Citation
Transit oriented development and affordable housing

Material Information

Title:
Transit oriented development and affordable housing analyzing the effects of economic, regulatory and advocacy factors on a developer's decision to include affordable housing in TODS in the Denver, Colorado region
Creator:
Bross, Lance A. ( author )
Place of Publication:
Denver, CO
Publisher:
University of Colorado Denver
Publication Date:
Language:
English
Physical Description:
1 electronic file (300 pages). : ;

Subjects

Subjects / Keywords:
Transit-oriented development -- Colorado ( lcsh )
Transit-oriented development -- Planning ( lcsh )
Genre:
bibliography ( marcgt )
theses ( marcgt )
non-fiction ( marcgt )

Notes

Review:
The purpose of this research is to analyze the impact of the economic, advocacy, and regulatory factors on the decision of developers to provide or forego affordable housing in a transit-oriented development (TOD). A literature review identifies eleven variables collectively comprising these factors. The study then analyzes the affordable-housing decisions of developers through the theoretical framework of satisficing. The research argues that TOD developers are satisficers who are willing to produce affordable housing in a given TOD only if the risks can be minimized and satisfactory profits achieved. The general hypothesis for the study is that the more the three factors (economic, regulatory, and advocacy) interact to reduce risks and create conditions for satisfactory profits, the more likely a developer will be to provide affordable housing. The literature additionally suggests that the economic factor provides the dominant influence on a developer's decision in this regard. In summary, some positive combination of reasonable land costs, stable housing-market conditions, the availability of public subsidies, and a solid expectation of return on investment is required for a developer to consider including affordable housing in a TOD. The study confirms in the cases reviewed that the economic factor is indeed crucial for each developer's decisions to provide affordable housing or not in their TOD. In all three cases where affordable housing is provided, a positive economic factor which helps reduce risk and create satisfactory profits is present. The study also shows that in the two cases where affordable housing is not provided, the negative advocacy factor characterized by public opposition to affordable housing creates significant costs and risks and thus non-satisficing conditions for the developers. This research examines five TODs in the Denver region. The study employs interviews with developers and key players from each TOD as well as analysis of the relevant primary documents. A specially developed scale measures the impact of each factor on the various developers' decisions for or against affordable housing. The study concludes with policy recommendations to incentivize developers to increase the production of affordable housing in TODs in both Denver and elsewhere.
Thesis:
Thesis (Ph.D.)--University of Colorado Denver. Public affairs
Bibliography:
Includes bibliographic references.
System Details:
System requirements: Adobe Reader.
General Note:
School of Public Affairs
Statement of Responsibility:
by Lance A. Bross.

Record Information

Source Institution:
University of Colorado Denver
Holding Location:
|Auraria Library
Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
903048701 ( OCLC )
ocn903048701

Downloads

This item is only available as the following downloads:


Full Text

PAGE 1

TRANSIT ORIENTED DEVELOPMENT AND AFFORDABLE HOUSING: ANALYZING THE EFFECTS OF ECONOMIC, REGULATORY AND ADVOCACY INCLUDE AFFORDABLE HOUSING IN TODS IN THE DENVER COLORADO REGION. by LANCE A. BROSS B.A., Baylor University, 1993 M.Div., Princeton Theological Seminary, 1997 M.Sc., Oxford University, 2000 A thesis submitted to the Faculty of the Graduate School of the University of Colorado in partial fulfillment of the requirements for the degree of Doctor of Philosophy Public Affairs 201 4

PAGE 2

ii This thesis for the Doctor of Philosophy degree by Lance A. Bross has been approved for the Public Affairs Program by Allan Wallis Dissertation Chair Tom Clark, Examination Chair Lloyd Burton Christine Martell July 2 3 2014

PAGE 3

iii Bross, Lance A. (Ph.D., Public Affairs) Transit Oriented Development a nd Affordable Housing: Analyzing the Effects of Economic, Regulatory a nd Advocacy Factors o n a t o Include Affordable Housing i n T ODs in t he Denver, Colorado Region. Thesis directed by Associate Professor Allan Wallis ABSTRACT The purpose of this research is to analyze the impact of the economic, advocacy, and regulatory factors on the decision of developers to provide or forego affordable housing in a transit oriented development (TOD) A literature review identifies eleven variables collectively comprising these factor s The study the n analyzes the affordable housing decision s of developers through the theoretical framework of satisficing The research argues that TOD developers are satisficers who are willing to produce affordable housing in a given TOD only if the risks can be minim ized and satisfactory profits achieved. The general hypothesis for the study is that the more the three factors (economic, regulatory, and advocacy) interact to reduce risks and create conditions for satisfactory profits, the more likely a developer will be to provide affordable housing. The litera ture additionally suggests that the economic factor provides the dominant influence on a in this regard In summary, some positive combination of reasonable land costs, stable housing market conditions, the availability of public subs idies, and a solid expectation of return on investment is required for a developer to consider including affordable housing in a TOD.

PAGE 4

iv The study confirms in the cases reviewed that the economic factor i s indeed crucial for each developer decision s to p rovide affordable housing or not in their TOD. In all three cases where affordable housing is provided, a positive economic factor which helps reduce risk and create satisfactory profits is present. The study also shows that in the two c ases where afford able housing i s not provided, the negative advocacy factor characterized by public opposition to affordable housing creates significant costs and risks and thus non satisficing conditions for the developers. This research examines five TODs in the Denver region. The study employ s interviews with developers and key players from each TOD as well as analys i s of the relevant primary documents A specially developed scale measures the impact of each factor on the various developer decision s for or against affordable housing The study concludes with policy recommendations to incentiviz e developers to increase the production of affordable housing in TODs in both Denver and elsewhere The form and content of this abstract are approved. I recommend its publication. Approved: Allan Walli s

PAGE 5

v TABLE OF CONTENTS CHAPTER I INTRODUCTION 1 Transit Oriented Development 3 Research Question 4 Theoretical Framework 6 The Denver Region Case Studies 7 Affordable Housing in the Denver Region 8 Transportation Costs and Housing Affordability in the Denver Region 10 Light Rail Development in the Denver Region 11 Transit Oriented Developments (TODs) in the Denver Region 1 4 TODs and Affordable Housing in the Denver Region 1 5 Significance of this Research to Public Policy 1 7 Organizat ion of Dissertation 1 7 II. LITERATURE REVIEW 1 8 Rising Transportation Costs for Households Living Far from Work 1 8 TODs and Jobs Housing Imbalance 20 The Economic Factor 2 1 The Regulatory Factor 25 The Advocacy Factor 2 9 The Theory of Satisficing 3 2 Satisficing Developers 3 4 Satisficing Developers and Affordable Housing Development in TODs 3 7

PAGE 6

vi III. RESEARCH DESIGN AND METHODS 40 Case Study Research 40 Denver TOD Case Study Design 4 2 Case Selection Criteria 4 2 The Semi Structured Interview 4 5 Selecting Interviewees 4 6 Analyzing the Interview Data 4 7 Documentary Evidence 51 Triangulation 5 2 The Economic Factor 5 4 The Regulatory Factor 60 The Advocacy Factor 6 6 The Scoring Timeframe 70 The Scoring System 70 Moderating Factors 73 Hypotheses 75 Conclusion 7 6 IV. THE FIVE DENVER T OD CASE STUDIES 7 8 Selection Criteria 7 8 Case 1 Englewood City Center TOD 80 Transit Station 80 Project Description 80 Photos 82

PAGE 7

vii Background 8 5 Case 2 Vallagio at Inverness TOD 8 8 Transit Station 8 8 Project Description 8 8 Photos 8 9 Background 92 Case 3 Gates TOD 9 7 Transit Station 9 7 Project Description 9 8 Photos 9 9 Background 101 Case 4 South Lincoln TOD 103 Transit Station 103 Project Description 103 Photos 1 05 Background 10 6 Case 5 Evans Station Lofts TOD 10 8 Transit Station 10 8 Project Description 10 9 Photos 1 10 Background 1 11 V. ANALYSIS O F T HE ECONOMIC FACTOR 11 6 Introduction 11 6

PAGE 8

viii Research Question and the Economic Factor 11 6 Englewood City Center TOD 11 7 Economic Context 11 7 Scoring the Economic Variables 11 8 Impact of the Economic Factor on Affordable Housing 1 21 Post Development Economic Context 1 22 Vallagio at Inverness TOD 1 23 Economic Context 1 23 Scoring the Economic Variables 1 24 Impact of t he Economic Factor 1 26 Post Development Economic Context 12 7 Gates TOD 12 8 Economic Context 128 Scoring the Economic Variables 12 9 Impact of the Economic Factor 1 31 Post Development Economic Context 1 32 South Lincoln TOD 1 34 Economic Context 1 34 Scoring the Economic Variables 1 35 Impact of the Economic Factor 1 38 Post Development Economic Context 1 40 Evans Station Lofts TOD 1 40 Economic Context 1 40

PAGE 9

ix Scoring the Economic Variables 1 42 Impact of the Economic Factor 1 43 Post Development Economic Context 1 44 Satisficing and the Economic Factor 1 44 VI ANALYSIS OF T HE REGULATORY FACTOR 14 9 Introduction 14 9 Research Question and the Regulatory Factor 14 9 Englewood City Center TOD 1 50 Regulatory Context 1 50 Scoring the Regulatory Variables 1 51 Impact of the Regulatory Factor on Affordable Housing 1 53 Post Development Regulatory Context 1 55 Vallagio at Inverness TOD 1 55 Regulatory Context 1 55 Sc oring the Regulatory Variables 1 56 Impact of t he Regulatory Factor 1 58 Post Development Regulatory Context 1 59 Gates TOD 15 9 Regulatory Context 15 9 Scoring the Regulatory Variables 1 61 Impact of the Regulatory Factor 1 62 Post Development Regulatory Context 16 2 South Lincoln TOD 1 63

PAGE 10

x Regulatory Context 1 6 3 Scoring the Regulatory Variables 1 6 4 Impact of the Regulatory Factor 1 67 Post Development Regulatory Context 1 6 7 Evans Station Lofts TOD 1 68 Regulatory Context 1 68 Scoring the Regulatory Variables 1 69 Impact of the Regulatory Factor 1 71 Post Development Regulatory Context 1 71 Satisficing and the Regulatory Factor 1 71 VII. ANALYSIS OF T HE ADVOCACY FACTOR 1 76 Introduction 1 76 Research Question and the Advocacy Factor 1 7 6 Englewood City Center TOD 1 77 Advocacy Climate 1 77 Scoring the Advocacy Variables 1 78 Impact of the Advocacy Factor on Affordable Housing 1 80 P ost Development Advocacy Climate 1 81 Vallagio at Inverness TOD 1 82 Advocacy Climate 1 82 Scoring the Advocacy Variables 1 83 Impact of t he Advocacy Factor 1 86

PAGE 11

xi Post Development Advocacy Climate 1 87 Gates TOD 1 88 Advocacy Climate 1 88 Scoring the Advocacy Variables 1 89 Impact of the Advocacy Factor 1 91 Post Development Advocacy Climate 1 92 South Lincoln TOD 1 93 Advocacy Climate 1 93 Scoring the Advocacy Variables 1 94 Impact of the Advocacy Factor 1 96 Post Development Advocacy Climate 1 97 Evans Station Lofts TOD 1 97 Advocacy Climate 1 97 Scoring the Advocacy Variables 1 98 Impact of the Advocacy Factor 200 Post Development Advocacy Climate 201 Satisficing and the Advocacy Factor 202 VIII. CONCLUSIONS 205 Research Question, Theory, and Hypotheses 205 Findings 210 Examining the Results of the Hypotheses 210 Satisficing 220 Trammell Crow at Englewood City Center 2 20

PAGE 12

xii Metropolitan Homes at Inverness 2 23 Trammell Crow at Gates 2 24 The Denver Housing Authority at South Lincoln 2 26 Medici at Evans Station 2 27 Additional Findings 2 29 Satisficing, Learning and Future Decision Making 2 35 Trammell Crow and the Satisficing Learning Cycle 2 38 Learning in the Region 2 39 Policy Recommendations 2 40 Policy Recommendations and the Satisficing Model 2 44 Contributions of this Research 2 53 Future Research 2 55 Limitations of the Research 2 56 REFERENCES 2 59 APPENDIX 2 73 A. List of Sample Questions Used for Interviews 2 73 B. List of Interviewees U sed in Research 2 76 C. Summary Table of Codes Used in the Qualitative Data Analysis 2 78 D. The Low Inco me Housing Tax Credit Program 2 80 E. Quantitative Easing/Mortgage Backed Sec urities Program 2 82

PAGE 13

xiii LIST OF TABLE S TABLE 3.1 Economic Factor Scoring Template 5 9 3.2 Regul atory Factor Scoring Template 6 5 3.3 Advocacy Fa ctor Scoring Template 6 9 3.4 Hypothetical Score for the Economic Factor 71 4.1 TOD Case Study Summary 1 15 5.1 Economic Factor Scoring Categories 1 17 5.2 Economic Factor Score for Trammell Crow at Englewood City Center TOD 11 8 5.3 Economic Factor Score for Vallagio at Inverness TOD 1 24 5.4 Economic Factor Score for Trammell Crow/Gates TOD 1 29 5.5 Economic Factor Score for South Lincoln TOD 1 35 5.6 Economic Factor Score for Evans Station Lofts TOD 1 41 6.1 Regulatory Factor Scoring Categories 1 50 6.2 Regulatory Factor Score for Englewood City Center TOD 1 51 6. 3 Regulatory Factor Score for Vallagio at Inverness TOD 1 56 6. 4 Regulatory Factor Score for Trammell Crow/Gates TOD 1 60 6. 5 Regulatory Factor Score for South Lincoln TOD 1 64 6. 6 Regulatory Factor Score for Evans Station Lofts TOD 1 68 7.1 Advocacy Factor Scoring Categories 1 77 7.2 Advocacy Factor Score for Englewood City Center TOD 1 78 7.3 Advocacy Factor Score for Vallagio at Inverness TOD 1 83 7.4 Advocacy Factor Score for Trammell Crow/Gates TOD 1 89

