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Downtown housing revival shuts out working class

Downtown’s housing revival is on a decidedly elite path – and that’s raising concerns that most city residents are effectively shut out of Buffalo’s newest opportunities in urban living.

With rents that routinely range around $1,200 to $2,000 a month, many of the trendy new apartments that are opening up downtown are too pricey for most people who live in one of the nation’s most impoverished cities.

In fact, the only people who can afford those rents are residents who are well-heeled enough to be able to afford a high-priced home in one of the city’s nicer neighborhoods or a trendy suburb. A $1,500 monthly payment is enough to afford a house that sells for somewhere around $180,000 at today’s low mortgage rates. With a $2,000 monthly payment, you can generally swing a home in the $250,000 range, including taxes.

That’s a pretty exclusive market, and it prices most city residents – and many suburbanites interested in urban living – out of the market.

“I’m very concerned about it,” said Rev. Darius Pridgen, the Buffalo Common Council president and the pastor at True Bethel Baptist Church on East Ferry Street. “We’ve got thousands of people – tens of thousands of people – who will never be able to live in downtown Buffalo.”

“The working class folks and the middle-class folks are priced out,” Pridgen said. “That’s the new Buffalo.”

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A big part of the problem comes down to economics.

Many of the new downtown apartments are in old commercial buildings that need extensive renovations. Those updates and repairs tend to be expensive, often costing more than it would to build new. As those costs rise, developers have to charge higher rents to recover their investment, even after taking advantage of the sales and property tax breaks that local development agencies offer.

And that ends up pricing out a big swath of the Buffalo Niagara region’s residents.

So the 30 one- and two-bedroom condominiums at the Historic Warehouse Lofts Building renovated by developer Jake Schneider sold for prices ranging from $216,000 to $365,000. Rents at the 97-unit Elks Terminal Lofts start at $1,195 a month. Rents at the 12-unit Alexandre Apartments, which will be built in the former Loew’s Theater Warehouse on Washington Street, are expected to range between $1,500 and $2,000 a month.

“It seems to me that a lot of the affordable living opportunities downtown are being lost,” said Sister Denise A. Roche, the retired president of D’Youville College who now sits on the Erie County Industrial Development Agency board.

There’s another element in play, too. These are high-risk projects for developers. The early apartment and condo projects are essentially creating a downtown housing market where one barely existed before.

And the work isn’t easy. Developers Amy and Mark Judd originally wanted to put a penthouse apartment on the top floor of the Loew’s building, but couldn’t because of the building’s historic status. They have to replace the elevator and put in a second stairway. They have to restore natural gas, electric and water service to a building that has been vacant for 19 years.

“The building has definitely been a challenge,” Amy Judd said. “The big cost in this building is providing the infrastructure.”

The former Loews Theater warehouse, 510 Washington St. (Derek Gee/Buffalo News file photo)

Taxpayers are helping out, too. The Judds are getting more than $161,000 in sales and mortgage tax breaks through the Erie County IDA. The project will get property tax breaks through a program run by the City of Buffalo. And the Judds are seeking $750,000 through the Buffalo Building Reuse Program.

When all the work is done and the apartments are rented, the Judds estimate that they’ll earn about an 11 percent return on their $4 million investment. Not bad, but not an outrageously lucrative return, either.

But to make the numbers work, the apartment rents have to be comparatively high. And that means they’ll be targeted toward more affluent residents.

“These projects are not for the faint of heart. These buildings have been vacant for as long as they have for a reason,” said Dottie Gallagher-Cohen, the president of the Buffalo Niagara Partnership and an IDA board member.

It won’t be easy to bring a more affordable element to the city’s downtown housing revival. One approach the IDA has sometimes taken has been to require one or two units in buildings receiving tax breaks to be more affordably priced, although that also can skew a project’s economics.

The city’s Office of Strategic Planning is working on a downtown housing study that is expected to provide better data to help shape what likely will be a growing discussion of the need for more affordable housing. That study is expected to be done by June.

The IDA’s staff also is reviewing the roughly 50 adaptive use projects to help the agency assess the impact of its policy aimed at encouraging the redevelopment of old buildings. That policy, initially targeted toward business and commercial use, also has opened the door for developers to receive tax breaks on downtown housing projects.

“I think we need to reconsider the adaptive reuse policy,” said Erie County Executive Mark Poloncarz, who has an influential role in shaping the agency’s incentive guidelines.

“I do understand that the numbers have to work,” Pridgen said.

But he also thinks affordable housing needs to be a higher priority.

“We have to talk about affordable housing,” Pridgen said. “If this isn’t a front-burner issue, it will never happen.”

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