GAP GIVES CITY ITS CHANCE
The Baltimore Sun
Developer Patrick Turner has big plans for nearly 40 acres in Baltimore's struggling Westport neighborhood. Big as in more than 5 million square feet of waterfront offices, retail, entertainment and urban living. Big as in 1,800 homes, twice what Westport has now.
KSI Services Inc. has big plans in the city, too: just over 1,000 homes on 14 acres in Greektown. And in midtown, the state has hired a development team to transform its office complex into a new neighborhood so big the numbers won't be worked out for at least a year - though a "vision plan" by the state shows the possibility of 1,200 mixed-income homes, a 200-room hotel, and many offices and shops.
Such scale shows the extent to which some developers believe they can draw more young professionals, affluent empty nesters and Washington commuters into Baltimore after years in which all the movement seemed to be out. But with a powerful whirlwind bearing down on the metro area, the potential could be bigger than even they hope.
A Sun analysis found that, with current suburban building restrictions in place, the Baltimore region will have 20,000 fewer homes in four years than it needs to keep up with projected job growth. It would be 100,000 homes short by 2030. With its vast number of vacant homes and empty lots, Baltimore is a natural relief valve with the space to absorb a substantial amount of the growth.
This could be the city's best chance yet for a comeback - if it can capitalize on it.
"The opportunity is here now," said Sandy Marenberg, whose Marenberg Enterprises Inc. has been building in the city for 30 years. "I think Baltimore City is on the verge."
Sandy Hillman, who as an official in Mayor William Donald Schaefer's administration was active in early efforts to revive the city, was stunned by the inherent potential of such a large housing shortage. It suggests to her that Baltimore "will prosper in a way that we've sort of been chasing for decades," she said.
There's no guarantee. Baltimore still has to overcome major challenges that helped to drive residents away. One of the most violent cities in the nation, it has a chronically underperforming school system, rampant drug addiction and the highest property tax rate in the state. It must make headway on a variety of fronts if it hopes to attract large numbers of residents and keep them, experts say.
A housing shortage that limits options in Baltimore's five suburban counties isn't by itself enough to entice local workers into the city, because they can push outward - to Pennsylvania, the Eastern Shore or Delaware. And they're already doing so.
Won't be overnight
"The city needs, in theory, to improve a little bit everywhere ... and that's not going to happen overnight," said Jake Ruppert, a Baltimore resident who heads the city chapter of the Home Builders Association of Maryland.
Baltimore has been a city of sharp contrast. Neighborhoods such as Federal Hill, Canton and Hampden have undergone a remarkable rebirth, with new residents and soaring property values, and the impact has been spilling over into adjacent areas. But other parts of the city remain bleak, pockmarked with houses that no one wants and persistent hopelessness.
The large-scale projects in the works could jump-start change in new places - if the developers pull them off.
"Size is important when you're trying to redevelop an area because you're trying to create a critical mass," said John K. McIlwain, senior fellow for housing with the Urban Land Institute. He spent four years running a fund that invested in developing urban neighborhoods.
Infusing - or creating - a neighborhood with hundreds of working people can change the dynamics quickly. It fosters a sense of safety in numbers, not the dangerous frontier of the urban pioneer. It means more residents with the resources to keep up appearances, greater buying power of the sort that can attract coveted retailers and services, plus increased property and income taxes for the city. And if middle-class families move in and use the local public schools, that too can have an effect and broaden support for educational improvement.
"Getting the buy-in of economically diverse families ... turns out to be so important," said Jeff Nugent, president of the Development Training Institute, an Ellicott City nonprofit that works nationally to improve neighborhood redevelopment efforts.
`Keep the momentum'
The key is good design and an understanding of how much is too much, McIlwain said.
"You want to keep the momentum without getting too far ahead of the market," he said. "I think that's an issue that a number of markets are beginning to face."
Baltimore among them. So many novice investors have flooded into the city in the past few years with dreams of rehabbing old rowhouses that too many properties are for sale now, Marenberg said. The market has slowed significantly, as it has in the suburbs.
But he's not worried long term. Give it a year or so to even out, he predicts. As for the multitude of planned units queuing up? He's convinced that builders will carefully phase them in to avoid a glut.
"The incredible good luck of being in Baltimore in the next 10 years is that we're supposed to have this humongous growth in jobs in the region, and we're going to need all those houses," Marenberg said.
When redevelopment is paced well, it pays dividends. Just as blight ripples outward, so can community improvement, and that positive change has begun to happen, said Charles Duff, president of the nonprofit Jubilee Baltimore Inc., which has been rehabbing in the city for 25 years. Duff sees good neighborhoods growing closer together.
That's why he thinks the city has a real shot - finally - at connecting its economic engines with an uninterrupted string of blocks that are walkable and safe. Downtown north to the Johns Hopkins University and downtown east to Johns Hopkins Hospital should be priorities, he said.
"To the extent that Baltimore works, it'll have to work as a city, which means people are going to want to walk around in it," Duff said.