PAGE 14

xiv 7.5 Advocacy Factor Score for the South Lincoln TOD 1 93 7.6 Advocacy Factor Score for Evans Station Lofts TOD 1 98 8.1 Composite Scoring Table for Five Denver TOD Cases 20 9 8.2 Economic Factor Scores for the Five Denver TODs 210 8.3 Factor Scores for Englewood and Vallagio 2 16 8.4 Factor Scores for South Lincoln 2 18

PAGE 15

xv L IST OF FIGURES FIGURE 2.1 Theoretical Model 3 9 4.1 Den ver/RTD Light Rail System Map 79 8.1 Theoretical Model 208 8.2 Multifamily Housing Market Conditions in the U.S. from 1999 20 13 2 30 8.3 The Satisficing Learning Cycle 2 37 8.4 Housing Markets and the Satisficing Model 2 45 8.5 Public Subsidies and the Satisficing Model 2 46 8.6 Land Banking and the Satisficing Model 2 47 8.7 Reduced Parking Requirements and the Satisficing Model 2 49 8.8 Communications between Advocacy Groups and the Satisficing Model 2 50 8.9 Affordable Housing Mandates and the Satisficing Model 2 52

PAGE 16

1 CHAPTER I INTRODUCTION Affordable housing continues to be one of the most pressing policy problems in major metropolitan communities in the U.S. (Joint Center for Housing Studies, 2012; NLIHC, 2012). While very low income households face the most difficulties finding affordable housing, increasingly working c lass and middle income families are feeling the cost burden. According to research completed by the Joint Centers for Housing Studies at Harvard University (2012), the loss in income associated with the Great Recession that began in 2008 considerably incr eased affordable housing problems for low income, working class, and modest income households. JCHS research revealed that between 2007 and 2010, the number of households paying more than half their income for housing rose by 2.3 million, bringing the tot al to 20.2 million. Additionally, JCHS reported that nearly one third of all Americans are burdened by housing costs and spend more than 30% of their pre tax income on housing. Furthermore, workers in low wage jobs like retail sales, childcare work, and health care services often pay more than half their income for housing (NLIHC, 2012). Research by the National Low Income Housing Coalition (2012) found that in larger metropolitan communities, a person must earn two to three times the national minimum wa ge to afford a modest two bedroom rental apartment. Housing experts maintain that affordable housing problems are significantly underreport ed particularly when one considers transportation costs to and from work (Center for Housing Policy, 2012). The t rue extent of the affordable housing problem is realized only when one takes into consideration the distance from the workplace that

PAGE 17

2 households must live to afford either a rental home or homeownership (often referred to as the jobs housing imbalance probl em). In order to spend less than 30% of their pre tax income on housing, many individuals or families must live far away from their employment centers. However, much of the money being saved on housing located far from work is lost in transportation co sts. The Center for Neighborhood Technology (CNT) has developed a housing and transportation index tool that examines housing affordability and transportation costs for households in the U.S. (Center for Neighborhood Technology, 2012) CNT reported that since the year 2000, housing and transportation research revealed that for every dollar a working family saved on housing, they spent 77 (households earning less than 100% of the area median income) in 28 metropolitan communities spent more on transportation costs than housing; specifically, 30 percent of their income on transportation versus 28 percent on housing. Thus the combined expenditure of housing and transportation for the average working family is equal to almost 60 percent of their total income. Furthermore, moderate and middle income households are struggling as well income renter spent an average of 55% of their income on combined housing and transportation costs while the typical moderate income homeowner with a mortgage on its property paid a comb ined 72 percent of their total income on transportation and housing costs. Furthermore, with 15 of the 20 fastest developing counties in the U.S.

PAGE 18

3 located 30 miles or more from the closest central business district, the housing and transportation problem i s expected to worsen (Cen ter for Housing Policy, 2012). Transit Oriented Development While the affordable housing and transportation cost problem is worsening in major cities across the country, one significant urban planning concept that has arisen in th e past decade that seeks to mitigate these issues is t ransit o riented d evelopment (TOD) (Bernick & Cervero, 1997; Calthorpe & Fulton, 2001; Center for Transit Oriented Development, 2007; Dittmar & Ohland, 2004 ). The Center for Transit Oriented Development (2013) defines TOD as a mixed use development that includes a variety of housing choices with a combination of retail businesses, offices, public spaces, and pedestrian walkways, usually located within a half mile of a public t ransit station ( Center for Transit Oriented Development, 2013). The lowest housing density TOD developments start at 15 to 20 dwelling units per acre while most TODs exceed 60 dwelling units per acre (Dittmar & Ohland, 2004). These housing densities far surpass typical low density suburban developments which range from one t o seven dwelling units per acre (Wheeler & Beatley, 2004) Higher density TODs can serve to moderate affordable housing shortages by offering a variety of housing options with various price points. Many TODs offer a mixture of residential units such as carriage houses, lofts, apartments, condo miniums townhomes, and single family homes. These residential options range from small s tudio apartments up to five bedroom homes. Many TODs also include income qualifying affordable rental and for sale homes for households earning less than 80% of the area median income.

PAGE 19

4 In addition to the affordability related to the variety of residential options in a TOD the proximity to public transit within TODs lends itself to reducing transportation costs for households as it enables residents to reduce their automobile expenses by accessing public transit to reach jobs and services in other location s. Many TOD residents in fact often choose to live there without a car or to downsize from multiple cars to only one (Cervero, 2009) Research Question Transit Oriented Developments (TODs) offer an effective strategy to mitigate housing and transportation costs. This dissertation seeks to understand the factors that review of the literature regarding TODs and affordable housing (discussed in Chapter 2.), decision to produce affordable housing in a TOD: Land cost, housing market conditions, public subsidies, return on inv estment (ROI), zoning requirements, infrastructure requirements, parking requirements, mixed use retail requirements, neighborhood advocacy, political advocacy, and non profit advocacy. The research organizes these eleven variables into three factors: Ec onomic (land cost, housing market conditions, public subsidies, and ROI); regulatory (zoning, infrastructure, parking and mixed use requirements), and advocacy (neighborhood, political, and non profit advocacy). The research question for this study is as follows: How do the economic, to produce or forego affordable housing in a TOD? The general hypothesis for this research is that if these three factors work to re duce risks and allow for satisfactory

PAGE 20

5 profits, then it is likely that a developer will choose to provide affordable housing. Furthermore, the study holds that the economic factor is the dominant of the three factors with regard to creating favorable con ditions for affordable housing. If the economic factor comprised of a combination of reasonable land costs, solid market conditions, available public subsidies can achieve an attractive return on investment, then it is more likely that a developer will co nsider including affordable housing in a development. The study also argues that the regulatory and advocacy factor s work to moderate the effect of the economic factor by either increasing or reducing risks for the developer. If the regulatory factor (co mprised of zoning, infrastructure, parking, and mixed use requirements) results in reduced risks for the developer via lower regulatory costs, then affordable housing is more likely since these conditions will enhance the economic conditions for the developer. Conversely if the regulatory factor increases risks as a result of increased regulatory costs, then affordable housing is unlikely because this situation will compromise the econom ic conditions. Additionally, if the advocacy factor is characterized by support for affordable housing, then this outcome will serve to reduce risk and thereby make it more likely that a TOD developer will choose to provide affordable housing. If however the advocacy factor is characterized by hostility to ward affordable housing, then affordable housing is unlikely because the costs and risks for the developer will be increased and negatively impact the economic conditions. This research maintains that i t is the dynamic interaction of the dominant economic factor with the moderating regulatory and advocacy factors that ultimately

PAGE 21

6 making process regarding affordable housing. The purpose of this study is to analyze the i nteraction of these factors both individually and as regarding affordable housing. Theoretical Framework The theory that undergirds this research is that developers are rational decision makers who se decisions regarding affordable housing development are formed within a context of limited information. Because of the complicated nature of urban infill developments like TODs which are rife with obstacles like uncertain market conditions, unclear regul atory costs, and an evolving advocacy climate, developers must make decisions within situations that pose significant risks. Based on these limitations, developers attempt to make decisions that will lead to satisfactory profits and reduced risks. This t heory of decision making is referred to as satisficing (See Chapter 2 for more details.). The theory of satisficing was developed by Herbert Simon (1956) in the context of his concept of bounded rationality. Simon states, It appears probable that howev er adaptive the behavior of organisms in learning and choice situations, this adaptiveness falls far short of the ideal of well great deal can be learned about rational decision making by taking into account, at the outset, the limitations upon the capacities and complexity of the organism . and the Psychological Review 1956, Vol. 63, p. 129). making with regard to land and housing developments (Kenney, 1972 ; Lucy & Phillips, 2000; Mohamed, 2006) The literature on satisficing holds that housing and land developers are satisficers who are content to obtain satisfactory profits as opposed to maximum profits

PAGE 22

7 when choosing to move forward with a land or housin g development project. Lucy and Phillips (2000) state d the following: Developers . In producing residential, commercial, and industrial buildings, they prefer easy development decisions with satisfactory profits to high risk projects with the possibility of maximum prof its but significant potential for losses (p. 27). This research employ s the theoretical framework of satisficing to examine the making process regarding the inclusion of affordable housing in a TOD. The research also examine s how t he economic, regulatory, and advocacy factors Throughout the research it is argued that TOD developers are satisficers who are attempting to make decisions that will lead to satisfactory profits with reduced risks. The Denver Region Case Studies The method used to analyze the impact of the economic, regulatory, and advocacy making process for or against affordable housing development is comparative case st udies. This method is appropriate for analyzing TODs because of its ability to capture and analyze the variety of actors and key players involved in the complex environment of a TOD development ( Belzer, Hickey, Lawson, Poticha, & Wood, 2007 ; Boarnet & Compin, 1999 ; Cervero & Duncan, 2002) This research identifies and develops five TOD cases from the Denver region. Each is a mixed use, retail and residential development located within a half mile of a transit stop. The data collected for these five T OD cases were developed using interviews with their developers and other key actors involved in the development of each TOD as well as primary source documents related to each case. Of the five cases included in the research, three are TODs providing affo rdable rental housing (housing targeted for

PAGE 23

8 households earning at or below 8 0% of the area median income), while two TOD cases have no affordable housing within the development. The mix of affordable and non affordable TOD cases was chosen purposely in or der to draw distinctions and comparisons between and among the cases. Affordable Housing in the Denver Region The Denver region provides an excellent context for researching TODs and affordable housing. Denver, one of the fastest growing regions in the U.S., has experienced significant affordable housing problems and transportation issues. Owing to its attractive location and high ratings for its overall quality of life, the Denver region has grown dramatically in the past 50 years (Goetz, 2013) The Denver/Aurora metropolitan area (MSA) has grown from a population of 564,000 in 1950 to approximately 2.7 million as of 2010. Furthermore, Colorado ranked as the third fastest growing state in the U.S. during the 1990s and the eighth fastest growing state since 2000 (Goetz, 2013) As of 2010, Denver was the 21 st population residing in the Denver region (Goetz, 2013). However, one of the bypr oducts of this explosive growth has been a lack of affordable housing. The origins of the affordable housing problem can be traced to the economic expansion and population growth of the 1990s (Affordable Housing Solutions for Colo rado, 2006) Fueled by the telecommunications and technology boom, the Denver region saw an annual economic growth rate of 3 4% per year from the early 1990s to 2002. This expansion produced a surge of high wage jobs followed by lower wage ones in the service and retail sectors. This significant economic and population expansion created a substantial growth in housing demand. While the economic recessions of 2002

PAGE 24

9 2003 and 2008 2010 moderated economic and population growth slightly, housing demand and the concomitant need for affordable housing have continued to be significant problems for the Denver region. The most recent data reveal that the Denver housing market ranks as one of the costliest in the United States (Zillow Realty Research, 2013) Of the 25 largest metropolitan regions cities in the United States, Denver had the seventh highest home price to income ratio with only New York City, Los Angeles, Boston, San Francisco, San Diego, and San Jose, California, s coring higher (Zillow Realty Research, 2013) The affordable rental market in the Denver region is even more problematic, since nearly half of all renting households in the area spend more than 30% of their gross income on ren t (Williams, 2012) Moreover, nearly one in four renting households spends more than 50% of their total gross income on rental housing. As a result of the significant population growth in the Denver region and the subsequent affordable housing problem, many developers have sought to purchase and develop cheaper greenfield acreages on the fringes of the metropolitan area. Many of these outlying developments were former ranch lands that had been converted to large tr act single family housing which still retain the name ranch for its nostalgic appeal (Goetz, 2013) Highlands Ranch is the most populated of these developments in the Denver region, with a population of over 100,000. Other po pular fringe developments in the area that were established on former ranch lands are Green Valley Ranch, Grant Ranch, Sterling Ranch, and Crystal Valley Ranch, among others. The problem with the growth of housing on the fringes of the Denver metropolitan area is that many households live farther from work and are required to make much longer commutes and bear higher transportation costs than they desire

PAGE 25

10 (Center for Neighborhood Technology, 2012) These costs offset the savings in housing costs. Transportation Costs and Housing Affordability in the Denver Region The Center for Neighborhood Technology (CNT) has developed a housing affordability and transportation index that measures housing af fordability by calculating the combined costs of housing and transportation to help understand the true costs of housing affordability (Center for Neighborhood Technology, 2012) research revealed that Denver ranked fourth in terms of rising housing and transportation costs versus income growth for a typical median income household. Only Atlanta, Dallas, and Miami had higher housing and transportation costs versus income growth than Denver. howed that moderate income households (income range of $31,000K to 62,000) in the Denver region paid an average of 58% of their total income on housing and transportation costs. These households are considered to be severely burdened because their housing and transportation costs far exceed the 45% income threshold considered by the U.S Department of Housing and Urban Development to be a healthy standard for combined housing and transportation costs (Center for Neighborhood Technolo gy, 2012) income households bore the brunt of transportation costs in the Denver region inasmuch as more than 30% of all low income households lived in communities considered to have moderate, high and very h igh transportation costs. Finally, 75% of all low income households in the Denver region had combined housing and transportation costs higher than the regional average. These households are paying a transportation penalty for finding affordable housing f arther from their place s of employment.

