Real Estate Advisor Law Blog : Ohio Real Estate Lawyer & Attorney : Ulmer & Berne Law Firm : Columbus, Cleveland OH

Architect Ross Chapin, who has spent his career championing the "pocket neighborhood" concept has proven that "walkability" and "new urbanism" concepts which are successful in the Northwestcan be successful in the Midwest. TheInglenook community development in Carmel, Indiana is proof that "pocket neighborhoods" can be successful anywhere. We particularly like the concept for in-fill parcels and in first and second ring suburbs.  To learn more about the concept see the links above and the video below.

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In the late 1960's and 1970's the retail industry clustered under a common roof in controlled 72 degree conditions.  As consumer tastes changed and populations shifts, the "life-style" center became the next new thing.  The problem being addressed today is what do we do with all of the covered malls around the country ?  One mall under going a "de-malling" is Randhurst Mall in Mount Prospect, Illinois by Casto Lifestyle Properties once the largest covered malls in the country. Follow this link to view the video of the redesign rendering.  The locations of older covered malls are prime today as many were originally built at the fringes of city limits or around close in suburbs; over the years new suburbs developed and completely surrounded these retail centers.  As developers and municipalities consider what to do with their tired covered malls mixed use opportunities abound.  

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According to walkscore.com a walkable neighborhood has:

1)  A center: Walkable neighborhoods have a center, whether it's a main street or a public space.

2)  People:  Enough people for businesses to flourish and for public transit to run frequently

3)  Mixed income, mixed use:  Affordable housing located near businesses.

4)  Parks and public space:  Plenty of public places to gather and play.

5)  Pedestrian design:  Buildings are close to the street, parking lots relegated to the back.

6)  Schools and workplaces:  Close enough that most residents can walk from their homes.

7)  Complete streets:  Streets designed for bicyclists, pedestrians, and transit.

As we wrote previously in our post titled "Trends We Are Watching", car dependency costs dearly and households which eliminate one car can increase their mortgage carry capacity by approximately $100,000. In order to shed a car in a typical two car family, public transportation options must be practical and convenient. Walkable neighborhoods have more density than typical suburbs and are usually closer to the urban core of a city or region. Cottage homes and neighborhoods which are built on in fill sites in mature neighborhoods can bring residents into or retain existing residents as they transition between phases of their lives. Businesses locate where their customers are located. 

Check out walkscore.com to see what your project's walk score. 

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• The residential housing market is stalling; and perhaps non-existent for homes priced in the top third of the market;
• Public funds for roadway expansions are going to become harder to come by;
• There is and will continue to be an over supply of low density fringe suburban homes (exurban);
• Baby Boomers and their children are showing a desire to downsize and live in walkable closer in communities with mass transit options, with no let up in sight at least through 2025; 

The Brookings Institute published a well reasoned article recently entitled The Next Real Estate Boom.  The authors raise the above and several other facts which lead them to the conclusion that inner ring communities and suburbs will see a quicker stabilization of real estate prices and development, long before the exurban areas of our metropolitan markets.  

So, how can developers and real estate professionals respond to these trends ?  

• Advocate for more and better public transportation options;
• Find ways to promote alternative energy and power options (charging stations);
• Enhance walkable communities through intelligent residential and commercial development.

One statistic mentioned by the authors is that when a household eliminates a car from its budget the household can afford an additional $100,000 in mortgage expenses.  This statistic alone should be enough to motivate governmental bodies to create incentives for taking advantage of these trends.  According to the authors, transportation policies drive development activity.  

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If we want a healthier community we need to start with a healthy core city.    I am a social worker, turned tax attorney, turned real estate deal maker. I tell you this because those phases of my life have all brought me to this point in my career.   You know the theory about the donut. If there is a hole in the middle surrounded by wealthy suburbs, eventually the suburbs will crumble. Besides, urban areas are rich in character, more ethnically diverse and in general are more interesting places to hang out. Given the choice many people would prefer to live work and play in an urban landscape.

Tax credits, whether they be historic, low income or new market fuel urban development deals. Without these tax incentives restoring old buildings in the urban core makes little economic sense. The costs to rehabilitate are more then the fair market value of the buildings upon completion considering the low rents and sales price per square foot. Especially in these economic times when every bank is looking for a reason not to lend money, tax credits are even more important. Yes, tax credit deals take more time, are more complicated and result in higher professional fees. However you can raise almost 50% of the project cost in tax credit equity/ subordinate debt through tax credit programs.

Just recently I read an article in the Sandusky Register Online about the Ohio Preservation Tax Credit and the resultant loss of a deal in the Sandusky area because the program makes it difficult for it to be used with the New Market Tax Credits program. While the article oversimplified the problem, the problem still exists and I and other professionals are having a hard time convincing the Ohio Department of Development and the Ohio Department of Taxation that it needs to be fixed. Basically the program requires the credit to be allocated in proportion to a member’s ownership interest. In other words it does not allow the credit to be “specially allocated” to a member. This is important because urban development deals usually involve federal historic tax credits, state historic tax credit and either low income housing tax credits or new market tax credits. Different tax investors have different appetites depending on their presence in Ohio and their tax liabilities. If the credits could be specially allocated then investors would pay more for them rather then trying to find one investor for all credits. 

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