Critics balk at tax breaks for uptown project that would lack affordable housing
Charlotte leaders have offered a developer up to $30 million in tax breaks and other incentives to bring new offices, retail and apartments to a massive uptown redevelopment project, but say they don’t have the money to include the affordable housing they promised would go on the site.
For five years, Mecklenburg County, the city of Charlotte and other partners have sought to revive a struggling area surrounding Spirit Square by selling property along North Tryon Street between Sixth and Eighth streets to private developers.
Documents viewed by the Observer provide new details about one of the most ambitious and controversial redevelopment projects in uptown in recent years.
The incentives package would provide the master developer, Metropolitan Partnership, with tax breaks to pay for parking, architecture, engineering and other costs, records say. Most of the money would go toward more than 1,500 spaces for above-ground and underground parking, documents show.
It is not uncommon for Charlotte to offer tax breaks, grants and other inducements to lure business investment and jobs.
But the prospect of giving millions of dollars worth of subsidies to build apartments and offices while nixing plans for affordable housing on the site has spurred complaints that leaders are betraying the city’s neediest residents.
Charlotte lacks more than 34,000 units of affordable housing, according to a city study. Housing advocates have long sought to put affordable housing near jobs, transportation, education and other amenities in uptown they say can help families escape poverty.
The social advocacy group Equitable Communities CLT has contacted 5,000 supporters and others to ask them to protest the Seventh and Tryon deal by calling and writing Mecklenburg County commissioners and Charlotte City Council members.
Commissioner Susan Rodriguez-McDowell said she plans to oppose the incentives for Metropolitan, which still must be approved by the commissioners and council.
“To provide more parking when you can’t afford housing, it just flies in the face of progress to me,” Rodriguez-McDowell said.
Metropolitan, which is based near Washington, D.C., did not respond to multiple requests for comment.
When Mecklenburg County, the city of Charlotte, Charlotte-Mecklenburg Library, Bank of America and Inlivian, formerly the Charlotte Housing Authority, sought bids from developers, they said they wanted at least 30 percent of the housing units priced below market rate.
In a Feb. 10 letter to Charlotte Mayor Vi Lyles and council members, Inlivian President and Chief Executive Officer Fulton Meachem questioned whether the other members of the landowner group were committed to keeping their promise to build affordable housing in the area as initially proposed.
Charles Bowman, Charlotte market president for Bank of America and one of the leaders of the redevelopment effort, told the Observer Meacham is spreading a falsehood.
“That is totally unequivocally not true,” Bowman said. “I don’t see any scintilla of evidence of that.”
County Manager Dena Diorio said building affordable housing on the site would not be a financially sound decision. She said the city and county do not have the $30 million needed to include roughly 120 affordable units in a proposed high-rise tower that is part of the project.
Instead, she said that proceeds from the land sale will go toward helping build affordable housing in other parts of the city, where more units can be built for the same amount of money.
“If this was an easy problem to solve, we would have solved it by now,” Diorio said. “This is an indication and a lesson on how hard it really is to do affordable housing. It is not for lack of trying.”
Is parking worth $25 million?
Some of Charlotte’s best-known government, civic and business leaders have vowed to transform the aging buildings and surface parking lots along North Tryon Street into a pedestrian-friendly area with a new library, smaller blocks and public spaces.
In 2015, landowners in a two-block area around Seventh and Tryon streets formed a stakeholder group to decide how it should be developed.
But last year, a major piece of the plan began to unravel.
Officials dropped affordable housing — one of the project’s top priorities — from the uptown site plans after Inlivian said it would only lease its property rather than sell to the developer outright.
A typical ground lease allows the property owner to lease the land for a price, but retain ownership. The arrangement can be less desirable to developers because it can make it more difficult to finance a project or hurt profits if they decide to sell buildings on the land.
The Seventh and Tryon landowners are now negotiating to sell 1.5 blocks without Inlivian’s land, Diorio said.
She said they scrapped plans for a low-rise apartment building that would have provided 132 units of affordable housing. The building would have stood mostly on property owned by Inlivian.
Under the latest proposal, Diorio and others in the landowner group said, Metropolitan would receive $25 million in tax breaks in exchange for building parking that includes 245 underground spaces.
Underground parking structures costs as much as $60,000 per space, officials said.
Taxpayers would also be responsible for up to $5 million in infrastructure improvements around the development.
Beth Hardin, UNC Charlotte vice chancellor for business affairs and co-chair of the Seventh and Tryon landowner group, said the underground parking would allow more room for green space and other amenities for pedestrians.
County Commissioner Elaine Powell said the landowners’ proposal prioritizes business interests over the need for affordable housing. She said she cannot support the deal because officials would be breaking their pledge to use public land for low-income housing.
“They want to say it’s not economically feasible .... well let’s just go back to the drawing board,” Powell said. “If we sell a public asset I want to make sure we do right by the people.”