PAGE 26

11 Another transportation cost that affects the quality of life is the amount of time Business First Journal analyzed automobile commuter trends by examining the American Community Surveys prepared by the U.S. Census Bureau ( 2006 2008 ) Based on his analysis of the commuting trends in the top 52 metro areas with populations over one million, the Denver region r anked in the top third for the longest automobile commutes with an average round trip time of approximately 54 minutes (Thomas, 2010) Furthermore, the cost of owning a vehicle has continue d to rise significantly. Research by the Automobile Association of American (AAA) revealed that the typical vehicle owner spent $9,100 per year to own an automobile, including fuel costs, maintenance, insurance, tires, and depreciation for a typical sedan driven 15,000 miles a year (Americ an Automobile Association, 2013) Finally, transportation costs and commuting times are expected to continue to rise in Denver and other American metro regions because of the ongoing popularity of fringe developments located far from work centers as well as the consistent rise in fuel prices and the other costs of owning an automobile. Light Rail Development in the Denver Region Owing to the escalating transportation costs associated with population growth and sprawling greenfield developments on the urba n fringe, many of the policy makers and community leaders in the Denver region began to consider alternative development patterns (Goetz, 2013) The rising infrastructure and environmental costs associated with low density developments in the form of road s, sewers, utilities, water, energy consumption, and air pollution coupled with rising transportation costs triggered many

PAGE 27

12 city leaders and advocacy groups to reconsider how local governments and municipalities could respond to these problems. The emergin g sustainability problems for the Denver region incentivized regional cooperation among local cities and governments as they tried to develop strategies to deal with these issues. Out of this push came the leadership of such non profit and public organiza tions as the Metro Mayors Caucus and the Denver Regional Council of Governments (DRCOG). With encouragement from and direction by the members of the Metro Mayors Caucus, DRCOG took the lead in the early 1990s to encourage sustainable development in the De nver region (Goetz, 2013) DRCOG, a regional membership organization founded in 1955, laid out a blueprint for sustainable transportation and urban growth patterns for the Denver region in their publication Metro Vision 2020 (Denver Regional Council of Governments, 1997) Following the momentum of and advocacy efforts related to this publication, DRCOG and the Metro Mayors Caucus among others partnered with the Denver Regional Transportation Dist rict (RTD) to promote what was considered one of the most important tools for sustainable growth in the region the development of light rail and commuter rail transit. After years of advocacy efforts, the first light rail line opened in Denver in 1994. T he Central Corridor line (also known as the MAC line), containing 5.3 miles of track servicing the downtown Denver area, was funded exclusively by an existing use tax as ( RTD 2013) The second light rail line to be develope d in the Denver region was the Southwest Corridor line, which opened in July 2000. This line, funded by a $120 million Full Funding Grant Agreement (FFGA) from the Federal Transit Authority together with $18 million in Federal Highway Administration funds

PAGE 28

13 extended 8.7 miles from central Denver to Littleton. Following the Southwest C orridor, the 1.8 mile Central Platte Valley Corridor opened in 2002 followed by the 19 mile Southeast Corridor line in 2006. This line was funded as part of a joint highway and light rail transportation expansion project known as TREX. The $1.7 billion TREX budget was funded by a voter approved bond issue, with approximately $880 million of the funds set aside for the Southeast Corridor line ( RTD 2013) In sp ite of much uncertainty and skepticism, the first phases of light rail development in the Denver region were deemed a success (M. Utter, personal communication, July 26, 2013). This outcome coupled with the advocacy of various regional organizations helpe d foster a positive political environment that ultimately led to the passing of a landmark light rail expansion in the Denver region called Fas Tracks. The 2004 voter approved initiative was a $6.5 billion rail and transportation expansion project that wa s considered by many to be the most extensive light rail development in the nation ( RTD 2013) The Fas Tracks program called for an additional 122 miles of light rail and commuter rail with 57 additional transit stations besides a $200 million dollar upg rade to Union Station. The new Fas Tracks system, once completed, will originate at Union Station and extend out to Longmont, Denver International Airport, Lone Tree, Littleton, Golden, Arvada, and a future terminus in Boulder. As of May 2013, the curren t operating light rail system in Greater Denver consists of six light rail lines with 46 transit stations and 47 miles of track. As of early 2013, twelve miles of the Western Corridor Fas Tracks system ha ve been built with 110 miles of track still under c onstruction or planned for construction. In addition, 46 additional stations will open over the next three to five years as funding becomes available.

PAGE 29

14 Transit Oriented Developments (TODs) in the Denver Region One of the most important goals of light rail expansion in the Denver region was to create opportunities for high density, mixed use development near the new transit stations. With 46 existing stations and 46 more likely in the next few years, city planners and community leaders were hopeful that gr owth within TODs would encourage urban infill development while reducing automobile usage and related transportation costs The Denver Regional Transportation District (RTD) stated the following regarding its expectations for TOD: Fas Tracks offers an unparalleled opportunity. . No other U.S. region today is making this scale of commitment to invest in transit. The dividends of this investment will come in the form of an enhanced quality of life. . One key to realizing these o riented development (TOD) (RTD 2010). As the RTD had hoped, the most recent rail transit and TODs had an influence on creating higher densities of population in the Denver metropolitan area. Research by DRCOG showed that housing densities in Denver had increased from 1,379 units per acre in 2000 to 1,429 housing units per acre in 2006 (Goetz, 2013) Moreover, resear ch by Ratner and Goetz (2010) revealed that from 2000 to 2010, developments within TODs made up a significant component of the total regional development. Their research claim ed that 10% of all residential growth, 11% of all retail growth, and 15% of all office development in the Denver region had occurred in TODs. Ratner and Goetz ( 2010 ) also found that the average population density within a half mile of transit stations was now six times greater than the average density in the rest of t he region. They found that household densities within a half mile of transit stations

PAGE 30

15 successful densification around transit was the result of three key strategies: Placing homes, jobs, and retail near transit; creating a mix of transportation, housing, and shopping options near transit stations; and ensuring that transit stations were entry portals to a regional network. According to the RTD, as of April of 2010 the following new development had occurred within a half mile of existing or planned transit stations: 17,399 housing units; 4,907 hotel rooms; 5.3 million square feet of retail space; 5.27 million square feet of office space; 2.3 million square feet of civi c space; 1.58 million square feet of educational space; 5.96 million square feet of medical space; and 2.62 million square feet of convention space. TODs and Affordable Housing in the Denver Region While significant growth and densification near transit s tops have occurred in the past ten years, affordable housing has not been a strong element in the TODs developed thus far (M. Utter, personal communication, July 26, 2013) Th is lack of affordable housing provisions near transit stems from a dearth of aff ordable housing advocacy during the early years of light rail activism in the Denver region. In the early 1990s, DRCOG and other light rail advocates were concerned with the large r issues of sustainable growth and the acquisition of federal funding for li ght rail development. While many of the light rail advocates were hopeful that affordable housing would be located near transit, it was not at the forefront of their push. Marilee Utter, a key player in advocating for light rail for the Denver region in the early 1990s, c onfirmed this state of affairs:

PAGE 31

16 Unfortunately, affordable housing was not given much consideration at Denver TODs in those [early] days, and I can't say we've made as much progres s as we should have, even now (M. Utter, personal communication, July 26, 2013) Ms. Utter went on to say that during the early years of light rail/TOD development, many communities, concerned about the untested TOD market, were unwilling to take on the product type (TOD) that was already (M. Utter, personal communication, July 26, 2013) Ms. Utter claimed that the other major reason for the lack of an affordable housing strategy in the early days of light rail and TOD advocacy was related to the ad hoc nature of TOD development and the lack of a region wide affordable housing strategy fo r all TODs and corridors. While affordable housing advocacy was absent in the early years of light rail development in the Denver region, advocacy efforts have increased significantly in the past five years. The major reason for this increase was relat ed to the significant densification within TODs and concern about the lack of affordable housing planned for these developing TODs. Many believed that affordable housing was being threatened by the increased demand for living in TODs. The Center for Tran sit Oriented Developments (CTOD) claimed that the creation of Fas Tracks would dramatically increase the demand for living near transit in the Denver region. CTOD asserted that this demand would increase 344% by the year 2030. CTOD argued that the growin g demand for living near transit would also raise land and housing prices in TODs and stymie the development of afford able housing: Demographic trends and changing housing preferences are converging to create new demand for housing near transit stops. W hile only about 45,000 households in metro Denver live within one half mile of a transit stop today, the creation of Fas Tracks means that, at a conservative estimate, potential demand for such

PAGE 32

17 housing could grow to 155,000 households by 2030 a 344 percent increase. The potential demand for housing in TODs is likely to exceed the number of homes that can be developed in transit districts. Consequently there is considerable risk that virtually all new development near transit in the region will be unafford able to lower income households (p. 5) Significance of this Research to Public Policy With the rising demand for living near TODs in the Denver region, available units are quickly becoming unaffordable for moderate to low income families. This study seeks to understand the economic, regulatory, and advocacy conditions that would lead Denver TOD developers to choose to produce affordable housing within a TOD. Based upon the findings of this research, recommendations are offered to help policy makers incentivize developers to provide more affordable housing in TODs. Furthermore, this research is important because it represents the first empirical study to examine the dev making process regarding the inclusion of affordable housing within TODs. Organization of Dissertation This dissertation is organized in the following manner: The second chapter reviews the literature relevant to the study. The third chapter explains the research design and methods for the study. Chapter four provides a context for each of the five Denve r TOD cases. The fifth, sixth, and seventh chapters develop cross cutting analyses of the economic, regulatory, and advocacy factors, respectively, and their impact on the development. Chapter eight pres ents the conclusions of this study.

PAGE 33

18 CHAPTER II LITERATURE REVIEW The purpose of the literature review is threefold. First, it examine s the empirical literature documenting the rising transportation costs for households living farther from work. Second, it investigate s the literature regarding the economic, regulatory, and duce affordable housing in TODs or not. Third, it explore s the theoretical framework of satisficing and the impact of that theory decision making process. Rising Transportation Costs for Households Living Far from Work Households have continued to move farther away from their workplace to find more affordable housing, a decision which has led to a significant increase in daily transportation costs. Those who study the rise in transportation costs have thus become concer ned about the balance of jobs and housing in a given locality (Cervero, 1989; Giuliano, 1991; Kain,1968) place of residence (Giuliano 1991 ; H orner, 2004; Levine, 199 2 ). Most scholars argue that jobs and housing are balanced on a broader regional scale and that it is the neighborhood, or local, scale where jobs and housing imbalances are most recognized. Researchers concerned with growing transportation costs and their impact on housing affordabi lity focus on the following: (a) the increasing decentralization of jobs from urban to suburban communities and the imbalances that follo w ( Cervero & Wu, 1997 ; Immergluck, 1998; Kain, 1968 ); (b) commuting patterns, distances between home and work, and tran sportation costs (Cervero, 1989; Giuliano 1991 ; Sultana, 2002); and (c) affordable housing deficits and longer commuting times for working families and

PAGE 34

19 individuals (Levine 1998 ). Ka in (1968) was the first scholar to propose the spatial mismatch theory reg arding the decentralization of jobs from urban to suburban communities. His research focused on suburban housing discrimination against minorities living in urban communities. Kain argued that as a consequence of discrimination, working class minorities who were the victims of manufacturing job losses in urban centers were unable to find housing in suburban communities where many of these jobs had relocated. mismatch concept (Ma sters, 1974: Offner & Saks, 1971). Recent studies examined the suburbanization of employment and housing, the subsequent lack of affordable housing, and increased commuting times for low income and working class households ( Immergluck, 1998 ; Kain 1992; Levine, 1992; ). Levine (1992 ) found that lower income and modest wage workers benefitted most from policies that encouraged job and housing balances alongside more affordable housing options. The issue of commuting patt erns and distance between home and work is one of the principal factors underlying the jobs housing balance problem. The basic argument is that jobs housing imbalances lead to longer commutes, which in turn result in more congestion and auto pollution and higher automobile related travel expenses (Cervero, 198 9; Frank and Pivo, 1995 ). Cerver o and Wu (1997 ) found that between 1980 and 1990, those working in the suburbs of San Francisco had an increased commute time of 23% caused mainly by longer distances betwee n home and work. Cervero (1996 ) discovered that from 1980 to 1990, jobs and housing imbalances were exacerbated in eight of the ten major job centers in the San Francisco Bay area, where the average time

PAGE 35

20 for commutes for workers rose 30%. Moreover, strongly confirmed a relationship between the imbalance of jobs and housing and mean travel time to work in the G reater Atlanta metro area. Sultana argued that the imbalance between the location of jobs and housing was the most significant determinant for longer commutes and that affordable housing near job rich communities would greatly benefit workers. Furthermore, Ewin g (1996) found that a properly balanced jobs and housing ratio within a region would reduce vehicle miles traveled by up to 15%. Frank and Pivo (1995) also uncovered evidence that a jobs housing balance would reduce commutes. Their research in the Puget Sound area showed that residents of localities with high rates of jobs housing balance had a 30% shorter commute than residents of non balanced communities. TODs and Jobs Housing Imbalance The rise in transportation costs resulting from longer distances between home and work has prompted a debate about policies and land use patterns that might reduce this problem. TODs have been hailed as an emerging approach to land use that can help to create a better balance between jobs and housing, particularly for modest to low income households (Center for Housing Policy, 2006; Center for Transit Orie nted Development, 2007; Cervero 2009; Center for Neighborhood Technology, 2012) The Center for Housing Policy (2006) argued that the most significant action that lo cal governments and cities could take to reduce the jobs housing imbalance would be to encourage high density, affordable residential development within multiple TODs connected along a transit network. However, providing for affordable housing in TODs ha s not been an easy process.

