Friday, November 07, 2014

Why a Reeves Center in Anacostia is not exactly the silver bullet everyone is making it out to be.

It's amazing the things The Advoc8te thinks about when walking the dog. While normal people are enjoying the view or wondering when the dog is going to finally do his business my thoughts often go to east of the river's economic development situation. 

Don't ask me why, but today my thoughts shifted to D.C.'s plans to relocate the Reeves Center from U Street to Anacostia's main street. The idea being that day-time foot traffic would somehow bring more economic development opportunities to Anacostia and to its small business community.

By now I've worked in Anacostia for five years -- both as a consultant, a small business owner,  a neighborhood booster, and as a professional supporting/assisting/attracting small businesses.  I've been there for Anacostia's small businesses from the planning stage, to the building stage, to the staffing stage and to the grand opening. I've cheered the success stories and mourned the closings of those small businesses that had great heart but not many paying customers. 

That got me thinking about the government agencies that are currently located in Anacostia (about half a dozen on Good Hope Rd and MLK Jr, Ave SE) and made me question honestly IF  have they been a significant "driving force" in bringing new retail and food opportunities to the community?

The short answer: not really

Yes, their employees do contribute -- somewhat -- to the economic development of local businesses, but that contribution it is limited. Government employees (at least some) do partake of lunch in the neighborhood and maybe the occasional happy hour after work but in reality government employees in Anacostia spend the majority of their time in Anacostia, well, working in their offices. And once the work day is over they go home -- and with them some of those food options that they enjoy during the day. King's Cafe on MLK across from the Anacostia Professional Building is a prime example, their operating hours mirror office hours. The lone parking garage in Anacostia closes when DHCD does. It's a great looking building but it is only really active 5 days a week.


Government agencies (for the most part) are five-day-a-week, day-time only entities. Even accounting for their daytime visitors/clients their contributions to local businesses are minimal. Even for the agencies that do see a lot of foot traffic like the DC Department of Health, their clients don't tend to have the disposable income to support local small businesses in a significant way.  It is hard to imagine someone waiting in a line for 5 hours to have their electricity turned on to splurge on a meal and drinks at Uniontown or head over to Nubian Hueman in the Anacostia Arts Center for a gown. 

Small businesses depend on not just foot traffic, but foot traffic with some kind of disposable income attached. Historically, for the residents of Anacostia anyway, when the government agencies and office buildings close so do most (if not all) of Anacostia's food and retail options. It hasn't been until the last few years that new food options such as Uniontown, Big Chair Bar & Grill, and NURISH Food & Drink came on the scene and in order for those places to survive and thrive they need six or seven day a week customers;  they need evening and weekend customers to survive; they need the support of customers in walking distance of their establishments. 

Anyone who has been to Anacostia's main streets on a Sunday knows how it turns into a ghost town. You could easily do the Electric Slide --  naked --  down MLK Ave and no one would notice. There are no food options on a Sunday (NURISH did initially open on Sundays but the lack of foot traffic led them to close on Sundays) and there is very little retail (if any).

In order to have a vibrant business district, you have to have one that keeps more than banking hours. Anacostia's small businesses can't be limited to customers who work, 9-5, five days a week. Anacostia's small businesses need customers who come home to Anacostia and wake up in Anacostia. Anacostia's small businesses need customers who are based in Anacostia, who will attract family, friends, and visitors to Anacostia not just for 40 hours a week, 50 weeks a year, but 24 hours a day, 365 days a year. 

Anacostia, like most communities east of the river doesn't need more government workers who might spend some of their disposable income in the community -- we need more residents with disposable income who will spend most (if not all) of their disposable income in the community. 

I live in Congress Heights yet I spend probably about 1% of my disposable income in my own neighborhood. Not because I don't want to, but because I have few options that suit my needs. I work in Anacostia and while I spend way more money there than in Congress Heights I still have to go outside of Ward 8 -- and almost always over a bridge to spend the majority of my income. 

What I and my neighbors need are more options -- better options -- and what those businesses need are more customers over more hours -- with some disposable income -- to support their business.  

So when it is reported that Anacostia residents are against plans to open  yet another income-restricted apartment building in their neighborhood of less than 10,000 residents (and now there are plans for four large scale projects)  it is because they have done the math and it does not add up to a vibrant Anacostia. It does not compute for more retail or food options, it does not result in job creation in a neighborhood desperately in need of new jobs.



For those seeking a a beautiful (yet still affordable by D.C.'s standards) single family home, it doesn't get much better than Anacostia and the real estate figures support that. Homeownership in the Anacostia neighborhood is at an all-time high and houses for sale stay on the market for a short period of time. 

