zoning changes to support business activity such as the elimination of the 1-year Rule for the abandonment of legal non-conforming use for retail and restaurant uses, and reduced restrictions on restaurant size and parking.
- Nashville recently eased its regulations on home occupations to make it easier for people (particularly musicians) to run small businesses out of their existing dwellings.
- Fee Reductions and Permitting/Inspections:
- The SMART housing program in Austin, TX provides a variety of incentives for private developers who create and preserve housing for low- and moderate households and for persons with disabilities. Projects that set aside units as affordable to homeowners and renters earning no more than 80 percent of the median family income (120 percent for owner-occupied units located in certain areas) are eligible for full or partial waivers of 29 separate fees. Fee reductions range from 25 percent for developments where 10 percent of units meet affordability requirements to 100 percent for developments where 40 percent of units meet affordability requirements.
How To Adapt this Approach:
- Rapidly examine slow-downs in permitting and approvals processes in city agencies and remove barriers and fees to project approvals, particularly for affordable housing.
- If digitization and online review meetings have already started, scale and further institutionalize changes to relieve staff burden
- May require staff training and permissions from the state
- If digitization and online review meetings have already started, scale and further institutionalize changes to relieve staff burden
- Leverage existing planning initiatives (comprehensive plans, neighborhood plans or zoning updates) and expedite those proposals for implementation
- Updates to comprehensive plans may already have proposed changes to the zoning code for future development
- Examine where variance applications are taking place and for what purpose
- Align city planning and the city’s economic recovery strategy
- Ensure that land is designated for the right purposes (e.g., industrial zoning when necessary, changing zoning to encourage development, etc.)
- Collaborate more robustly with land banks (if already established) and streamline processes to develop or convey land to prevent speculation in underserved areas
- Evaluate options given local circumstances
- If a land bank is not yet established, work with the state or county to understand which regulations would need to be put in place for tax collection
- Create or update the database of city-owned land
- Understand losses from unpaid taxes on vacant or abandoned properties
- Determine the best place to house a land bank
- If a land bank is not yet established, work with the state or county to understand which regulations would need to be put in place for tax collection
- Depends on the capacity of your city (e.g., could you do this within the city, does your mayor want to be directly engaged and oversee, etc.)
- Some cities may prefer to set it up as a standalone agency with more autonomy
Benefits:
- Uses one of the strongest municipal powers to draw investments in a way that is aligned with economic development goals
- Relatively low cost for a city (e.g., fee reductions may have some costs)
- Leverages existing planning, or current planning processes that can be implemented quickly
- Accelerates digitization of review processes and permitting already underway due to COVID
- Recoups taxes or puts properties back on tax rolls for revenue creation
Risks:
- May require disruption of existing planning processes
- Can perpetuate economic disinvestment in low-income areas, if not thoughtfully considered
- Can be time-consuming and require considerable buy-in from stakeholders and community
- May require supporting legislation from the state or county
Impact: Medium
Implementation time: Slow (if no city council approval required), M (if required)
Cost: Low. Some FTE are required to administer the program, but the actions are centered around powers and property the government already owns.
Learn more about the Toolkit
Action:
Use land powers and incentives to support inclusive development projects, which convert abandoned or vacant buildings in disinvested neighborhoods. Promote the projects to philanthropic, corporate, or other government funders.
Why:
In this way, you will support local businesses and create short-term construction jobs as well as good, neighborhood jobs, and fill a long-time vacant building.
Case Study
7800 Susquehanna – Pittsburgh, PA
7800 Susquehanna is a 150,000 square foot hub for manufacturing, makers, small businesses, nonprofits, and job training in a historically Black neighborhood of Pittsburgh.
Bridgeway Capital, a local CDFI, purchased the former manufacturing facility to ensure that the building’s reactivation and future use would align with the community’s plans for economic revitalization benefiting local residents.
To purchase and renovate the property, Bridgeway has invested $13 million to date. It is financing the project through a mixture of philanthropic funding, government grants, and New Markets Tax Credits equity investments.
Bridgeway prioritizes maker/manufacturer and workforce development tenants, which create good-paying jobs and training benefits for the surrounding community. The building is fully leased to 22 tenants, who collectively employ 90 individuals. Also, the workforce development nonprofits annually graduate 75 individuals into living-wage jobs. Many of the building’s employees and workforce are residents from the immediate and surrounding communities.
Bridgeway also created ORIGINS, a business support program, which promotes Black makers and manufacturers. ORIGINS has a dedicated 750-square-foot space in the building for Black makers and manufacturers looking for their first business space.
How to Adapt This Approach:
- Identify former industrial buildings in disinvested neighborhoods, which are ripe for redevelopment
- Deploy public capital funds to support the acquisition and development of industrial properties
- Develop relationships with local or national CDFIs and other community development entities to advocate for redevelopment uses that retain the area’s manufacturing legacy and provide local jobs
- Ensure a diversity of spaces and rents in these districts by supporting mission-driven nonprofit ownership
- Identify and facilitate local, state, and federal sources of funding for the project including tax increment, New Markets Tax Credits, Opportunity Zones, and other federal sources
- Cities can support the project by facilitating land use changes to accommodate the project, investing in infrastructure, and providing grants for pre-development costs/environmental clearance
- Build local coalitions to advocate for philanthropic investments
- Connect small business support programs and workforce development services and provide tailored support to meet the local community’s needs
Learn more about the Tactical Guide