PAGE 36

21 TODs are complicated developments, and developers are often constrained by a variety of issues that serve to discourage the development of affordable housing. Escalating land costs, unpredictable housing markets, costly rezon ing, parking requirements, and neighborhood opposition to density are just a few of the most common issues that a TOD developer faces when deciding whether to produce or f orego affordable housing (Center for Transit Oriented Develop ment, 2007) In order for inclusion of affordable housing in a TOD to be successful, developers must navigate these obstacles successfully. The following literature discusses the most common eleven variables that developers encounter when deciding to produce or forego affordable TOD housing: Land cost, housing market conditions, public subsidies, return on investment, zoning requirements, infrastructure requirements, parking requirements, mixed use retail requirements, neighborhood advocacy, political advocacy, and non profit advocacy. The v ariables are organized and grouped into three factors economic, regulatory, and advocacy. The economic factor is comprised of the following variables: l and cost, housing market conditions, public subsidies, and return on investment. The regulatory facto r is comprised of these variables: z oning requirements, infrastructure requirements, parking requirements, and mixed use retail requirements. Finally, the advocacy factor is comprised of these: n eighborhood politi cal, and non profit advocacy. The Econo mic Factor With regard to the economic factor, one of the most significant constraints that developers of TODs encounter regarding their decision to produce or forego affordable housing is high land prices. The Center for Transit Oriented Development (CTOD), in its report The Case for Mixed Income Transit Oriented Development in the Denver Region

PAGE 37

22 (2007), claimed that rising land costs near TODs in the Denver region were among the most important barriers to the deve lopment of affordable housing: Land prices are high at TOD sites. In the Denver region, developers already pay a premium on land at many plan ned and existing TOD sites. This presents a formidable obstacle to providing housing products at affordable prices. Land prices are being driven up by speculative pressures (p. 25) Moreover, research by Mile High Connects confirmed the high cost of land near TODs in Denver. Its research revealed that developers paid an average of 25% more for land located within one quarter mile of an existing or planned light rail stop in the Denve r region (Mile High Connects, 2012) More studies of transit oriented developments in rapidly growing cities of the American Southwest and West, meanwhile, revealed escalating land values near transit developments. A 1999 stu dy of the DART system in Dallas found that land values and rent values near new DART transit stops were 25% higher than comparable non transit oriented properties in the county at large (Weinstein, Clower & Gross, 1999). Follow up studies in 2002 and 2005 using different methodologies showed similar impacts on land values near DART stations in Greater Dallas ( Weinstein & Clower 2002; 2005). Moreover, a 2001 study found that land second most populous county, saw a significant increase in values following the release of plans for light rail and T OD build out in the county (Knap p, Ding & Hopkins, 2001). Furthermore, a 2007 study of 14 major U.S. cities with significant investment in light rail development showed significant gentrification trends for properties near walk and ride impacts on land values near these stops in Atlanta, Baltimore, Boston, C hicago, Dallas, Sacramento, and Washington, DC.

PAGE 38

23 Another economic factor that developers must navigate is changing housing market conditions (Choulet Nappi, 2006; Winarso, 2002 ; Yusof & Shafiei, 2011) Developers make choices regarding how to proceed bas ed on their ideas and predictions regarding the market. Urban infill developments such as TODs can often show unpredictable housing market dynamics because of uncertain zoning practices, increased infrastructure requirements, and other regulatory costs. research confirmed that developers desire predictable housing markets. They state d, U ncertain outcomes from housing markets are to be expected. For the majority of developers . limiting uncertainty is a goal. A common strategy to limit uncertainty is to make conventional choices [that] will limit risk ( p. 31). While many developers are fe arful of uncertain housing markets for TODs, recent research suggests that the se housing market s are gaining strength and stability as demand rises for living in these types of communities. Levine and Frank (2007) un covered empirical support for the rise in housing market demand for transit oriented neighborhoods. Their research analyzed transportation, land use preferences, and neighborhood choices from a sample of roughly 1,500 residents in the Greater Atlanta area. Their findings revealed a strong pre ference for more walkable, compact neighborhoods like TODs. They suggested that market demand was not being met and that an undersupply of transit friendly, compact neighborhoods existed. Moreover, research conducted by the Center for Transit Oriented De velopment (2004) claimed that more and more people want ed to live in high density, pedestrian friendly transit oriented developments. CTOD (2004) argued that all demographics except for married families with children were beginning to show a stronger pref erence for transit oriented, mixed use living. The CTOD report stated that

PAGE 39

24 . household size is shrinking, producing more households of empty nesters, singles and non family residents. Baby boomers are aging, swelling the ranks of older households as they pass from the child rearing stage of life to the empty nest phase. Evidence suggests that they are fueling much of the growth in urban populations as they seek smaller homes in locations with a greater mix of amenities. The traditional nuclear family that made up 40 percent of households in 1970 now comprises less than 24 percent of house holds. . These households are less interested in a single family home on a quarter acre in a distant suburb than in the 24/7 lifestyle, cultural richness and diversity of walkable neighborhoods (p. 12 13). While rising land costs and housing market demand for living in a TOD can act as a constraint for developers who are considering affordable housing, there are economic incentives that federal and local governments can offer to developers to counteract these forces. These include public subsidies like tax credits, tax increment financing, grants, and low interest loans. Johnson and Talen (2008), in surveying over 80 developers, found that such subsidies as L ow I ncome H ousing T ax C redits ( LIHTC) community development block grants, HOPE VI grants, and HOME funds could dramatically reduce costs for developers who were considering the inclusion of affordable housing in their projects. The availability of these types of subsidies, pa rticularly LIHTC funds, provides a developer with equity to be used i n affordable housing development and thus reduces risk (Cervero, 2004; Dittmar & Ohland, 2004 ; Shoemaker, 2006 ). Along with LIHTC funding, tax increment financing (TIF) is another economic subsidy that has emerged in recent years as an effective strategy for incentivizing developers of affordable housing in TODs ( Boarnet and Compin, 1999 ; Cervero, 2004; Shoemaker, 2006 ). TIF subsidies can provide developers significant resources for affordable housing redevelopments that require significant infrastructure costs (Johnson & Talen, 2008) These subsidies are offered to developers based on the likelihood of future increase s in property sales taxes. While public subsidies have helped bolster affordable housing in developments

PAGE 40

25 like TODs, many of these funding mechanisms are closely scrutinized. Owing to the Great Recession of 2008 2011 and subsequent austerity measures and budget shortfalls, public subsidies targeted for low income housing initiatives have been scrutinized and reduced in many states and local communities. The State of Colorado, for example, has seen its public subsidy funding for affordable housing scrutinized and reduced in the past few years because of spending restrictions related to the T ax P ayer B ill of R ights (TABOR) amendment. The Center for Transit Oriented Development (2007) claimed that the reduction in public subsidies was one of the most significant constraints on affordable housing development in TODs in the Denver region: State and federal public subsidies have dwindled dramatically in the past five to seven years, especially for af fordable rental housing. . General Assembly has slashed affordable housing grants, largely as a result of constitutional revenue an d sp ending restrictions. . HUD cuts have eroded city CDBG funding an important source of flexible, affordable rental projects subsidies (p. 25). The Regulatory Factor In addition to the economic barriers encountered by TOD developers, regulatory require ments for TODs can add significant cost constraints for developers considering affordable housing development. Johnson and Talen regulatory constraints were one of the most significant barriers to developers considering affordable housing provisions in New Urbanism/TOD type developments. They stated, Many of the developers that did not build affordable units blamed local government regulations for creating prohibitive expenses. Moreover, approximately half of these d evelopers noted that local financial incentives or regulatory changes could encourage them to include affordabl e units in the future (p. 602). One of the most common regulatory constraints associated with the develop ment of TODs is the time and cost s related to rezoning a parcel for a mixed use, high density

PAGE 41

26 development. Many sites where TODs are developed or planned for development are still zoned for single use. The major motivation behind single regulations has been single homes and protect against commercial development (Fischel, 2004). Even though recent evidence reveals that mixed use, higher density developments like TODs have a positive effect on home values, man y homeowners fear that densification will bring negative effects like crime, parking issues, and overpopulation (Cho an d Linneman, 1993; Green 1999; Malpezzi, 1996 ; Pogodzinski and Sass, 1991 ). The problem for TOD developers regarding the older single use zoning code is that they must invest the time and cost to rezone the parcel from single to mixed use zoning. The higher costs and complications related to the lengthy rezoning process discourage developers from producing affordable housing. The CTOD (2 007) report claimed that rezoning expenses were one of the main obstacles to the development of affordable housing in Denver CTOD stated that TOD sites frequently require rezoning and land assembly. This can lead to lengthy acquisition and permitting processes, which increase development costs. When developers are saddled with these costs, they have less flexibility to include affordable housing in transit oriented developments (p. 26) Moreover, Czamanski urban infill parcels led developers to prefer the urban periphery where land parcels had fewer rezoni ng requirements. On a similar note, Baerwald stated that when developers

PAGE 42

27 local governments have reputations for delays in project approval, the site search will focus q Baerwald, 1981, p. 347). forego affordable housing within a TOD is infrastructure requirements. M any TODs are develope d within urban or inner ring suburban communities that require significant infrastructural improvements (Center for Transit Oriented Development, 2007) Furthermore, high density TODs often have additional infrastructure requirements related to design standards for roads, trails, bridges, public spaces, parks, and pedestrian friendly walkways. These requirements add higher than normal infrastructure requirements for TODs that act to deter develo pers from producing affordable housing. The CTOD (2007) report listed infrastructure costs as one of the top ten barriers to affordable housing development. The report stated the following: TOD involves expensive infrastructure. High land prices at TOD sites make significant residential density not only desirable but also financially necessary for example, upgrading the capacity of sewer lines for high density developm ents can be particularly expensive. . Generally affordable housing developers are not capable of taking on these infrastructure costs themselves (p. 26). Owing to the high infrastructure costs often associated with TODs research revealed that developers often preferred outlying greenfield developments with reduced infrastructure costs. He claimed that developers were trying to minimize risks from required infrastructure development. He gave an example of an urban infill development that required creating brand new high quality roads, something which discouraged developers because of the higher costs involved. Mohamed stated, Developers create rules about which investments they will make and which the y will avoid . such as roads of high standards, which do not contribute to meeting

PAGE 43

28 their satisficing profit targets. Thus . developers move outward in search of locations with l ower regulatory costs. (p. 23). Costly parking regulations are yet another constraint for developers considering affordable housing in TODs. TODs are built as high density, compact developments that discourage large surface lot parking. Many TODs require the development of expensive parking garages, a feature which dramatically raises the price of a development ( G. Krause, personal communication, December 5, 2012) Moreover, since TODs are designed with pedestrian friendly considerations, they often are required to hide parking and reduce its negative appearance. T his requirement which forces developers to tuck parking garages into the rear of their development adds considerable costs. The CTOD (2007) report on mixed income development in Denver TODs thus listed parking requirements as one of the main barriers to affordable housing development: Parking requirements often are unnecessarily high at TODs. High land prices at TOD sites, coupled with the average cost of providing a structured parking space (over $20,000), means that parking requirements can signific antly affect the financial feasibility of TOD projects. Zoning requirements that assume all tenants will have cars add a great deal to the cost of building TOD housing (p. 26). Along with parking requirements, another regulatory requirement that can act as a constraint to developers of affordable housing is the mixed use retail requirement for TODs. This requirement is a central component of the TOD concept (Victoria Transport Policy Institute, 2012) TODs contain a mixt ure that includes residential, retail, office, and entertainment uses. The retail/office component of many TODs is developed on the ground floor of the multi family residential building (s). Most TOD design guidelines require a minimum of 5,000 square fe et of office/retail space to be included as part of the development ( Calthorpe Associates and Mintier Associates, 2011 ; Planning Department

PAGE 44

29 of Plano, Texas, 2008; TransAct, Inc. and Van Meter Williams Pollack, LLP, 2011 ) These ground floor commercial spa ce requirements add significant risks to TOD developers because of the foot traffic needed to make the retail space successful. Many support the retail component, a lack which often leads to unleased or vacant space ( S. Johnson, personal communication, March 24, 2011 ) This risk along with the added costs involved with the retail requirement often discourage developers from wanting to take on the additional risk of providing affordable housing ( T. Gladwell, personal communication, April 19, 2012 ). The Advocacy Factor In addition to the regulatory issues that TOD developers confront, the advocacy climate near a proposed TOD development can also be a significant con straint to developers considering the inclusion of affordable housing. Neighborhood opposition to high density, mixed income development is one of the most common barriers igh the mix of incomes, particularly the low income households that are often a part of high density developments. Neighborhood groups that oppose affordable housing dev elopment in a TOD can create significant time and public relations costs for developers. Most developers are not comfortable navigating the unpredictable and volatile nature of neighborhood groups that oppose affordable housing and prefer to steer clear o f them. The CTOD (2007) report listed neighborhood opposition as one of the top ten obstacles to affordable housing :

PAGE 45

30 Denver region. Initial resistance and development delays can be expected with higher density projects, particularly without an inclusive community planning process at the outset (p. 26). The literature showed that neighborhood opposition could be very effective in thwarting development plans for affordable housing and high density developments like TODs. Lucy and Phillips (2000) argue d that neighborhood opposition to high density developm ents could often discourage developers from even trying infill developments: Opposition by neighbors to infill development, and insufficient motivation for developers, lenders, and public officials to overcome opposition and higher acquisition costs c ompared to green space, leads development actors to avoid most major infill projects. (p. 10). Moreover, Franzen and Hunsberger (1998) stated that Portland homeowners were successful in thwarting a new mixed income development of high density apartments row homes, and light rail by recalling the mayor and two city councilmembers over concerns about high density development. A similar mixed income development in Mount Pleasant, South Carolina, was thwarted by homeowners and a town council which feared h igh density development (Farris, 2001). According to Hirt (2007), tolerance for high show ed that two thirds of the residents and town leaders in the suburbs of nearby Cleveland oppose d high density, mixed Furthermore, research shows that it is not only suburban residents who fear high

PAGE 46

31 density developments like TODs. Urban residents are al so concerned about higher density developments. They argue that suburban communities are better able to absorb high highly urbanized and dense setting of the San Francisco Bay a rea found that of the 141 residential development projects then in the application approval process, high density multi family projects were 42% more likely to draw protest than a single family development. Similarly, affordable housing projects were 38% more likely to be opposed than single family home development. In an effort to help mitigate both suburban and urban communities fears about affordable housing, many communities have engaged local nonprofit organizations to help communicate the advantag es of attractive affordable housing developments in high density developments like TOD s Johnson and Talen (2008) stated that consensus building aided by nonprofit groups had been one of the most important and successful strategies used by developers to r educe tensions caused by neighborhood groups concerned with high density developments. In addition to the influence that neighborhood and non profit groups can have on affordable housing provisions, another important constituency wielding significant im pact on affordable housing development consists of political figures and elected officials. A political champion for affordable housing in a TOD can be one of the most te can create positive public momentum that can help a developer gather additional public subsidies to help cover the costs of affordable housing. In Denver, for example, two TOD developments were the recipients of strong support from the then Denver Mayo r