On the flip side, the apartment rental market in Anacostia is tiny and comes with lots of caveats. First, there are few rental options near the metro (a key point in attracting renters). The best rental option near the metro comes with income restrictions and the rest of the apartment rental stock in the neighborhood is either small or not on par with what someone would who has disposable income to spend. Plans for new rental housing stock are 100% low-income with income caps between 30% - 60% AMI. Future renters in those projects would have to fit in a very slim economic bracket -- high enough to afford the rent, but earn below the income caps which for a single person is about $45k on the high end (60% AMI cap). Most of the opposition to the proposed Big K Project is because of the low income caps of 60% AMI. Their concern (and understandably so) is that for a neighborhood that is in desperate need of disposable incomes to support more neighborhood goods and services (and with them local jobs) they are getting more of the same -- low-income residents with vouchers.

And it is not from a lack of people with disposable income wanting to rent east of the river. I probably get an email every single week from someone who reads this blog and wants to rent in Ward 8 but they make around $50,000 a year -- far too much for the income-restricted apartment buildings in my neighborhood. They may want to buy a home here in the future but they aren't ready right now.  I am not alone in this. Many of my east of the river neighbors report interest from their working class friends and family in renting here but there are no options for them to rent. These potential new residents aren't necessarily looking for "luxury" but they are looking for quality apartments near public transportation, in walking distance of food and retail options -- in a building where their $50,000 a year salary won't instantly make them ineligible. They are by no means rich, but they do have the disposable income and desire to contribute to east of the river's economy. Even a nudge up from a 60% AMI income cap to a 80% AMI income cap would be a big boost to Anacostia's economy. 


So from the Anacostia resident's perspective, the very thing that Anacostia needs more of -- renters with disposable income-- is the very thing they are being shut out of. Why? Because west of the river has an affordable housing problem. But instead of investing more affordable housing in neighborhoods west of the river were rents truly are "sky high" it has been deemed more "financially feasible" to invest in more "affordable" and low-income rental housing where the land is cheapest -- despite the east of the river rental market already being the most affordable in the city

West of the river has an "affordable" housing problem.
East of the river has an employment and economic development problem.

And while the latter is being asked to sacrifice to solve the former, the former never seems to sacrifice to support the latter. 

To those who live in Anacostia and who have small businesses there they go about their day hoping for more but realizing they are stuck between a rock and a hard place. It is for that reason I hear more and more "die-hard" residents contemplating a move out of Anacostia. While they love their neighborhood (and fight like hell to protect it) they are feeling like the west of the river agenda is trumping their desperate need for an Anacostia with food options and retail, with jobs, and with opportunities for growth.

For many that live in Ward 7 and Ward 8 it feels like when it comes to D.C.'s needs (like more low-income housing) we are "one city" but when it come's to east of the river's needs (like more jobs, retail, and food options) we are own our on -- left to make do with the bad hand we are dealt, in a game that was stacked against us from the beginning. 

And any way you slice it, it is going to take a lot more than week day lunches to solve it.

19 comments:

Anonymous said...

PREACH!!!!

Whitney Hubbard said...

Instead of our main business corridor being lined with, I don't know...businesses, retail, and restaurants, they are already lined with folks waiting for social services. I'm over it. The Reeves Center needs to stay exactly where it is.

The Advoc8te said...

@Whitney Hubbard I know a lot of people who would agree with you -- including me!

Anonymous said...

Excellent article.

Washington Highlands Living said...

This article is so on point I can't stand it!

How can we get the city government to understand that years of bad policy (such as concentrating poverty east of the river) = such an economic divide?

I also have friends and family who want to live east of the river but have no rental options.

I don't think we are asking for too much to think we should have at least some decent rental options near a metro that don't have an income restriction. How else are we going to increase the income levels so we can get some more businesses?

Anonymous said...

@TheAdvoc8te -- I've lived EOTR for over 4 years first in Ward 7, and recently (6-months ago) purchased in Congress Heights. I don't understand how EOTR is going to move forward without more middle-income folks. At every turn laughingstock Barry, childish ANCs, and a pathetic DC Council continue to literally suffocate and stifle innovation and entrepreneurship by turning Wards 7/8 into a sea of renters. Is anyone else outraged over this? I am growing tired of fighting while Yards Park and SW are about to look like H-street and Georgetown.

I don't necessarily want that for Congress Heights/Anacostia, but it would be nice to be able to go out for some basic home goods in my neighborhood.

Distressed Congress Heights resident...

The Advoc8te said...

