Provo City Transfer of Development Rights: Preserving historic neighborhoods through economic incentives for Developers of high density housing in targeted areas.
Provo City has 6 Historic neighborhoods that have deteriorated due to previous zoning standards and their consequences. Old homes were routinely chopped into duplexes, triplexes or worse, turning them into income property instead of cherished owner occupied residential property. Prime example: Knight Mangum house on the corner of 400 East and Center Street. What was once a family mansion is now 12 apartments for married student housing. Unfortunately, as these homes age, their condition deteriorates excessively due to this sort of density, and the lack of “invested” homeowners living in the homes.
In particular, we see this sort of problem in the Joaquin and Maeser neighborhoods. Literally, hundreds of homes which were built as single family homes have become (or are becoming) legal duplexes, with no requirement of owner occupancy. The area has gone from having three schools to one, due to a decline in the number of children and families living in the area. Fewer homeowners in an area where homes range from 60 to 120 years old means a much greater likelihood of blight, higher crime and a larger number of police calls.
The Goal: Treasured family neighborhoods like the “Avenues”, Capitol Hill or the Westminster area in Salt Lake City which have a physical condition that attracts and retains long term residents and successfully preserves the historic character of the homes.
Can we create this in Provo?
Yes: but not with our current tools. Our current tools of revitalization, while effective, have limitations. They can’t enable us to buy historic homes that have been turned into 4-plexes, convert them back into owner occupied property and make the necessary repairs (usually extensive) that would attract new buyers. The costs are too high, and since we have funded most of our revitalization with CDBG funds, we have income and house price limitations in place.
But we can use lessons learned and certain methods of our revitalization efforts in this process. Our Purchase & Rehabilitation Program has been extremely successful at changing the character of troubled property. We buy blighted homes, and through NeighborWorks Provo, we fix structural, system and visual defects, and sell them to owner occupants. However, our funds are limited, and we have to work within fairly strict limits with this program. Squeezing other funds out of the municipal budget right now would be a difficult, if not impossible, task.
So where could we get the money or resources?
We do have another asset which we haven’t put to use yet; it is called Development Rights. In essence, when we zone a particular property, we “impose” a value upon it. If land is zoned to only allow one house for every 10,000 square feet of land, it is likely less valuable to a developer than land which allows one house for every 5,000 square feet of land. In the past, we’ve simply made those determinations by zone changes, and someone (not the city) benefitted economically. Why shouldn’t we put this tool to work for the benefit of our city?
According to the City’s general plan, there is property in Provo where high future density development is planned. North Joaquin and the Transit Oriented Development area quickly come to mind as examples. Neither currently have very specific zoning in place, so perhaps this is an ideal time to consider it.
How could this work?
In essence, we create a plan which allows developers of these high density areas to gain density bonuses for tackling the projects we want to see happen, but can’t afford to do. They purchase and rehabilitate older, larger houses that have been “chopped up” into places a family would love to live. Deed restrictions are placed on the properties which prevent it from once again becoming multi-family or multi-student housing. Owner occupancy could be required for 20 years. If reasonable, an accessory apartment (which always requires owner occupancy in the main unit) could be maintained. The city would be a party to the restrictive covenant language, with a standing right to enforce the deed restrictions. If the home is historic, it would be placed on the Provo Landmarks Registry.
The density bonus could work as follows:
All properties that are in the RC zone (North Joaquin) have a maximum density assigned by current structures. So for our purposes let’s assume a developer has 4 congruent lots with a current density of 12 units for 1 acre of land. The developer’s project wants to put 40 units on that land. To do that, the developer needs 28 density “credits.” To get those credits, the developer accepts purchase/rehabilitation projects which provide that number of credits.
We would likely want to involve a third party, like NeighborWorks Provo in this process, by enabling them to maintain purchase options on various houses within our targeted rehabilitation area. This could prevent artificial inflation, and provide the city with a dedicated, resident guided, method to determine which properties we focus on. Their experience with rehabilitations would be valuable in guiding a sales contract/density bonus for each property that reflects the complexity of the project, and the property’s particular needs for updating and restoration. Another factor would be where the developer’s property is. So let’s look at an example of how this could work.
• NeighborWorks buys an option on a “fix-up” property which fits the goals of the city and its board of directors. Let’s say the property is a house which has been chopped into a triplex.
• NeighborWorks Staff evaluates the house, and draws up plans for turning the house back into a single family home.
• The cost of these improvements is estimated to be 100k.
• Based on estimated value at re-sale and those costs, NeighborWorks assigns a value of 7 density credits to the project.
So what are the real benefits?
• We use a previously unused asset of our city to fund something beneficial to our historic neighborhoods.
• We let market driven forces accomplish 2 things we want: effectively down-zoning “chopped up” historic properties, and creating housing density where we want it.
• We avoid the political battles of a real down-zone or a fight for Amortization.
• These fixed up historic properties will become “crown jewels” in these neighborhoods, attracting long-term residents who will contribute to the quality and stability of the area.
• A higher degree of historic preservation will further push market forces by turning these areas into “neighborhoods of choice.”
What would our City have to invest?
• Staff time, City Council time to create the ordinance.
• A method of administering the ordinance.
• An amount of money from the General Fund or EDI to seed NeighborWorks or RDA involvement in the plan.
Could this be expanded for other use or other areas?
The simple answer is yes. It could be used in other areas where rental property has become too large a percentage of housing stock, or to simply eliminate structures we feel are counter to our goals for the future. My mind is drawn to deteriorating four plexes which dot our neighborhoods…. In essence, if the density reward is sufficient, the task will be accomplished.
How do we use this within our current systems?
Currently, our development process requires a pro-zone and approval by the planning commission and City Council. In essence, we just make this part of our process. City Staff would evaluate the project, and in that process, make a recommendation to the Council about the number of required density credits the project would need. A formula based on location, density desired, and parking ratio would help us make that determination. If a project has some other benefit to the community, the requirement could be reduced. The Council would then make a final determination as part of the Pro-Zone approval. The beauty of this is the flexibility it offers the city government.