PAGE 47

32 and City Council. The results were two new TODs ( C. Nevitt, personal communication, September 21, 2010) Conversely political negativity or even neutrality can effectively thwart affordable housing within a TOD by leaving space for or fostering community opposition and blocking any public subsidies for such initiatives. Two TOD developments in Arapahoe County near Denver were unsuccessful in achieving affordable housing. Part of the reason for the lack of its inclusion was the absence of suppor t from both the Arapahoe County Commissioners as well as City Council members who both opposed affordable housing in these developments ( L. Myers, personal communication, December 3, 2012 ; R. Simpson, personal communication, 2011 ) The Theory of Satisficin g While the literature established that the economic, regulatory, and advocacy affordable housing decision, it is important to understand these factors impact on a making process regarding risks and profit estimation. Satisficing is making process. The (Simon, 1956; 1991) Satisficing holds that people and firms are not necessarily profit An examination of the historical context of satisficing follows. The theory of satisficing emerged from the classical and neo classical schools of economics and their thinking regarding the motivation of individuals and firms. Classical economic thought was based on ideas regarding free markets (Smith A. 1776) free trade

PAGE 48

33 (Ricardo, 1817) freedom of the individual (Mill, 1869) and utilitari anism (Bentham, 1789) Neo classical theory, which expanded on the classical traditions, held that individuals have rational preferences, work to maximize utility, and act on complete information (Weintraub, 2002) Closely al igned with these tenets of neo classical economic theory was rational choice theory. It held that individuals would make decisions based on a rational process of weighing costs and benefits and then choose the most beneficial course of action (Becker, 1976) The neo classical theory of the firm was similar. It held that a firm was a single decision making unit and that the collective actions of a firm could be compared with the acts of individuals. Furthermore, neo classical theories of the firm claimed that perfect markets existed and that a firm would also act rationally based on perfect information regarding all the possible choices. Decisions by firms would then be made out of a self interested, utility maximizing effort to bring the firm maximum profits and benefits (Kantarelis, 2007) Critics of the neo classical paradigm and the rational choice theory claimed that perfect markets, perfect information, and optimal decision making did not exist. Herbert Simon developed a decision making concept that rejected the notion of perfect information and profit maximizing behavior. He referred to his concept of human decision (Simon, 1955; 1991) Simon argued that an making process. He believed that individuals were unable to obtain perfect information for their decision making process since the complexities involved would lead to an overwhelming nu mber of choices. With boundless choices the human brain would be unable to identify and compute the maximum return on all decisions. Simon further argued that most decision

PAGE 49

34 making situations allowed for only a limited amount of time, and if a person exce eded the time frame, there would be significant costs and risks. Simon believed that given the various constraints and complexities involved in the decision making process, individuals optimal ones He whereby an individual would choose from the first few options to meet a given need as opposed to holding out for the optimal solution (Simon, 1956) To illustrate his point, Simon gave the example of a mouse searching for a piece e. The mouse, in other words, would satisfice. A Behavioral Theory of the Firm they argued that firms were to aid their decision making process. They asserted that firms were instead satisficers that made decisions within a context of constraints. Furthermore, these theorists held that in the decision making process, firms settled for with long term survival and managing risks t han with trying to maximize profits. Satisficing Developers Following from Cyert and Ma research emerged claiming that land and (Baerwald, 1981; Drewett, 1973 ; Hepner, 1983 ; Kenney, 1972 ) The first empirical

PAGE 50

35 research regarding satisficing developers was pr oduced by Kenneth Kenney in 1972. The Residential Land Developer and His Land Purchase Decision was based on Cyert interviews with single family and multi family housing developers in the Atlanta region. His interviews revealed the following: First, developers were risk averse and chose sites and dev elopment concepts they were familiar with and had been successful with in the past. Second, developers shied away from uncertainty and would choose to develop lots th at were the most predictable. T hird, developers were concerned with time constraints and the costs related to searching for land parcels. Rather than attempt a long drawn out search for an optimal piece of land, they would tend to select one of the first feasible what is acceptable to him in terms of price, location, size, and estimated profit potential, and (Kenney, 1972 p. 170). Finally, Kenney found that development firms were m otivated by more than just profit maximization. His research determined that these firms were primarily concerned with long term security, status in the community, and professional excellence rather than, or at least ahead of, profit. Additional research on satisficing developers was published in the early 1980s Thomas Baerwald interviewed 17 developers in the Minneapolis St. Paul region regarding their residential site developers satisfice when ch oosing sites for housing development. He stated that they meets their basic standards, they do not search extensively for alternatives that might

PAGE 51

36 produce marginally la (p not profit maximizers. . Provided a project would generate an acceptable profit, they were more concerned with reducing risks and assuring prompt and smooth completion of br More recent literature regarding the satisficing behavior of developers focused on urban sprawl ( Czamanski & Roth, 2011 ; Lucy & Phillip s, 2000; Mohamed, 2006 and 2009; Nelson & Duncan, 1995) Much of this literature argued that weak regulations and inexpensive suburban land had influenced developers to satisfice in their preference to develop ex urban greenfields. Lucy and Phillips (2000) stated that developers In producing residential, commercial, and industrial buildings, they prefer easy development decisions with satisfactory profits to high risk projects with the possibility of maximum profits but significant potential for losses (p. 27). . The tyranny of easy development decisions means that development . goes where risk is limited and profits are satisfactory. . Settings where lending institutio ns will finance development readily, and where opposition to fringe locations . (p. 10). The literature a rgued that the satisficing behavior of developers would lead to inefficient development patterns since infill developments would get bypassed for suburban one s ( Czamanski & Roth, 2011; Mohamed, 2009 ; Nelson & Duncan, 1995 ) Furthermore, esearch concluded that developers dealt with two major constraints that encouraged them to satisfice. One, they were constrained by their lack of ability to

PAGE 52

37 projects one at a time and made each investment decision one at a time because of ( p. 32). Two, Mohamed argued that developers had liquidity constraints that encouraged them to focus on easier, more predictable greenfield developments. He claimed that developers were fearful of urban infill developments owing to the higher financial ca pital requirements related to regulatory costs and heavy infrastructural redevelopment. concluded that satisficing developers avoided smaller, denser parcels in urban locations because of their higher infrastructure costs. Satisficing Developers and Affordable Housing Development in TODs The literature on satisficing developers, as has just been s hown, argues that developers are bounded rationally and have limited cognitive c apacity. Because of these limitations and the unpredictable nature of urban infill developments, they seek to reduce risk and achieve satisfactory profit levels. Since TODs are usually infill developments with more unpredictable environments, developers who cho o se these projects take on higher levels of risk than in traditional greenfield developments. Further more, when developers consider producing affordable housing within a TOD, they take on even more risk. Thus to incentivize more developers to cons ider urban infill development like TODs, many governments and local communities have begun to implement policies that for satisficing developers: Satisficing develop ers contribute to sprawl in the form of low density . development. In response, government policy makers have designed policies aimed at reducing risks to developers. Reducing risks is intended to help developers overcome the bounds on their rationality so that they will make

PAGE 53

38 decisions that result in more efficient land use. . Risk reduction policies include clear rules about zoning and allowable uses, fixed rather than negotiated exactions; tran sparent capital improvement programs; and predictable, streamlined approval processes ( p. 28). Based on the satisficing literature it is thus clear that developers of TODs would be more likely to consider affordable housing development s if the risks imp osed by the economic, regulatory, and advocacy factors were reduced and satisfactory profit margins were achievable. This study holds that developers would more readily provide affordable housing in a TOD if they were the beneficiary of reduced risks and satisfactory profits in some combination of the following: a.) reasonable land costs, steady housing market conditions, significant public subsidie s, and solid return on investment; b.) lower regulatory costs with regard to zoning, parking, and infrastru cture and mixed use requirements; and c.) supportive advocacy conditions in the form of neighborhood, non profit, and political support for affordable housing. The theoretical model (Fig. 2.1) on the following page provides further unde rstanding of the satisficing concept through a graphic illustration of the decision making process that a developer would follow when considering whether or not to include affordable housing in a TOD. This model, based on the literature search, serves to demonstrate how the three factors (economic, regulatory, and advocacy) influence a whether or not to produce affordable housing within a TOD development.

PAGE 54

39 Figure 2.1 Theoretical Model Economic Factor (dominant) Land Costs Market Conditions Public Subsidies ROI Satisficing Decision Based on the interaction of the three factors a developer will decide whether risks are m anageable and satisfactory profits possible. Advocacy Factor (moderating) Neighborhood Non Profit Political If Developer decides that the risks are manageable and satisf actory profits are attainable, Affordable Housing will be developed in a TOD. If Developer decides that satisfactory profits are unattainable owing to higher risks and costs, Affordable Housing will not be developed in a TOD. YES NO Regulatory Factor (moderating) Zoning Infrastructure Parking Retail 1. Theory Developers are satisficers who will make the decision to provide affordable housing within a TOD if profits are satisfactory and risks manageable. 2 General Hypothesis If the economic, re gulatory, and advocacy factors meet the standards for satisfactory profits and reduced risks developers will produce affordable housing in a TOD.

PAGE 55

40 CHAPTER III RESEARCH DESIGN AND METHODS This chapter discusses the rationale for selecting the comparative case study method for this research. It also explain s the process for choosing and developing the five Denver TOD cases to be analyzed. The chapter describes how the two primary data sources interviews and source documents were used for gathering evidence. Lastly, the chapter defines the three factors and the related eleven variables used in the research model and explain the scoring method for examining thei decision making processes. Case Study Research The comparative case study is the primary method u sed to organize and analyze the data for this study. Comparative case study, an important approach in qualitative research has become a prevalent model for studying TODs (Bernick and Cervero, 1997; Boarnet and Compin, 1999 ; Weinstein and Clower, 2005) research used comparative case studies of TODs in the U.S., Sweden, and Canada to develop guid elines for urban planners on how to design pedestrian friendly, mixed use transit villages. Their study focused on site planning, creative land usage, zoning, and real estate development. Boarnet and Compin (1999) used the comparative case study method to analyze the planning and implementation of TODs in San Diego County, California. After interviewing regional planning directors and analyzing zoning record s they found that TOD planning and implementation resembled the incremental m odel of policy making explained by Lindblom (1959). Furthermore, Weinstein and Clower (2005) created multiple case studies of select TODs developed along the DART light rail

PAGE 56

41 system in Dallas, Texas. They used the comparative case study method to help the m evaluate the impact that TODs had had on economic investments around select transit stations in the Dallas region. Researchers use the case study method for studying TODs because it is a helpful tool for analyzing the complexities of a TOD development Among the many parties responsible for bringing a TOD into existence are the developers, community advocates, politicians, and city planners. The case study is well suited to examining the complex behavior, decision making, and interaction of these var ious actors. Yin (2003) c laimed that the case study approach i stated that it is often used in sociology, po litical science, social work, public administration, and urban planning to examine complex social phenomen a Flyvberg (200 1) similarly argued that the case study is the most appropriate method to use when one is trying to understand the richness and depth of a certain phenomenon. George and Bennett (2005), moreover, claim ed that case stud ies provide a strong approach for theory development since they help one find the connections between causes and outcomes. Moreover, Herriott and Firestone (1983) argue d that the multiple case study framework i s more convincing because it provide s increased levels of generalizability owing to its comparative approach. Stake (2006) argued that the multiple case framework helps to reveal differences and distinctions with regard to the research question guiding the study. Furthermore, Flyvbjerg (2001) claim ed that multiple case studies are particularly helpful when the cases for analysis are strategically selected to help confirm or disprove hypotheses and research propositions.

PAGE 57

42 Denver TOD Case Study Design This research, which uses the multiple case study comparative approach, focuses on five TOD s in the Denver region. Of the se cases, three represent TODs with affordable housing provisions while two had no affordable housing. Successful affordable housing provision is defined as 10% of all residential units in the development are affordable to households earning less than 80% of the area median income. This is a standard affordable housing criterion used by most national affordable housing advocates (Smart Growth America, 2014) The cases were strateg ically chosen to enable distinctions to be made between affordable and non affordable TOD developments. The three TOD s that provide affordable housing are the Gates TOD at I 25 and Broadway near downtown Denver the South Linco ln TOD at 10 th and Osage near downtown Denver and the Evans Station Lofts TOD at 2140 S. Delaware Street in S outhwest Denver. The two TOD cases that do not include affordable housing are the Englewood City Center TOD in Englewood, Colorado and the Vallagio at Invernes s TOD in Centennial, Colorado in the South Suburban Denver region. Case Selection Criteria Out of the 46 existing transit stations in the Denver light rail network, the five Denver TOD cases were selected for this research and were chosen in accordance with the following criteria: They met the required definition of a TOD (Center for Transit Oriented Development, 2013) ; they each had ground floor retail space in excess of 5,000 square feet (Planning Department of Plano, Texas, 2008; TransAct, Inc. and Van Meter Williams Pollack, LLP., 2011; Calthorpe Associates and Mintier Associates, 2011) ; they each exceeded a total residential budget of at least $10,000,000 ; the project was under

PAGE 58

43 constru ction or completed at the time of study and was located within the Denver region ; and at least two of the TOD cases had to have affordable housing provisions The following section describes the case selection criteria, the first criterion being close adh erence to the commonly accepted definition of a TOD. The Center for Transit Oriented Development (2014) defined a TOD as follows: Transit oriented development is often defined as [a] higher density mixed use development within walking distance or a hal f mile of transit stations. [TOD] and take transit. Boost transit ridership and minimize traffic. Provide a rich mix of housing, shopping and transportation choices. Gen erate revenue for the public and private sectors and provide value for both new and existing residents. We believe that TOD is really about creating attractive, walkable, sustainable communities that allow residents to have housing and transportation choices and to live convenient, affordable, pleasant lives. Each of the Denver TOD cases met this description of a TOD since all were pedestrian friendly, mixed use developments that include residential and retail space located within to mile of the nearest light rail transit stop. Furthermore, the developers in each of these TOD cases planned, designed, and marketed their project with the TOD concept in mind. Many of the residents in these developments, moreover, chose to live there because of the affordability, proximity to light rail, opportunity to reduce automobile travel, and walkability of the community. The second selection criterion was the minimum retail square footage requirements. One important component of this study is to analyze the risks imposed by ground floor retail requirements. In order to meet the minimum risk threshold for analyzing the developer s risk regarding ground floor retail requirements, a TOD must have more than 5,000 square feet of retail. Moreover, m ost TOD desig n guidelines require at least 5 000 square feet of office/retail space as part of a mixed use requirement