@Anonymous 3:44pm

You are not alone in your thoughts. Many of my Ward 8 neighbors are also frustrated by looking at the new grocery stores, retail, housing (and with them jobs) and not understanding why all of our "new" projects center around more of the same.

It breaks my heart hearing neighbors talk about moving into Maryland because they are frustrated with going without.

Elle @ (Eat.Style.Play) said...

A friend of mine, A non- ward 8 resident made some comments about ward 8 and this article is exactly what i was trying to convey, but couldn't put the words today. This is exactly a lot of sentiments of ward 8 residents with disposable income.

It's a sad situation, and like the commentator about the fixed income housing. This is the same issue I have when looking for a nicer place to live in DC>

skeptic said...

This is so correct. I wish this article could be hung on the wall of everyone with any part in EOTR economic or housing development.

It won't stop those who wish to force low-income housing as far away from NW as possible... but it would stop those of us who are generally affordable housing supporters from continuing to be accomplices.

Anonymous said...

@Advoc8te

Since this is really a RE discussion, an explanation for this problem is in land value. The cheap land and low demand is the problem in Anacostia. There is no profit to be made in Anacostia right now without low income tax credits or grants. You're asking for market rate housing, however, banks aren't going to provide loans to build class A market rate housing in Anacostia at the moment. If banks would, there would already be market rate housing there.

This is also a question of the market place. Developers only build class A luxury apartments now. The ADU apartments in Anacostia will have granite countertops and stainless steel appliances with premium amenities. It is pretty much impossible to build a market rate building like that in Anacostia right now with a return on investment. That is the problem.

The only way market rate housing will come to Anacostia is when rapid gentrification comes to Anacostia and the land value rises, however, then everyone will be upset they can't afford it anymore. Developers are in the business of making profit.

As for retail, it follows money and foot traffic. Until Anacostia gets gentrified and density increases by a wide margin, retail will not be able to survive.

Anonymous said...

This is completely on-point. My wife and I recently moved to Fairlawn, and while we love the neighborhood and our neighbors, we keep saying that the area will grow and more businesses will come. I realized what I was hoping for was more young, middle to upper-middle-class families who inevitably bring development. Fairlawn already is a solid, middle-class area. But there is absolutely nothing for sale, no small business, no chains, nothing. I have to drive five or six miles for a cup of coffee. Part of this is metro-inaccessibility, and part of this is just continuing down the same path SE has always tread.

We wanted a quiet, residential neighborhood. But I also want to see growth, I want to see people walking to work, I want bike lanes, I want restaurants, I want these things that economically stable neighborhoods have. I don't want to be jealous of Cleveland Park - I want those simple luxuries here. Most of my neighbors can afford them, and currently spend that money elsewhere. Bring it back home!

The Advoc8te said...

@Anonymous 10:46pm said: "The cheap land and low demand is the problem in Anacostia."

On the first point the land is "cheap" because failed and short-sighted DC policy has made it so. I would also argue that just because the land is cheaper than land west of the river doesn't mean it doesn't have any value - Anacostia is one of the most charming neighborhoods around.

On the 2nd count that is one of the BIGGEST MISCONCEPTIONS about Anacostia. There is in fact a LOT of demand -- what the problem is there is no (and I mean no) housing for that rental market. The for sale market in Anacostia is very hot -- formerly vacant single family homes are being sold, renovated, and lived in. For those that are in a position to buy a single family home, Anacostia is where they are going. The problem is Anacostia (like all of Ward 8 for that matter) has no quality rental housing that doesn't have a low income cap. So what you are seeing by "lack of interest" is actually a lack of housing. If I wasn't in a position to buy my condo I would not have been able to live in Ward 8 -- neither in 2007 when I bought or today in 2014. Any single person making over $46,000 a year would find themselves ineligible for almost all of the housing in Ward 8 and all of the new rental housing projects currently planned for Anacostia.

So, that being said, unless there is a policy change that allows Anacostia (and all of east of the river) to finally get some rental housing that can accept some middle income renters then nothing is going to change. Will some of that no-inome cap (or at least higher income cap) housing may have to be paid for by DC gov dollars? Maybe, but that seems like a very small price to pay considering the decades of neglect and short-sighted policies that got east of the river in this problem in the first place.

Anonymous said...

I second the Advoc8te on this: there is demand, but no housing being built (or allowed) to meet that demand. I am not a unicorn; but I, and many of my neighbors, make a very solid middle-class salary- and I live barely a block from the Anacostia metro. But, our friends and associates have to look to WOTR or outside the District for housing that doesn't lock them out. I live so close to the Anacostia metro that it boggles the mind that another low-income project is planned for my neighborhood. This is just the kind of location that people like me are hungry for- but....