Some of the new construction is happening in marginal neighborhoods in those areas. For instance, workers are building a 32-townhouse project on Calvert Street close to Penn Station - and near numerous boarded-up homes. As Jeni Paik puts it, "That area is still a little scary right now." But she's buying one of the townhouses anyway and moving from nearby Mount Vernon, where she has seen improvements in her five years of Baltimore living.
"I have faith that the Station North area is going to get better too," said Paik, 26.
Other signs that the regional housing shortage is coming at an opportune time for Baltimore:
Building activity has spiked. The city issued permits for just over 1,400 new-construction housing units last year, more than six times the amount in 2000. Single-family rehabs nearly tripled, and workers are increasingly converting old office and industrial buildings to apartments and condominiums. The city says developments that will eventually have 4,200 units are under construction, 7,100 new homes are in the planning pipeline, and thousands of potential units are in earlier "conceptual" stages.
National homebuilders are moving in, including Pulte Homes, which is about halfway through construction on its first project in the city and is in negotiations for a second. "The pro-growth attitude and cooperation from the city is very refreshing," said Rod Hart, vice president of operations for Pulte's Maryland division.
The city felt the effects of the housing boom as much as its suburbs. The average Baltimore home that sold through the multiple listing service in June was 90 percent more expensive than it was five years ago, roughly the same gain as in the counties, according to Metropolitan Regional Information Systems Inc.
The city's residential property tax base increased 25 percent from 2001 to 2005, according to state numbers. Including apartments, it was $15 billion last year, helping to give the city a significant surplus.
Positive demographic trends are helping to drive this change. Baltimore's population loss - more than 300,000 people since 1950 - seems to have slowed, if not stopped. Census estimates showed the city had about as many residents last year as in 2002.
The baby boomers
Meanwhile, more and more Americans are becoming prime candidates for urban living. Baby boomers, that numerous generation that helped make the suburbs possible, are now fueling downtown development in Baltimore because they're leaving empty-nest suburban homes. Young professionals are moving in too.
"Baltimore is in a great position to experience greater growth," said Joseph Haskins Jr., chief executive of the city-based Harbor Bank of Maryland. "It's already appealing to a certain group. I think Baltimore should be thinking very seriously about becoming more attractive ... across the board."
For example, the city's high property tax is a hindrance, said Joseph T. "Jody" Landers III, executive vice president of the Greater Baltimore Board of Realtors. The city's tax rate - just shy of $2.29 per $100 of assessed value - is at least double that of any county in the state. Mayor Martin O'Malley's plan for a 10-cent cut over five years, beginning last July, won't change that.
The city's average home sales price of $180,000 is still markedly cheaper than in the suburbs, where homes are selling for nearly $370,000 on average. But, increasingly, the city neighborhoods where middle-class residents would be most likely to buy don't look like such a bargain anymore. The number of city homes that sold for at least $300,000 through the multiple listing service last year was slightly more than 1,400, seven times as many as in 2000. And many of the new homes are priced much higher.
Tax bills are vaulting upward as prices and assessments rise sharply.
"In order to keep the momentum going, I think the city is going to need to address this," said Landers, a City Council member from 1983 to 1991. "I would think a reasonable target would be to try to stay no more than ... 50 to 60 percent above the regional average."
It's a chicken-or-the-egg quandary for the city, deciding whether tax cuts or growth comes first. If it lowers the tax rate so much that it's forced to cut services, it risks alienating residents.
But David Washington, who bought a new townhouse in Canton last year, said he's proof that the city is already alienating residents. Though he considers himself a loyal Baltimorean, he put his house up for sale and said he plans to leave the city because the taxes on the home he bought for $630,000 will be at least $16,000 a year once the discount for new construction phases out.
`Can't afford the taxes'
"Some people are getting a clue and saying, `Well, you can afford the house, but you can't afford the taxes,'" said Washington, an engineer who works in the District.
Laura Kaufman Siner and her husband were stunned when they learned what their tax bite would be for them to move from Silver Spring to one of Pulte's new townhouses in Locust Point in October - $12,000 a year, $4,000 more than the original estimate. The new- construction tax credit will help, but they paid their first year's bill upfront. It would be easier to take, she said, if public services such as road maintenance showed any improvement.
Still, they're happy to be here, she said. They feel safe walking around the area. They go to local museums all the time and take a water taxi to restaurants on the other side of the harbor. She even moved her art business to town.
"I used to hate Baltimore, truthfully ... but I notice change coming over the whole city," said Siner, 59, whose son and daughter- in-law also moved to Locust Point last year. "It just seems exciting to me - I wanted to be there."
But she wonders whether her son and other young-adult residents will want to be elsewhere once they have children.
Educational improvement is critical for the city to get back some of the middle-class families it lost, many say. Frequently, city boosters - writing that demographic off as lost - have focused on buyers without school-age children. But others worry that a childless niche might not work over the long term.
"We can attract all day and all night young professionals to the city, which is great, but the key is, how are we going to keep these people here?" said Tracy Gosson, executive director of the nonprofit Live Baltimore Home Center, which markets city living. "No one city survives on professionals, no kids; empty nesters; 25-some- things. Because those people are not going to live in neighborhoods like Howard Park and Hamilton. Those are family neighborhoods."