PAGE 59

44 (Planning Department of Plano, Texas, 2008; TransAct, Inc. and Van Meter Williams Pollack, LLP., 2011; Calthorpe Associates and Mintier Associates, 20 11) All five of the Denver TODs in this research exceeded 5,000 square feet of ground floor retail requirement The third criterion for selecting TOD s for this research was a required minimum residential development budget of $10 million. Most develop ments with less than a $10 million residential budget do not have the size and scale to support mixed use development. The majority of multi family developments in the Denver region with a total budget of under $10 million moreover, are unlikely to inclu de 5 000 square feet of retail/office space. These smaller developments usually lack the residential density to support a ground floor commercial space component ( Calthorpe Associates and Mintier Associates, 2011; T. Gladwell, personal communication, April 19, 2012 ) Any development that falls below the $10 million residential budget threshold moreover, simply does not have the size, scale and risk factors of the TOD cases included in this research. All five Denver TOD cases selected have a total r esidential development budget in excess of $10 million. The fourth case selection criterion for this research related to the construction timeline for the respective TOD. The purpose of this dissertation is to examine the economic, regulatory and advoc acy factors impact ing about whether or not to include affordable housing within his/her TOD. To decide effectively, the developer and the TOD site had to be at the stage where final decisions could be made, economic commitments w ere guaranteed, ground ha d been broken, and the construction process ha d started or the project ha d been completed. All the TODs in this

PAGE 60

45 study had either been completed or were close to completion at the time of th e study. The final criterion for this re search, affordable housing requirement, was met as three of the Denver TOD cases included have affordable housing provisions. The Semi Structured Interview The two major sources of data used in the analysis of the Denver TOD case s wer e semi structured in terview transcripts and primary source documents relevant to each case. The semi structured interview also referred to as the general interview guide approach, is the preferred interview protocol for case study research because it has more uniformity than the conversational approach but is less rigid than the fully structured approach (Gall, Gall and Borg 2003; McNamara, 2009) Drev er (1995) contend ed that the semi structured interview was a good fit for case studies sin ce its predetermined set of questions allow ed for consistency and standardization. Moreover, the semi structured interview was often preferred by researchers because it allow ed for more flexibility by encourag ing probing and exploratory follow up question s. Robson (2002) argue d that the strength of the semi structured approach was that it g ave the interviewer more freedom in the wording of questions. Patton (1990) argued that by using the semi structured interview approach to build a conversation within a particular subject area, to word questions spontaneously, and to establish a conversational style but with the focus on a particular subject that has been predetermined (p. 283). The semi structured interview uses a standa rdized set of questions asked of all respondents in the same order and format. Mitchell and Jolley (2007) considered that th is pre constructed set of questions was helpful by providing uniformity that would reduce interviewer bias.

PAGE 61

46 The semi structured approach was utilized for this particular study The researcher conducted each semi structured interview from a predetermined set of questions related to the economic, regulatory, and advocacy factors impacting affordable housing development in the five TODs considered All questions were developed with the intent ion of examining how the economic, regulatory, and advocacy factors influenced the developer decision s regarding the possible inclusion of affordable housing in the ir respective TOD s The res earcher who used the same set of questions for all the interviews asked the m in similar order. The pre constructed, pre ordered set of questions and the consistent method of asking the questions assisted the researcher in maintaining uniformity and consistency in the interviews as a means of reducing interviewer bias. The sample set of int erview questions employed in this study can be found in Appendix A. Selecting Interviewees The interviewees selected for the study were chosen under the sample selection criteria recommended by Creswell (2003; 2007). The respondents were thus selected according to their title, position, authority, and importance to each TOD case ( S ee Appendix B ). The types of people chosen for interviews were developers, planners, city officials, community advocates, local citizen leaders, and other important actors an d decision makers involved in the development of (2007) strategy of purposeful sampling for selecting respondents, the researcher was able to obtain interviews with the most important decision makers in each TOD The researc her also employed the snowball sample strategy for identifying importan t players for each case (Goodman, 1961) In other words, d uring the interview process, the researcher

PAGE 62

47 asked each interviewee for recommendations of other key players involved in the de velopment that the researcher should contact Based on the feedback from these interviews and contacts, the researcher was able to develop an extensiv e list and network of possible interviewees and contacts for future interviews. T he researcher followed all the Institutional Review Board ( IRB ) protocols regarding the informed consent process and received IRB approval for the all the interview questions used in the interview process The researcher then contacted each of the potential interviewees via em ail to explain the nature of the interview and the scope of the research. Th is introductory email explained that the researcher was a Ph.D. student at the School of Public Affairs of the University of Colorado Denver who was undertaking dissertation resea rch on the topic of TODs and affordable housing in the Denver region. Once the initial email contact was made, the researcher followed up with emails and phone calls to set up a meeting time and to give mor e details about the interview. The researcher found that most of the respondents proud to be involved with a TOD were excited to share lessons learned and to contribute to academic research related to TODs and affordable housing. In total, the researcher conducted 33 interviews and digitally record ed more than 1 427 minutes (approximately 24 total hours) of interviews The complete interview list with the names and titles of all interviewees and the lengths of the respective interviews is included in Appendix B. An alyzing the Interview Data This study used directed content analysis for examining the interview transcripts and primary source documents. The use of content analysis is recommended as a primary tool for examining data since it allows the researcher to r eview, highlight, and condense a

PAGE 63

48 significant amount of text, documents, interview transcripts, and literature into usable proportions (Hsieh & Shannon, 2005; Miles & Huberman, 1994; Weber, 1990) Moreover, a coding scheme was employed to assist in the analysis of the interview transcripts and primary source documents. Use of such schemes is recommended as part of the content analysis framework because it helps to facilitate and organize the examination of the research by condensing important data into smaller chunks. The directed content analysis approach is considered the appropriate method for research that has a predetermined set of research questions and hypotheses generated from a literature review (Mi les and Huberman, 1994; Pott er and Levine Donnerstein, 1999 ) Moreover, experts recommend that studies using directed content analysis create a coding scheme based on a theoretical framework developed prior to fieldwork. Hsieh and Shannon (2005) stated, f or example, that the goal of a directed approach to content analysis is to validate or extend conceptually a theoretical framework or theory. Existing theory or research can help focus the research question. It can provide predictions about the variables of interest or about the relationship among variables, thus helping to determine the initial coding scheme or relationships between codes (p. 1281). Layder ( 199 8) argue d that theories should inform and drive the initi al coding process while Auerbach and Silverstein (2003) claim ed that the theory and questions should be kept in the forefront to assist the researcher in making coding choices. Saldana (2009) suggested that the coding scheme most appropriate for the direct content analysis approach was provisional coding, also referred to as hypothesis coding (Bernard 2006; Dey, 1993; Weber 1990). These coding schemes were thought suitable for research that already has a research question,

PAGE 64

49 hypothesis, and theory identified before the fieldwork research and interview process began: provisional list is generated from such preparatory investigative matters as: knowledge and experiences, and researcher formulated hypotheses or hunches [p. 120 121]. . The codes are developed from a theory/prediction about what will hypothesis coding: One method of creating codes the one we prefer is that of creating [a] conceptual framework, list of research questions, hypotheses, problem areas and/or key variables that the researcher brings to the study [ p. 58]. . Examples of a well conceptual variables, and defined precisely enough so that researchers have a common language and can be clear about whether and how a segment of data actually fits into a category (p. 62). It was also recommended that the coding schemes, definition of codes, and semantics related to the codes be as closely aligned with the variables, research question, hypothesis, and theory as possible so that the r esearcher might access these concepts quickly during the analysis process. As Miles and Huberman (1994) suggest g ive a code a name that is closest to the concept it is describing. . Keep the codes semantically close to the terms they represent. . The rationale is that the analyst must be able to get back to the original concept as quickly as possible, This study used the directed content analysis approach because the general frame work for the research questions, hypotheses, and theory had already been developed based on a thorough review of the literatures on TODs, affordable housing, and a making process. Moreover, the research used the provisional and

PAGE 65

50 hypoth esis coding schemes outlined by Saldana (2009). To maintain clarity and efficiency during the analysis of interview transcripts, the code names were closely aligned with the three factors (economic, regulatory, and advocacy) and the eleven variables ident ified in the literature review for this study. For example, the code names for the variables associated with the economic factor were the following: land costs market conditions (code name code descriptions can be found in Appendix C. Finally, another significant component of content analysis was the highlighting of important quotations in the interv iews and using those statement s to assist in making important arguments regarding the research questions, hypotheses, and/or theory involved (Booth, Colomb, and Williams, 2003; Creswell, 2007). Saldana (2009) claimed that quotations found in interview tra nscripts can become key pieces of evidentiary warrant to support your propositions, assertions, or theory and serve as illustrative examples throughout your report. . Quotes may even be so provocative that they become part the title, organizationa l framework, or through line of the report (p. 16). This study used a significant number of direct quotations pulled from the analysis of the interview transcripts. All the interviews were of high level developers, urban planners, elected officials, and key players involved in the important decision making processes in the five Denver TODs. Many of these interviews yielded important direct statements and quotations that related to the research question, hypotheses, and theoretical framework for this stu dy. These statements were highlighted and used prominently in the three analysis chapters (Chapters 5, 6, and 7) of this study.

PAGE 66

51 Documentary Evidence In addition to the semi structured interviews, the second major source of data in this study was primary source documents. Yin (1994) argued for the importance of primary documents as a valuable source of evidence for case studies. He claimed that 81). Merriam (1988 ) confirmed the importance of documentary evidence when she source materials and documentary evidence were an essential component of this study. The researcher estimates that over 2,000 pages of source documents were obtained, reviewed, and used. The strategy applied for collecting primary source documents for this study was based on their relevance and importance to the particular TOD case being considered. The most important source documents used were the following: Low Income Housing Tax Credit applications, master and area redevelopment plans, pre development and final developmen t plans, land and property archival data, minutes and housing market conditions for the Denver region, and LoopNet archival records for commercial and residential land sale s with comparisons for the Denver region. Other documentary sources used were blueprints and design plans for each TOD site, relevant reports from local and national non profit organizations, articles from online sources and local print media, memoranda, agendas, written reports, proposals, internal records, and community newsletters, among other s

PAGE 67

52 Of all the primary source documents used in this research, the Low Income Housing Tax Credit applications and the master development plans were the most signi ficant sources of evidence. Low Income Housing Tax Credit applications were used in three of the five TOD cases selected for this research (Gates, South Lincoln, and Evans Station Lofts). Thanks to the Open Public Records Act, the developers of these TOD s were required to release their LIHTC applications for each of the sites in question. The LIHTC applications were significant sources of information since they contained complete financial projections for each TOD project including such line by line budg et items as the land price paid for the parcel, the amount of public subsidy granted for the site and rental revenue and regulatory cost projections for the development, among them zoning, infrastructure, and parking requirements. The second most important set of source documents related to this study were the master plans, redevelopment plans, and station area plans related to each of the TOD sites. These documents included the Englewood City Center Final Development Plan, the Val lagio Final Development Plan, the Gates Cherokee Redevelopment Plan, the South Lincoln Master Plan, and the Evans Station Area Redevelopment Plan. Each contained important information regarding the relevant zoning, infrastructure, parking, and mixed use r equirements as well as the local advocacy group activity at each TOD site. Triangulation This study used the triangulation technique as recommended by Creswell (2007) to assist in confirming or disqualifying evidence collected in the interview transcripts and primary source documents. The triangulation process is used to judge the quality of

PAGE 68

53 evidence among multiple data sources with regard to research questions and hypotheses. The following scenario is an example of how the triangulation process was used to corroborate evidence in this study. Scott Johnson of Trammell Crow Residential was th e lead developer of the affordable and market rate residential units at the Gates TOD. In an interview with Mr. Johnson, the researcher asked the following set of questions related to pay for the land considered below market value, at fair market, or above market value for comparable decision to produce answers to this set of questions, the researcher verified the information received by examining the Low Income Housing Tax Credit application for the Gates development, which included a line item record of the price paid for the land parcel in question. The researcher then confirmed this figure with the Denver municipal archival records. Furthermore, the researcher access ed the online real estate database, LoopNet, which provides records of land price comparisons for similar properties in the Denver region. transcripts from other key players in the Gates development who answe red the same set of questions. By using both interviews and source documents to corroborate or disqualify data, the researcher strengthened the likelihood of having the actual verifiable land cost as well as a more detailed account of the impact of the la nd cost variables on the making process.

