Buffalo's downtown housing market is growing at a healthy rate, but the city must keep the momentum going by maintaining incentives that spur more development.
Those were some conclusions of a study commissioned by the Buffalo Niagara Partnership with support from the Buffalo Urban Development Corp.
The study said downtown produced 262 new housing units in 2017, just below the current annual demand of 281 units. The vacancy rate for downtown apartments was 4.2 percent, described as well below the industry standard of 5 percent for a healthy rental market.
"These figures indicate that economic development efforts are effective and the need in the market is being satisfied," the report said. The study was performed by Real Property Research Group, a consulting firm.
Among newly redeveloped properties, the study found average rental rates ranged from $798 per month for a studio apartment to $1,962 per month for a three-bedroom apartment. Downtown has 4,684 rental housing units, according to the study.
The report also looked at for-sale properties in the greater downtown area. Of those 1,591 units, 51, or 3.2 percent, were sold last year.
The median price for greater downtown single-family homes sold last year was $225,000, meaning half sold for more and half for less than that price, the report said. The median sale price for town houses was $455,000, and $466,000 for condominiums.
The consultant believes that because the median prices of for-sale properties are so high, there is untapped demand for those types of properties, said Dottie Gallagher-Cohen, the Partnership's president and CEO. However, "there are no incentives that help pay for that kind of development," she said.
The study was an outgrowth of the Buffalo Building Reuse Project, launched more than six years ago amid concerns about rising vacant commercial space downtown. A key issue then was HSBC Bank USA exiting its signature downtown tower. At Mayor Byron W. Brown's request, the Partnership explored how to make downtown more competitive for private investment. A focus that emerged was turning vacant commercial space into living space.
The latest study took a fresh look at the demand for downtown housing, following a surge of development in recent years, Gallagher-Cohen said. Some developers were concerned that rental rates have not risen to the level they expected, she said.
The study found about two-thirds of downtown rental units either proposed, under construction or completed since 2011 were market-rate, compared to about one third that were affordable, or income restricted. For 2018, more than 50 percent of proposed rental units downtown were identified as affordable.
"We've got a nice mix of market-rate development and also income-restricted development," said Brandye Merriweather, vice president of downtown development for the Buffalo Urban Development Corp. "Part of this narrative is that we are not displacing or eliminating any affordable housing. If anything, we're maintaining and we're adding more."
Gallagher-Cohen said the next step is to build on the development that came from creating more downtown residential space.
"Now what we're saying is, downtown's not finished, so how do we finish it, and given where we are today, what are the strategies and tactics we need to get it finished?" she said. "The answer to that is, making sure that we don't think of downtown as finished and we don't start messing with the incentives that have got us where we are today, where it's very tenuous."
The study calls for keeping intact incentives such as the Erie County Industrial Development Agency's adaptive reuse program and state and historic tax credits to fuel more downtown housing development.
Among other suggestions in the study:
- Work on creating a "cohesive downtown neighborhood," Gallagher-Cohen said. A lot of the development thus far has been "opportunistic," but not stitched together like Allentown or the Elmwood Village.
- Find the "next big thing" to generate more demand for housing, just as the Buffalo Niagara Medical Campus and Canalside have done, Gallagher-Cohen said.
- Determine how to stimulate "infill" development in places like the 29 football fields worth of parking lots in the central business district, she said. "Those are holes in the urban fabric."