She's battling the general negative opinion of the school system by promoting elementary schools that beat the statewide average on third- and fifth-grade tests. Sixteen - scattered across the city - topped the state in each grade in reading, math or both last year. Thirty-three more surpassed the state on at least one measure in one grade.
But the system has more than 100 schools with elementary-grade classes. And 11 of the city's middle and high schools are performing so poorly the state wants outside takeovers. Kalman R. "Buzzy" Hettleman, a city school board member who was an aide to two former mayors, said there's not nearly enough money to substantially lower class sizes, to successfully battle the problems of poverty or to take care of what he said is more than $1 billion in deferred maintenance and capital needs.
School quality is an important consideration for homebuyers with children, but safety matters to everyone. Baltimore's violent crime troubles are a particular problem for transitional neighborhoods, whose population could just as easily go down as up. More taxpaying residents would mean more money for police coverage - and fewer blocks with the sort of abandonment that allows drug dealing to flourish - if only they would feel safe enough to move in, community developers say.
This is where perception can be just as important as reality, several local leaders said, because people are more likely to come to Baltimore if they think the city is improving. Local politicians can have a significant effect here, for good or for bad, said Abell Foundation President Robert C. Embry Jr., a Baltimore housing commissioner under two former mayors.
"If the city becomes a place where the city leadership is seen in an unfavorable light, that could be a real damper," said Embry, who thinks Baltimore's challenge is less about changing direction than about not messing up.
Another perpetual drag, vacant housing, has in the past few years taken on the sheen of rose-colored possibilities for investors. Still, the uptick in rehabbing is hitting just the tip of the iceberg: More than 16,000 properties are uninhabitable as is, the city said. More are merely vacant.
"It's the difficulty, but it's also the opportunity," said Sara West, housing coordinator for the Reservoir Hill Improvement Council. The city counts about 150 uninhabitable properties among the 1,500 in the neighborhood.
The city government has spent the past four years acquiring 6,100 vacant and abandoned homes through its Project 5000 initiative, aiming to get them into the hands of homeowners, rehabbers and developers. So far, about 1,000 have been sold or donated, and 2,000 are earmarked for large-scale redevelopment work.
In Reservoir Hill, which has a sizable concentration of such homes, roughly 45 percent of the city-owned properties have been sold and more deals are imminent, the city said. Action is harder to quantify. Neighbors know that rehabbers have 18 months to finish their work when they buy through Baltimore's Selling City-Owned Properties Efficiently program but are concerned that some purchasers haven't done any upgrading yet, West said.
City officials say improvement takes time, not only for rehabbing but also for large redevelopment projects that must wend their way through the planning process. "You will see a year from now a dramatic change," said Christopher Shea, the city's deputy housing commissioner for development.
There's an inherent dilemma in revitalization: Progress for a neighborhood could be a disaster for residents who aren't already homeowners - and some who are. As values rise, so do rents and property-tax bills. Joyce Smith, 54, who bought a house 17 years ago in Franklin Square, a neighborhood in the U.S. 40 West corridor, said that worried residents are asking, "My grandmother lived here, my mom lived here - will I be able to live here?"
"I see people who are working class or more moderate income being pushed out," said Smith, executive director of the nonprofit community coalition Operation ReachOut SouthWest.
Washington, which saw a spike in demand a few years before Baltimore, is a gentrification example. Sales prices in that city are averaging $580,000, outstripping even neighboring Montgomery County, one of the most expensive counties in the state.
The District, trying to balance that out, has an affordable- housing trust fund and is developing an "inclusionary zoning" law that would give builders density bonuses for offering some of their units at prices aimed at low- and moderate-income workers. But its experience offers a lesson for Baltimore, said Adrian G. Washington, president and chief executive of the Anacostia Waterfront Corp., a quasi-public redevelopment agency.
"It's much less expensive to preserve the affordable housing you have than to lose it and to build new affordable housing," he said. The upward pressure on prices from renewal "means we've got to work harder to make sure people aren't displaced."
Baltimore seems to have heard the message. A task force recently recommended a variety of "inclusionary housing" measures to the city, including development incentives and homeowner assistance. A $59 million fund for affordable housing efforts, approved last year, is available for the city to begin spending this summer. And a variety of nonprofits are trying to revitalize without gentrifying.
Not all the pricey developments will necessarily act as forces of displacement. Some, such as Turner's Westport project, are rising on the ashes of dead industry. His Turner Development Group is demolishing old industrial buildings on the Southwest Baltimore site to prepare for infrastructure work in June, drawing praise from nearby residents who had long been blocked off from the Middle Branch waterfront.
Turner believes suburbanites and Washington commuters will move to Baltimore, and he's putting increasing amounts of money where his market research is. He plans to announce two more projects in the city this year. Each, he said, will have homes, offices and retail totaling a bit more than 1 million square feet. Together, that's the equivalent of nearly a dozen Wal-Mart supercenters.
Noting that the city's population seems to be stabilizing, Turner said his goal for these developments is simple: "Give 'em a good reason to come back."
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