RRHA Fails to Find Private Developers for Blackwell News by Michael C. Hild - July 6, 2019July 6, 201911 As reported in November 2018, the new and expanded historic districts for areas of Blackwell, Swansboro, and Manchester recently spurred RRHA into action. RRHA cited the threat of rising property values as the reason for developing 96 vacant parcels of land it has been sitting on in Blackwell. The area has had largely stagnant property values due to widespread blight, in large part caused by RRHA itself as it is the dominant property owner in Blackwell. RRHA’s plan was to put 96 parcels out to bid, with the hope that private developers would agree to buy, but with binding timeframes for the completion of timely construction. 55 of those parcels were supposed to garner widespread development interest for income-restricted housing, while 41 properties were earmarked for market rate housing. But that plan failed. Due to lack of interest as outlined in the Richmond Times-Dispatch, RRHA has decided to hold on to the 41 parcels that were designated for market rate housing. For the 55 income restricted parcels that are to be sold, only two entities expressed an interest. And these two entities can hardly be called private developers. 34 of the income-restricted parcels are slated to go to Southside Community Development Corporation and 21 to The Maggie Walker Community Land Trust. Now this is not to diminish the mission of either of these two entities, but these entities rely on donations, non-profit status, and a cocktail of federal HUD grants and special governmental arrangements with the City of Richmond to exist and operate. That is the only reason these two entities were interested. Said differently, private developers do not believe the market is currently functioning in Blackwell to warrant private investment for new home construction, or at least not in the timeframes RRHA was demanding. So What’s The Cause for the Hesitancy? If you had to boil it down to two reasons that private developers are not chomping at the bit to build houses in Blackwell, these would be the two: The Existing Housing Stock Badly Needs Renovation that Market Prices Do Not Support: Renovation of old dilapidated houses is really expensive. Those renovation costs often cannot be recouped at market rates for a home buyer or a house flipper even in established neighborhoods, and they can almost never be recouped in a struggling area like Blackwell. The only realistic means for breaking even is to use Historic Tax Credits, and holding the property as a rental property for 5 years as the federal rules dictate (owners using federal historic tax credits cannot live in the home per federal/IRS rules). So the house renovation investor in Blackwell needs to be dedicated to the long term, by holding the properties as rentals for at least 5 years. Finding long term investors, as opposed to flippers, is very difficult. Blackwell needs to find housing investment unicorns that can stomach the risk, and be very patient. Until that happens, old dilapidated houses will continue to sit and deteriorate until they are eventually torn down.Income-Restricted Housing Dominates The Area: Blackwell’s housing construction has almost exclusively been RRHA led income-restricted development. Often these properties are renovated and sold by Southside Community Development Corporation, Project Homes, etc. Again, this is not to diminish the role of these entities, as affordable housing is a very good thing, and these entities aim to do good work. Bust as the old saying goes…all things in moderation. Blackwell needs mixed income and housing types to have a fighting chance. You cannot dominate the area exclusively with income-restricted housing and expect market rate housing investment to come knocking on your door. Many private homeowners and investors are scared off by Blackwell’s stagnant property values and high foreclosure rates that have plague the area. The foreclosures seen in the last few decades have been caused in large part by income-restricted housing that has gone back on the market via bank foreclosures with very little healthy market rate housing sales to help balance the dynamic. Ironically, and seemingly turning a blind eye to the very real struggles of the area, the City of Richmond just slapped Blackwell and its environs with egregious increases in property assessments that are difficult to substantiate with market based sales comparables. The Maury/Swansboro areas leads the entire City with a whopping 26% increase compared to last year. Just south of Blackwell at Oak Grove, assessments are up 23%. Blackwell/Manchester/Bainbridge North came in at a hefty 13%. It sure feels like the city got the cart before the horse with these anticipatory increases. Could it be that these increases are a means to an end because of the Mayor’s failed attempt to raise the City’s property tax rate? It doesn’t take a genius to understand that if you simply inflate property assessments, but hold the tax rate steady, the City will collect more real estate taxes. And that is exactly what is about to happen in Blackwell and the surrounding area. But I am digressing from the primary topic at hand. Blackwell badly needs buy and hold rental investors who can use historic tax credits to do the hard work, and be patient for five years. That is the only realistic way the area will see private investment in its old, historic houses given current market dynamics. When those 5 years are up, those same houses can then be put on the market for sale to private homeowners. Only then will Blackwell have a mix of income and housing types that will compliment the areas’ vast quantities of income restricted housing. Blackwell will need these market based sales to help stabilize the neighborhood. Then you might see developers willing to build new market rate houses. Until then, Blackwell will need to find long term home renovation investors who don’t mind being landlords. Interactive Map of RRHA Properties Slated for Development Filter byAllRestaurantBrewery/BrewpubMarketEvent SpaceScooter/Motorcycle StoreParkClimbingCoffeehouseRetail ShoppingDanceBakeryTrain MuseumLibraryArt GalleryMuralFishingYoga Get Directions For Driving Walking Bicycling show options hide options Avoid Tolls Avoid Highways From To Fetching directions...... Reset directions Print directions *Red Marker = Market Sale Housing, Blue Marker = Income-Restricted Housing
This is a really thorough explanation of the underlying factors going on here; greatly appreciate these insights (although very painful to realize how unlikely resolution will be—unless many things change). Reply
Could this be why Mr Cochrane (founder of Overnite Transportation, currently UPS Freight) bought up all those properties in Manchester in the 80’s and leveled them? Many of those properties now have apartments on them. I wonder if he understood then that renovating the run down houses wasn’t economically viable. Rumor has it that he ran afoul with city council when they realized he was tearing down the old houses. And that he gifted those properties to the VMFA. It’s a story I keep hearing but haven’t been able to confirm. Reply
I dont believe the properties you are referring to are located in the area that is discussed in this story. Those properties that were demolished were likely from my understanding located in the vicinity of where the old Overnite building (now UPS) was located, on Semmes ave., near the Sun Trust building. Reply
The ratio of income restricted housing to market rate housing is definitely way off. The city should have learned long ago that restricting investors and tying their hands makes for a ghost town. Most would be long term rental investors do not want to be in an area of uncertainty. The premise is to go in knowing the home you purchased will eventually gain equity. RRHA’s recipe is one doomed to fail. Although it sounds nice look at the turn out. No one wants to be involved. Like any unsure market they should have been willing to be fluid and make changes here and there until momentum increased in interest. Reply
Private Investor implies ones wishing for gains for money spent… An area crippled by decay, plagued by crime and only the beginnings of a brighter employment picture for it’s residence are hardly the right environment for investing. The policies of the Democrats are filled with promising the kitchen sink as they sink the city further in dept, while taxing the residents paying for nonsense such as football fields for rich teams, visiting two weeks out of the year. Money spent by the city to provide homes scattered through the city isn’t an investment, it’s Social Engineering at best and at worst it can destroy families not prepared for the complications of home ownership…As with most of California, Richmond is adopting policies which send investors fleeing which in turn, City officials seek another new tax to pay for what is already committed…These temporary officials will be gone and no one held responsible…. Investors… ? 😀 😀 😀 Fiscal restraint ring a bell ? Reply
Didn’t RRHA just say not so long ago they are really more like a real estate company. Well, doesn’t look like it. Reply
As a small real estate investor/landlord, the two most important questions are: can i find good tenants that pay the bills, and will the bank carry a loan? No in both cases for that area Reply
Not true Justin…unable to find a good tenant to pay bills,and will the banks carry a loan?….Justin Nelson people in the African American community work just like you (I suppose?) I’m reading some of these comments, and like yours they sound very condescending. Reply