New homes outside uptown
Current plans for the Seventh and Tryon redevelopment call for a high-rise apartment building.
Diorio said landowners considered putting affordable housing units in the tower, but the plan was not economically feasible.
The apartment building did not qualify for federal low-income tax credits, which help finance construction of affordable housing, because the per-unit cost to build was too high, she said.
Under the new plan, officials said they will take at least $10 million from the land sale proceeds and use it to finance affordable housing projects already underway in other parts of the city.
The money would help provide more than 300 affordable units compared with the 120 envisioned for uptown, they said. Homes would go into “high opportunity” areas near jobs, public transportation and other resources, officials said.
Bowman, the Bank of America market president, said that any affordable housing that would go into the Seventh and Tryon redevelopment would not be available for years.
“Remember, all we have is plans (uptown),” Bowman said. “Over here, we’ve got 300 families that we could conceivably take care of in the course of a year.”
Meachem, the Inlivian CEO, said he believes it is still possible to build affordable housing along North Tryon Street.
Meachem said Inlivian submitted a proposal to Metropolitan last year laying out how it would develop mixed-income housing, a boutique hotel and parking. He said it was too soon to say what would happen with Inlivian’s property if it is not included in the larger redevelopment.
“Affordable housing is needed and necessary within the city,” Meachem said. “Where there are opportunities of public land that have more flexibility than private land out there, we should do everything in our power to have some (affordable housing).”
Diorio said Inlivian deserves some of the blame for the shortage of affordable housing uptown.
Inlivian, which is responsible for helping provide housing for the poor, owns two acres along North Tryon Street near Eighth Street, but has failed to redevelop the 12-story former Barringer Hotel, later known as the Hall House, that has remained vacant since at least 2014, she said.
“You need to explain to us why it is that you can’t develop affordable housing on your site,” Diorio said. “If they can’t do it, why is it expected that we can do it?”
Missed opportunity?
The dispute over affordable housing has threatened negotiations between Metropolitan and a potential anchor tenant for the development, documents say.
In a May 31, 2019, email to city and county officials and others, Meachem said officials needed to resolve the disagreement over affordable housing because it might jeopardize talks between Metropolitan and a company considering moving into the proposed office tower.
A source with first-hand knowledge about the deal said the building was being considered by Truist, a Charlotte-based bank created through last year’s merger of BB&T and SunTrust.
Minutes from the Charlotte-Mecklenburg Library’s Real Estate Committee meeting in October 2019 show that officials discussed the bank merger, saying that it was “obviously pivotal for the master developer” for the Seventh and Tryon project.
Truist announced in December it had bought the former Hearst Tower for $455.5 million and would rename the building the Truist Center. The sale price broke a North Carolina record for an office building, the Observer previously reported.
Truist did not say if the company ever considered moving into the Seventh and Tryon development.
“We looked at a number of potential real estate options for the Truist corporate headquarters that could meet the space, availability and timing needs for the new, combined company,” a statement said. Hearst Tower was “the compelling choice due primarily to the prime Uptown location, the availability in late 2019 to house the combined executive leadership team and the purchase option, which we have elected to exercise.”
Leaders for the Seventh and Tryon project would not say if Truist was involved in negotiations to move into the redevelopment project, but they acknowledged that there is urgency to get construction started.
“If you just look at those folks who are looking at Charlotte for headquarters relocations or other major relocations of people, they are looking for sites ... they are looking for the capacity to build,” Hardin said. “Those certainly trigger a clock for this project.”
Is affordable housing in uptown’s future?
Landowners in the Seventh and Tryon redevelopment said they will pursue affordable housing elsewhere within uptown.
Mecklenburg County owns the Hal Marshall Center at Ninth and College streets and surrounding property and could potentially put low-income housing on the site sometime in the future.
But Bowman and others acknowledge construction and land costs could go higher.
“The longer you take in this environment, the more expensive it’s going to be,” Bowman said. “The longer we wait, the harder it gets.”
Equitable Communities CLT, an affordable housing advocacy group, is organizing a protest against the proposed deal with Metropolitan.
“It’s a choice,” said Mary Kelly, co-founder of the group. “They chose to lower the importance of affordable housing and look at market rate (units), anchor tenants, other projects they have incorporated into the development as being a higher priority than affordable housing. The people that need it most, they’re disregarding.”
Her husband, Peter Kelly, of Equitable Communities, said it has always been more cost-effective to build elsewhere, and said officials could use the same logic to decide against affordable housing for other uptown sites.
“Is there a social obligation of the county to have affordable housing uptown,” Peter Kelly said. “That’s the question. Is there a social responsibility when public land is involved?”
This work was made possible in part by grant funding from Report for America/GroundTruth Project and the Foundation For The Carolinas.
This story was originally published March 7, 2020 at 10:50 AM.
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