Small development — the key to solving New Haven’s budget woes
Small development offers the best promise to repair New Haven’s budget woes — and quickly. It has the potential to raise revenues beyond just erasing budget problems and could lead to dropping tax rates.
Small development, if implemented properly, would mobilize hundreds of untapped small local developers, builders, and finance, keeping money in New Haven. Its affordability would draw a host of motivated young people downtown, launching a “start-up city” and recovering New Haven’s deserved global recognition as an innovative and thriving city.
Here are two examples in Boston’s North End and Beacon Hill. The images depict residential and commercial/mixed-use. There currently is no intimate small development in New Haven.
In Boston’s case, there is so much intimate small development filling what could have been vacant land that Bostonians pay 20% the taxes New Haven residents pay for the same value property.
Tax-wise, New Haven is a tiny village supporting a large city. Currently, 70-80% of New Haven is vacant land, including overly wide streets, surface lots, off-street parking, parking garages and vacant lots. These make up the majority of land that produces no or very little tax revenue. Accommodating cars is extremely expensive, and we all pay whether we own a car or not. Before cars, percentages were reversed: only 20-30% of old cities were vacant.
The six-acre example below illustrates how a different perspective can explode tax rolls and social vibrancy. Just by narrowing State Street and dividing vacant land to small parcels, the city gains $4.6 million in taxes and 1,800 dwelling units.
Why is small development so necessary? Beyond the heroics of balancing New Haven’s $569 million general fund budget crippled by the pandemic, the city hangs precariously beneath a debt of $1.4 billion: $760 million in unfunded liabilities (such as for pensions) and $651 million in outstanding bonds. Bankruptcy offers the quickest fix, but small development promises the quickest recovery. Many hands make light work.
To illustrate small development’s remarkable capabilities, it’s compelling to compare a typical big box housing development at 1245 Chapel to a four-story small development proposal for a 0.45-acre site at 352 Whalley:
Using a tax/acre figure produces a fair apples-to-apples comparison. It is calculated by multiplying the property assessment by the mill rate (42.98 in 2019), then dividing that number by the property’s acreage, producing a property taxes/acre number.
Another confirmation of the power of small comes from expense/revenue (cash-flow) studies by Joe Minicozzi of Urban3. He extrapolates hard data of what cities receive in taxes and spend in services, such as infrastructure, street cleaning/repair, trash collection, education, first responders, recreation, running of government, etc. The result is “cash-flow” (positive or negative) for every property.
Urban3’s hard-data analysis reveals that small, even poor, parcels are more cash positive than large, even affluent, parcels. Urban3’s 3-D cash-flow model for Lafayette, LA (see illustration) reveals cash-flow positive (green, the higher the better), and cash-flow negative (red, the higher the worse.) Bulky red are big box stores such as Walmart, Home Depot, etc. are cash dumps that exceed salary and pension obligations.
Additional cash-flow problems fester with big box housing developments. An analysis by architect and urban advocate Jonathan Hopkins shows the money from these developments bleeding out of town. All parties involved with a big box project’s development are typically from out of town.
Approximately two-thirds of New Haven’s 4,000 municipal union employees live outside New Haven. Closer to three-quarters of higher paid employees, like police, firefighters, teachers, and administrators live outside New Haven. Same goes for retirees. Despite healthy union-negotiated terms, employees can’t afford to live in the city. The developer’s money and most New Haven payroll goes to benefit other towns.
Hopkins’s point is that despite a multi-million-dollar housing project “expanding the grand list,” practically none of it directly benefits New Haven’s residents or, at a minimum, serves very well to help retire debt and lower mill rates, much less raise New Haven to global prominence. The proof’s in the pudding. The flood of recent big box housing projects has yet to reverse the city’s decline.
Small beats large in other ways:
- Lower costs associated with small parcel and building footprints engage small local players, including landowners, developers, builders, and lenders. It keeps money and jobs in the city.
- Small Development can be financed with simple mortgages from local banks. Foreign venture capital is not required.
- Small Development savings translates into affordable rents. Even with affordable rents, low expenses yield profit margins that outperform large developments.
So far, small development wins in every category over big box development. But there’s a problem. The nationally crafted zoning code, the Municode, used by most cities, including New Haven, makes small development “illegal.” Regulations for minimum lot size, maximum coverage, minimum set back lines, maximum dwelling units, minimum dwelling unit size, off street parking, etc., do not allow for the intimate congregation of dwelling units we saw in the State Street or Boston examples.
The city’s insistence on market-driven rather than vision-based planning also dissuades small development. Without identifying small development “neighborhoods,” the isolation of scattered sites in incompatible locations leaves it vulnerable to the same NIMBY opposition as big box projects, but without their deep pockets to pay for a defense.
The framers of city policy must recognize that exclusionary zoning is de facto vision-based planning. The car-dependency, lack of economic viability, under-utilization of valuable land, continued segregation, and lack of clustering of companies in a particular field — a phenomenon identified by the Harvard Business Review as the new foundation of prosperity — are all outcomes of exclusionary zoning.
The framers also must recognize that zoning based on vision (what one wants instead of what one doesn’t want), including public and professional participation, clarifies expectations and wins buy-in from neighborhoods, otherwise threatened by the uncertainty of market-driven development. From the developer’s point of view, a vision-based code and citizen-embraced sensible regulating plan amounts to pre-approval. Conforming proposals save time and money and avoid lawsuits; translate: affordable rents.
If you want to change development patterns, you have to change the framework that creates the development patterns.
Luckily creation of an alternative framework has been around 35 years, with more than 4,000 implementations. There’s a rich resource of legally vetted and instituted codes with visible results.
Called the SmartCode, there are free downloads at SmartCode Central. The SmartCode framework calibrates according to appropriate density, from raw no-density nature to high density center city. Germain to this article, it includes small development, affordability, tiny houses, etc.
The SmartCode needs only a regulating plan to identify where regulations apply. Experienced consultants create a publicly facilitated and approved regulating plan on site in a week, with a full report in a month or two, ready for government approval. Project approval can be speedier, since government takes part in the intensive week-long framework formation process.
Finally, rigorous analysis of burdensome approval processes identifies egregious sticking points to correct in order to attract and expedite small development — to deputize local entrepreneurs’ involvement with the betterment of their own city, and to make New Haven an affordable and dynamic start-up destination with high retention of the best and brightest spilling out of institutions of higher learning here in our own midst.
Robert Orr is the owner of Robert Orr and Associates, an architectural and town-planning firm based in New Haven.
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