Anonymous said...

@Advoc8te

The appraised value of the land for Anacostia is low which would be a good thing if the Internal Rate of Return (IRR) wasn't so low on rental property. The problem stems from the lack of demand for high end housing. You say there is demand, however, I doubt people are going to pay $1,800 for a one bedroom in Anacostia. To get the IRR developers want in Anacostia with such a glut of apartments in the D.C. marketplace, that price point would need to be met. I don't see a market for that right now. The neighborhood doesn't offer the amenities needed to sustain that price point.

This is a chicken and egg problem. Which needs to come first? The problem is, neither can survive without the other. Demand is driven first by gentrification in the owner occupied housing. As that market changes in Anacostia and surrounding communities, the demand for apartments and condos will come. The Trinidad neighborhood had a home go for close to $1 million a year ago. Don't worry, the wave is coming, but it takes time. When homes start to become unaffordable in Anacostia, the apartment buildings will begin.

One thing people don't understand about gentrification is that it's a domino effect. Unless people are being priced out of the neighborhood next to your respective neighborhood, gentrification has not arrived yet. Just because people are beginning to move to Anacostia and Congress Heights doesn't mean the development wave has arrived. When people are being priced out of Anacostia and Congress Heights, gentrification will have arrived.

h st ll said...

Honestly, there is no one 'silver bullet' for Anacostia (just as there isn't for anywhere...)

I do think the DC Govt building in Anacostia will be a net positive. Those are middle class jobs, and some will elect to live nearby. And the DC Gov only builds nice building, it will def be architecturally pleasing.

As you mentioned The Advocate SFH RE prices are on a tear in the neighborhood. I do think you will see significant market rate apt construction soon. I know it's somewhat different than the SFH market but people are paying significant money for housing in the neighborhood. And then the retail will take care of itself. Good times ahead imo...

Matt said...

Nikki- This is a great post and completely on point. Part of the problem is based in tax policy--i.e the Federal Low Income Housing Tax Credit Program. The program provides about 1/3 of the cost of construction for a building like Sheridan Station, and the total equity is calculated based on the number of total units in the building that are reserved as affordable for families up to 60% of AMI. reserve 100% and get 100% of the equity. For every unit that is not restricted, developers stand to lose between $30,000 and $50,000. The only way to make up that loss would be to raise the rents to over $3,000 a month, which is not a risk developers or lenders have been willing to take. Perhaps understandably. The tax credit program is a great program, but in markets without a proven market rate, the program tends to further concentrate poverty and prevent economic development. There have been proposals at the federal level to allow a certain percentage of units to be restricted WITHOUT losing the equity or to allow the building to average out at 60% AMI without losing the equity, but they have lost steam. I would try to get a meeting with ENH now, share your thoughts, and start to get some momentum around this. A little flexibility would go a long way.

h st ll said...

Although to be clear I think the retail in HA is solid right now. 3 good sit down restaurants, tasty take out, banks, basic cleaning supplies covered. Could be a lot better tho, agreed, and needs a very close grocery store (current one a mile away is too far) and a nicer discount store would be nice also.

Darin said...

Several commenters have pointed out the economic problems hindering market rate rentals in Anacostia. One of the suggested solutions is more of the "G" word. Fine; but how does that happen in any kind of serious way? There are a lot of middle-class households in my Sheridan Sayles development- but we won't be getting many more because the overwhelming majority of the remaining housing being built here is income-restricted (and I don't mean "workforce" I mean low-income.) As I have said in another context, the developer of Sheridan Sayles didn't make a very concerted effort (that I could see) to solicit buyers- I had to look for Sheridan; it didn't look for me. Again, I am one of people with disposable income who wanted an urban-style place close to metro- and was willing and able to pay market rate for it(in Anacostia, but priced out of other neighborhoods.) Where are the options EOTR for other people like me? More of us would be happy to contribute to the "G" word in Anacostia- but the opportunities are not there.

Anonymous said...

Anonymous 1:29 is wrong on one point....the market price in Anacostia does not need to be the same as the market price on U Street BECAUSE the land is cheaper. Developers should be able to make the same IRR because the land costs less. Lower profit WITH upfront costs will still get you a return....

BUT what's the "right" rent number? No one knows.

Can you charge $1,400 for a one bedroom? That's a lot cheaper than U Street but no one feels confident you can rent out 100 1-bedroom apartments in Anacostia for $1,400 a month, or even 50 of them? This is why developers and banks won't take the risk.

Great article by the way.