PAGE 69

54 The next section describe s how the use of interviews and source documents were incorporated into a scoring model designed to analyze the impact of the economic, regulatory, and advocacy fact housing in his TOD. The Economic, Regulatory, and Advocacy Factors The three core factors for this research (economic, regulatory, advocacy) and the eleven variables (land cost, housing markets, publi c subsidies, ROI; zoning, infrastructure, parking, retail; and neighborhood, non profit, and political advocacy) were chosen because of their prominence in the literature regarding their impact on a housing in a TOD. The following section will define each variable and explain the scoring system designed to housing decision. The Economic Factor The first economic factor variable is land cost. This variable was chosen because decision to move forward with a housing development project (Baerwald, 1981; Kenney, 1972; Winarso, 2002) If a developer can purchase a parcel of land at fair market value or even below market value, it bodes well with regard to the likelihood of earning a satisfactory profit on a particular development. However, if land costs are well above market value, then that fact increa ses the risk for the developer because the added cost will require a higher return on investment. High land costs are often cited as one of the most significant barriers to affordable housing development within a TOD ( Center for Transit Oriented Developme nt, 2007; Cervero & Duncan, 2002; Weinstein & Clower,

PAGE 70

55 2005) For the purpose of this study, land cost is defined as the purchase price the developer pays for the specific TOD parcel on which the housing development will be built. The three scoring categ ories for the land If the developer paid below fair market value for the land, the land positive economic impact, since the developer was able to acquire the land at a discount. If the developer paid fair market value for the lan representing a neutral economic impact. Finally, if the developer paid above fair market price, the land 1 representing a negative economic impact for the developer. The fair market value fo r each land parcel was determined through comparing the actual purchase price of the parcel with those of similar land parcels in the same region. Land value comparisons were determined by research at the Denver Municipal Land and Property Archives as wel l as the online real estate database, LoopNet (LoopNet.com, 2014). LoopNet, the largest online commercial real estate database in the world, contains land price and real estate records for every major city in the United States for the past 30 years. The land comparison pricing found in LoopNet and other archival databases was corroborated through interviews with developers, key informants, and primary source documents. Housing market conditions represent the second variable included under the economic fac tor. Interviews with developers as well as a review of the housing development literature revealed that strong, predictable housing market conditions made

PAGE 71

56 it more likely that a developer would acquire stronger rental and sales revenues from his or her res idential products. These positive economic conditions also made it more likely that affordable housing wou ld be considered. Conversely poor housing market conditions reduce d the probability of profits for the developer and made it less likely that affor dable housing would be produced. The housing market conditions variable for this study is defined as the overall state of the housing market within the Denver region during the timeframe of a particular TOD project. The scoring categories for the housing market conditions variable are If a developer encountered negative or slumping housing 1 If housing market conditions were neutral/stab le for the region, the variable w as scored 0 and if housing market conditions were strong, the variable was scored a +1 Negative housing market conditions are characterized by a combination of declines in new housing starts (both single family and multi family), sluggish sales of existing homes, reduced rental revenue and an uptick in vacancy rates. Neutral housing market conditions include stable housing market conditions with no trend either upward or downward. Strong housing market conditions are characterized by an increase in permits for housing starts, shorter listing times for the sale of existing homes, growth in sales price s for existing and new homes, lower vacancy rates, and rising rent levels. The relevant housing market conditions fo r each particular development was determined by Conditions publication ( HUD 1997; 1998; 1999; 2000; 2003; 2004; 2005; 2006; 2007; 2010; 2011) Each quarterly report contains housing market conditions for specific

PAGE 72

57 regions including a summary of housing starts (both single family and multi family), existing home sales, rental market conditions, and vacancy rates. The third economic variable chosen for inclusion in th is research is public subsid ies The amount available for a particular TOD project greatly influence s a ( Center for Transit Oriented Development, 2007 ; Johnson & Talen, 2008 ) The more public subsidies a vailable for a specific development, the more likely a developer will make a satisfactory profit. The most prevalent public subsidy for developers of affordable housing was and is the L ow I ncome Housing T ax C redit (LITHC), a federally funded program admin istered by the U.S. D epartment of Housing and Urban Development (Cummings & DiPasquale, 1999; Korb, 2009) Other significant subsidies offered by cit y governments are HOME funds, Tax Increment Financing, and Community Development Block Grants (Johnson & Talen, 2008) The public subsidy variable is defined as the total amount of federal, state and local subsidies available for a given TOD project. The scoring categories for the public , A negative subsidy, scored a 1 occurs when the developer of a particular project is r equired to pay a penalty for the ability to opt out of affordable housing requirements A neutral public subsidy, scored 0 occurs when a developer receives no public funding for the respective project. A positive public subsidy, scored +1 is given when a developer receives a subsidy package for the intended TOD development. The amount of subsidy granted to a particular TOD is based on an analysis of LIHTC applications and development master plans as well as interviews with developers and other key players

PAGE 73

58 associated with the TOD development. The last variable chosen for inclusion under the economic factor is the (ROI) The projected ROI was included as an economic variable because of its impact on a devel housing in a TOD. The stronger the predicted ROI for a particular development, the more likely a developer will produce affordable housing there This study defines ROI as the expected income to be received through r etail leases, rental income, profits earned from for sale units within the project, and equity gained through appreciation of the property. The scoring categories for the ROI variable s , 1 is defined as a situation in which the developer projects a los s on their particular project. A neutral ROI, scored 0 occurs when a developer projects break ing even. A positive ROI, scored +1 is given then, when a developer projects a profit. The expected ROI for each development is determined by interviews with the developers as well as analyzing the development budget, tax credit applications (Colorado Housing and Finance Authority, 2007 2010 2011) and housing market studies (National Valuation Consultants, Inc., 2005; Prior and Associates, 2011) These from rental revenue, expenses and housing market conditions. Interviews with o ther key players involved in each project are also used to corroborate the data in the development documents.

PAGE 74

59 Table 3.1 Economic Factor Scoring Template Economic Scoring Categories: Economic variables 1 = Negative 0 = Neutral +1 = Positive Land Cost Above fair market value Fair market value Lower than fair market value Housing Market Conditions Negative housing market conditions Neutral/stable housing market conditions Positive housing market conditions Public Subsidy Negative subsidies/developer pays penalty for opting out of affordable housing requirement No subsidies available Positive subsidy package granted to developer Return on Investment Negative ROI/developer projects loss Neutral ROI/developer expects to break even Positive ROI/developer projects profits Economic variables Rationale for inclusion within economic variable Land Cost Land cost is a major factor in affordable housing development. Most TODs are developed in major urban communities where land costs are high. The more reasonable the land cost, the more likely affordable housing will be developed. Public Subsidy Public subsidies are considered one of the most important incentives required to enable the development of affordable housing within a TOD. Of all the public subsidies used in the development of affordable housing, the Low Income Housing Tax Credit (LIHTC) is the most popular. Other popular subsidies include the following: TIF, HOME Funds, CDBG, etc. The more subsidies available for a project, the more likely affordable housing will be developed. Housing Market Conditions Housing stronger the housing market conditions, the more likely the developer will see positive benefits related to both market and affordable developments in the form of increased property value, increased rents, lower vacancy rates, more financing options, and future growth within the TOD. Solid housing market condition s make it more likely a developer will include affordable housing. Return On Investment (ROI) The stronger the ROI is for a development, the more likely the developer will be inclined to produce affordable housing, since higher ROI helps offset the costs of affordable housing.

PAGE 75

60 The Regulatory Factor The first regulatory variable chosen for inclusion in this research is zoning. The zoning variable was selected because of decision to produce affordable housing in a TOD (Johnson & Talen, 2008; Mohamed, 2006) Rezoning costs can be a significant barrier to the provision of affordable housing in a TOD (Cho & Linneman, 1993; Czamansk i & Roth, 2011 ; Green, 1999; Malpezzi, 1996 ). If a developer is compelled to spend time and money rezoning a particular piece of property, this requirement can reduce profit margins and thereby make it less likely the developer will choose to produce aff ordable housing. The zoning variable is defined as the total costs associated with the zoning changes required for the specific parcel/site of the proposed development. The scoring A bove average costs and average costs for the developer A score is assigned based on the amount of time and money a developer must spend rezoning a parcel. If it is found that a particular development must be rezoned completely, the zoning variable is scored development requires partial rezoning, the c ost and if the par ticular development requires no rezoning work These scoring guidelines were created from a review of the development literature, interviews with developers and a reading of the master development plans for each TOD The second regulatory variable in this research is infrastructure requirements. They comprise another important element that impacts the possible development of affordable housing within a TOD. If the se regulations are too burdensome and costly for

PAGE 76

61 th e developer, they can negatively affect the development of affordable housing (Johnson & Talen, 2008; Malpezzi, 1996; Mohamed, 2009) However, if infrastructure costs are reduced, this situation creates conditions more supportive of affordable housing dev elopment. In this study, i nfrastructure requirements are defined as the total costs associated with such regulations as roads, bridges, pedestrian walkways, right of ways, sewers, utility upgrades, flood plain management brownfield remediation and other types of infrastructure costs associated with developing a TOD. The scoring categories for infrastructure requirements are again defined as and oper The score for infrastructure requirement is based on an analysis of both the development documents and interviews with developers and other key players. If it is determined that the infrastructure requirements for a particular development exceed m ore than 1 0 % of the total budget, the variable is scored a 1 average costs for the developer If the infrastructure costs come to 5 % to 10 % of the total budget, the variable is scored 0 and if the infrastructure costs are less than 5 % of the total budget, it is scored a +1 standing for average costs for the developer are based on a review of the development literature regarding infrastructure requirements as well as interviews with developers of all the TOD cases considered. Infrastructure costs were determined via the analysis of budget documents, master development plans, and LIHTC applications related to each TOD. The third variable included in the re gulatory factor consists of parking requirements. Those associated with TODs can impede the development of affordable

PAGE 77

62 housing because of the excessive costs involved (Rick Williams Consulting, 2007) Parking requirements for high density developments like TODs can force the developer to build parking garages, landscaping wraps and expensive design features to make the parking area more aesthetically pleasing for potential tenants These costs which tend to reduce profit mar gins discourage developers from building affordable housing in TOD s In this study, the parking requirements variable is defined as the total parking costs per residential unit The scoring categories for parking requirements are: A bove average erage The average parking cost per residential unit for multifamily developers in the Denver region is between $8,000 to $12,000 per uni t ( T. Gladwell, personal communication, April 19, 2012; G. Krause, personal communication, December 5, 2012 ; Rick Williams Consulting, 2007) This range is based on the regions typical requirement of two surface lot parking spots per unit at an average cost of approximately $5,000 per surface parking spot A score of 1 is assigned if the developer is required to spend more than the average $12,000 per unit (i.e. via the development of parking garage spots or detached garage spots which exceed $15,000 per unit ) A score of 0 is assigned if the developer spends with in the average $8000 to $12,000 range per unit Finally, a score of +1 is given if the developer is required to spend less than the $8000 per unit, which would represent a significant financial benefit to the developer. These categories were developed based on interviews with developers and other key players from the five Denver TOD cases as well as a reading of the literature on parking costs and parking management expenses for the Denver region (Rick Williams Consulting, 2007; Victoria Transport Polic y Institute, 2013)

PAGE 78

63 The last regulatory variable for this research concerns ground floor retail requirements. This variable was included because of its strong influence on the regulatory context of a TOD. TODs are mixed used developments requiring that commercial space be integrated with residential development (Bernick & Cervero, 1997; Dittmar & Ohland, 2004) In most TOD s some portion of the ground floor of a multi family residential building must be set aside for retail space. This requirement can be a barrier to the development of affordable housing within a TOD because of the risks involved for the developer. If the location of the specific development does not have the appropriate foot traffic and density, the retail space can be underutilized a situation which leads to higher retail vacancy rates and less rental income These conditions which reduce profit margins for the developer, will naturally discourage the inclusion of affordable housing in a TOD The ground floor retail variable is defined as the required amount of ground floor retail square footage required per residential unit for a specific development The scoring categories for the retail regulations are : average Based on interviews with multi family developers in the Denver region, the average ground floor retail density requirement in TODs in the Denver region is estimated to be between 40 to 60 square feet of ground floor retail space for every residential unit ( T. Gladwell, personal communication, April 19, 2012; C. Parr, personal communication, September 7, 2011 ) This would translate into a 100 residential unit multifamily development with about 4,000 to 6,000 square feet of g round floor retail. Based on these requirements, i f the TOD developer is required to provide more than 60 square feet of ground floor retail for every residential unit the variable is scored a

PAGE 79

64 for above average. I f a TOD developer is r equired to pr ovide between 40 60 square feet of retail per residential unit the variable is scored 0 since this is considered an average size d retail requirement. If a TOD developer must produce less than 40 square feet of retail space per residential unit the va riable is scored a +1 denoting a minimal retail requirement. T he se average retail requirements were supported by the literature regarding typical mixed use retail guidelines for TODs ( Calthorpe Associates and Mintier Associates, 2011 ; TransAct, Inc. and Van Me ter Williams Pollack, LLP, 2011 )

PAGE 80

65 Table 3.2 Regulatory Factor Scoring Template Regulatory Scoring Categories: Regulatory Sub variables 1 = Negative 0 = Neutral +1 = Positive Zoning Code Above average costs to the housing developer; rezoning required Average costs to the developer; partial rezoning required Below average costs to the housing developer; no rezoning required Infrastructure Regulations Above average costs to the housing developer; greater than 1 0 % of total budget Average costs to the housing developer; costs total 5% to 10 % of total budget Below average costs to the housing developer; less than 5 % of total budget Parking Regulations Above average costs to the housing developer; greater than $12,000 per residential unit Average costs to the housing developer; within the range of $8,000 to $12,000 per residential unit Below average costs to the housing developer; less than $8,000 per residential unit Ground Floor Retail Regulations Above average costs to the housing developer; greater than 60 square feet of ground floor retail per residential unit Average costs to the developer; between 40 to 60 square feet of ground floor retail required per residential unit Below average costs to t he housing developer; less than 40 square feet of ground floor retail required residential unit Regulatory variables Rationale for inclusion within regulatory variable Zoning Code produce affordable housing within a TOD. The more time and cost involved in rezoning a parcel of land to produce a residential development, the less likely it will be for a de veloper to choose to develop affordable units. Infrastructure Regulations Infrastructure requirements can have a significant impact on whether affordable housing is developed. Infrastructure costs associated with urban infill developments like TODs can increase costs significantly for development. Parking Regulations Parking regulations have a significant impact on affordable housing development. Because of the reduced surface parking requirements in TODs, developers are often required to build parking garages and expensive landscaping wraps. These parking requirements rais housing. Ground Floor Retail Regulations Ground requirements are risky since the projected foot traffic densities may not being realized leading to vacant or undervalued retail properties. The costs and risks associated with ground affordable housing.

PAGE 81

66 The Advocacy Factor The first advocacy variable chosen for inclusion in this study is neighborhood advocacy. Neighborhood support or opposition to affordable housing can have a Advocacy fro m the local or nearby neighborhood(s) can help increase good will for a particular development and thus provide positive support for affordable housing. H owever, neighborhood opposition, often in the form of the not in m y b ackyard (NIMBY) response, can ra ise the risks and costs to the developer and thwart affordable housing development (Danielson, Lang, & Fulton, 1999; Franzen & Hunsberger, 1998; Hirt, 2007; Pendall, 1999) This study defines neighborhood advocacy as the overall level of support or oppos ition exerted b y the residents homeowners business leaders or business owners within the neighborhood or nearby the development area. The scoring categories for this variable are defined as follows : If it is determined that local neighborhood groups op pose the development of affordable housing a score of 1 is assigned to signify a negative impact on the development of affordable housing. If the neighborhood is impartial or neutral to the development of affordable housing a score of 0 is assi gned. Finally, if the neighborhood consensus is support for the development of affordable housing a score of +1 is assigned to show a positive impact for the inclusion of affordable housing The neighborhood consensus for support for or opposition to affordable housing was determined by analyzing documents and news articles written about the development as well as interviews with local citizens, developers and other key players associated with the particular TOD.

PAGE 82

67 The second advocacy variable is non profit advocacy. Non profit housing groups often bring strong resources to bear in support of developing affordable housing within TODs. The activism of an organized affordable housing non profit can exert significant pressure on develope rs and dramatically increase the chances of affordable housing being developed in their TOD (FRESC, 2011; Grady & LeRoy, 2006; Read, 2006) On the one hand non profit groups can assist developers in acquiring subsidies and political support for affordabl e housing which lower s development costs. On the other hand, non profit organizations can also serve to thwart affordable housing development in a TOD. Some suburban non profit s help monitor design standards and control housing types and land usage in th e ir communit ies These organizations can thus block affordable housing in the neighborhoods they serve. The scoring categories for the non profit advocacy variable are d to affordable ive of affordable housing development If the consensus from the non profit advocacy groups related to a particular TOD development is opposed to affordable housing, the variable is scored 1 If the non profit community is impartial to affordable housing development, the variable is scored 0 Finally, if the local non profit s support affordable housing development in the TOD, the variable is scored +1 The no n profit consensus of support for or opposition to affordable housing i n this study was determined by analyzing source documents and news articles written about the development as well as through interviews with local citizens, developers and other key players associated with the respective TOD development s The final advocac y variable chosen for this study is political advocacy. Strong

PAGE 83

68 political support for affordable housing can lead to significant benefits for the developer in terms of good will, subsidies, expedited applications, and reduced regulatory fees (DeCristoforo, 2009) Conversely political opposition can silence support for affordable housing and create a significant barrier to its inclusion in a TOD. This study defines the political advocacy variable as strictly the measure of political support or opposition exerted by political leaders and elected officials for or against affordable housing in a TOD. Political support or opposition can come from state or local elected officials as well as civil servants and city administrators. The scoring categories for the political d to the development of ive of the development of affordable housing Scores are assigned based on the overall political support or opposition political officials and political leaders exert regarding affordable housing development in a TOD. If a particular TOD development encounters political oppositi on from political leaders to affordable housing, the variable is scored 1 If the political leadership is neutral regarding affordable housing in a TOD, the assigned score is 0 Finally, if affordable housing development in a TOD enjoys support from political leaders and elected officials this fact is reflected in a score of +1 The consensus for political support for or against affordable housing was determined by an analysis of documents and news articles written about the development as we ll as interviews with local citizens, developers and other key players

PAGE 84

69 Table 3.3 Advocacy Factor Scoring Template Advocacy Scoring Categories: Advocacy variables: 1 = Negative 0 = Neutral +1 = Positive Neighborhood Advocacy Opposed to affordable housing development Neutral to affordable housing development Supportive of affordable housing development Non Profit Advocacy Opposed to affordable housing development Neutral to affordable housing development Supportive of affordable housing development Political Advocacy Opposed to affordable housing development Neutral to affordable housing development Supportive of affordable housing development Advocacy variables Rationale for inclusion within advocacy variable. Neighborhood Advocacy Neighborhood groups exert a strong impact on affordable housing development within their community. If the neighborhood consensus is to oppose affordable housing (NIMBY), this response can drive up costs for the developer. However, if the neighborhood su pports the development, it can reduce risks and add strong support for and benefit to the developer. Non Profit Advocacy Non profit housing groups can have a powerful impact on the development of affordable housing in a TOD. Many TODs are big developments requiring large public subsidies to offset costs. Because of this public involvement, organized non profit groups often lobby for political support and additional subsidies. These groups can have a significant positive impact on a developer' s decision to produce affordable housing in a TOD. However, non profit organizations can also serve to block affordable housing development. Political Advocacy Political advocacy also has a significant impact on the development of affordable housing in a TOD. Strong political support from elected officials and city administrators can help generate good will for affordable housing in a TOD and lead to stronger subsidies and other support for it.

PAGE 85

70 The Scoring Timeframe To understand the impact of the economic, regulatory, and advocacy factors on a making process, one must measure the variables at the proper time during that process. Based on interviews with TOD developers and a review of the development literature, the optimal timeframe to measure the impact of these factors is within the two year s leading up to the ground breaking for the project. During this window the developer will have begun to invest significant amounts of time and resources into architectural, engineering, and infrastructure plans as well as othe r pre development expenditures. It is within this time period that the developer makes the decision to produce or forego affordable housing within the respective TOD This study uses the above described timeframe as the focal point for its analysis. By looking at the two years preceding the ground breaking for e ach Denver TOD case, the study scores the economic, regulatory, and advocacy factors in terms of their impact on the respective developers. The Scoring System The scoring system used in this research as mentioned above, is based on the three interval sca le of 1, 0, and +1. While the study initially considered using a binary scoring scale, the three part system was deemed preferable in that it allowed for greater precision. Scores were based on the variables produce affordable housing in the TOD. For example, 1 would represent a negative impact on the developer, 0 a neutral one, and +1 a positive one If the final average score for the particular factor were positive, it was hypothesized that the factor was c reating conditions supportive of affordable housing. If the final score of the factor by

PAGE 86

71 contrast were negative, it was hypothesized that conditions were unfavorable to the development of affordable housing. Table 3.4 below gives an example of how the ec onomic variables would be scored and their respective impact s decision regarding the inclusion of affordable housing in a TOD Table 3.4 Hypothetical Score for the Economic Factor Table 3.4 above gives an example of a hypothetical score for the economic factor. In this example, the land cost variable is neutral, while housing markets, public subsidies, and ROI are all positive. The final score for the economic factor is found by taking the sum of the individual variables and dividing it by the total number of variables. This operation would consequently result in a final score of +0.75 for the economic factor. Based on this score, positive economic conditions would make it more likel y that a developer would consider the inclusion of affordable housing. The fair market land costs coupled with solid housing market conditions, strong subsidies, and a strong ROI would thus provide significant economic benefit to the developer by helping offset the costs and risks of affordable housing Dominant and Moderating Factors This literature suggests that the economic factor provides the dominant influence on whether or not to include affordable housing in their TOD project The research indicates that some positive combination of reasonable land costs, Economic variables Land Cost 0 (fair market value) Housing Market Conditions +1 (strong housing market conditions) Public Subsidy +1 (strong subsidies available) ROI +1 (strong return on investment) Final Score +0.75 (sum divided by total number )

PAGE 87

72 stable housing market conditions, the availability of public subsidies, and a solid expectation of return on investment is required for a developer to consider i ncluding affordable housing in a TOD development Without solid economic conditions it is unlikely that a developer would consider taking on the added risks of affordable housing. Moreover, the study holds that both the regulatory and advocacy factors serve as moderators that either enhance or minimize the impact of the economic factor. On the one hand, r educed regulatory requirements can lower the costs for a developer and enhance the economic conditions and thereby make the inclusion of affordable h ousing more likely On the other hand increased regulatory costs can diminish the economic conditions and weaken the prospects for affordable housing. Furthermore, a positive advocacy environment characterized by solid community support for affordable housing can lead to increased good will and a possible increase in public subsidies All this would enhance the economic context and increase the likelihood of affordable housing. Conversely community opposition to affordable housing can raise costs and concerns for the developer and diminish the economic context while reducing the likelihood of including affordable housing in a development. It is the interaction of the dominant and moderating factors that create s conditions which ultimately influence a decision on affordable housing within a TOD. The following section discuss es the concept of moderating variables as developed in the psycholog ical research of Baron and Kenny (1986) and Frazier, Tix, and Barron (2004) This section applies t he latter research model to the present research on the economic, regulatory and advocacy factors

PAGE 88

73 Moderat ing Factors Frazier, Tix and Barron (2004) illustrate d the impact of moderating factors in their research on psychotherapy and depression. They explain ed that in a simple causal relationship, the independent predictor variable X causes the dependent outcome variable Y. However, their research also showed th at when a moderat ing variable Z was introduced into that simple equation, it change d the relationship and altered the outcome. For example, Frazier, Tix and Barron (2004) f ound that psychotherapy helped alleviate depression where psychotherapy ( X the ind ependent predictor variable ) had a positive influence on the person receiving therapy ( Y the dependent or outcome variable ) research thus indicated that psychotherapy ha d a beneficial effect by improving the lives of individuals who suffer ed from depression. However, when a moderat ing variable like gender was added to the equation, the influence on the causal relationship was altered. Frazier, Tix and Barron (2004) found that the effectiveness of psychotherapy on al leviating depression changed when this moderating variable was added It turned out that women with depression respond ed better to psychotherapy than did men. Predictor Variable Outcome Variable X (psychotherapy) Y (depression) Moderat ing Variable Z (gender) be used to help explain how regulatory and advocacy factors can likewise influence a

PAGE 89

74 research, the simple causal relationship is characterized by positive economic factors which create conditions that make it more likely that a developer will produce affordable housing in a TOD. The simple causal statement is that E (positive economic conditions) leads to AH (likelihood that a developer will decide to provide affordable housing), where E is the independent, or predictor, variable and AH is the dependent, or outcome, variable. However, when a moderating factor such as the regulatory or advocacy fac tor is added, the causal relationship is changed. For example, if a negative regulatory factor (increased costs related to zoning, parking, infrastructure, and/or retail) were added to the equation, it would diminish the positive economic conditions and d ecrease the likelihood that a developer would choose to provide affordable housing. Similarly, if a positive advocacy factor (solid community support for affordable housing) were added, it would enhance the economic factor and make it more likely that a d eveloper would produce affordable housing. Moderat ing Variable R (regulatory factor) Predictor Variable Outcome Variable E (economic factor ) AH (decision to build affordable housing) Moderat ing Variable A ( a dvocacy )

PAGE 90

75 It is thus the interaction of the dominant (economic) and moderating (regulatory and advocacy) factors that ultimately impacts a inclusion of affordable housing in a TOD. The following section presents three hypotheses regarding these interactions. Hypotheses The research question for this dissertation is, How do economic, regulatory, and TOD ? The general hypothesis is that if these factors interacted to create satisfactory profits and lower risks, it would be more likely that a developer would choose to provide affordable housing. Furthermore, the literature suggests that the economic factor would housing, while the regulatory and advocacy fac tors would serve as moderating factors that either enhanced or minimized the impact of the economic factor. Based on the about including affordable housing in a TOD, the following three hypotheses were developed for this study: Hypothesis #1 If the economic factor is negative, then affordable housing is not likely to be produced in a given TOD. The first hypothesis for this study was developed from the argument that economic conditions are the most important determinant for a developer with regard to making a positive decision on affordable housing development. This study argues that positive economic conditions are required for a developer to consider including affo rdable housing.

PAGE 91

76 Hypothesis 2. If the advocacy factor is negative, then affordable housing is likely only if the economic and regulatory factors are both positive and strong enough to offset the advocacy costs. The second hypothesis was developed from the argument that a negative score on the moderating advocacy factor would reflect strong opposition to affordable housing within the respective TOD. T he increased costs of community opposition at a given TOD site would like ly block a developer from choosing to provide it unless the developer was the beneficiary of significantly reduced regulatory requirements as well as substantial economic incentives to help offset the advocacy costs Hypothesis 3 If the regulatory facto r is negative, then affordable housing is likely only if the economic and advocacy factors are both positive and strong enough to offset the regulatory costs T he third hypothesis for this study was developed from the argument that a negative score for the regulatory factor reflected some combination of high costs related to zoning, infrastructure, parking, and/or ground floor retail requirements. In order for a develop er to choose to include affordable housing in a TOD encumbered with these costs, the economic conditions and advocacy context would need to be supportive enough to offset the costs mentioned and allow the developer to achieve satisfactory profits. Conclus ion This chapter explained the design and method used in this research. It gave the rationale for employing the comparative case study as the primary methodology and explained how the data were gathered and analyzed. The chapter defined the three factor s and eleven variables included in the study and gave the rationale for their inclusion. The chapter also explained the scoring model used and gave examples of how

PAGE 92

77 it worked. Finally, the chapter discussed the role of both dominant and moderating factors and concluded with a discussion of the hypothetical scenarios related to the possible inclusion of affordable housing. The next chapter will provide a brief intro duction and contextual background for each of the five Denver area TODs.

PAGE 93

78 CHAPTER IV THE FIVE DENVER TOD CASE STUDIES The following chapter provides an introduction to and overview of the five TOD cases included in this research. For each case, the chapter presents its location within the Denver/RTD light rail system, a brief project description, and photos of the development taken unless otherwise indicated, by the researcher The chapter also includes a background narrative on each case to give the reader an understanding of the economic, regulatory, and advocacy contexts. The conclusion of the chapter consists of a case study summary table containing the most important comparative details for each case. Finally, the cases are presented in chronological order from the first development, Englewood City Center in 2002, to the most recent, the Evans Station Lofts in 2013. The first two cases, Englewood City Center and Vallagio at Inverness, have no affordable housing provisions while the Gates, South Lincoln, and Evans Station developments all do. Selection Criteria As stated previously in Chapter 3 t he five Denver TOD cases studied here were selected according to these criteria: minimum retail space requirements of 5,000 square feet; a minimum residential budget of $10,000,000; a completion date falling within the time frame of the fieldwork for this research (2008 2012 ) ; a project location within th e Greater Denver region and at least two case s with affordable housing provisions

PAGE 94

79 Figure 4.1 Denver/RTD Light Rail System Map (RTD, 2014) Evans Station Lofts Englewood City Center South Lincol n Vallagio Gates

PAGE 95

80 Case 1 Englewood City Center TOD Transit Station The Englewood City Center TOD is located within a quarter mile of the Englewood Transit Station in Englewood, Colorado. The Englewood Transit Station, at 899 W. Floyd Avenue, opened in July 2000 on what was then designated as the Southwest Corrid or Line but is now known as the C and D Lines (See Fig. 4.1.). The C and D Lines, which both depart from Downtown Denver (C at Union Station and D at 16 th and Stout), terminate at the Littleton/Mineral Transit Station in Littleton, Colorado. The Englewoo d Station is located between the Evans Station to the north and the Oxford/Sheridan stop to the south. The Englewood station has 910 park and ride parking spaces as well as walkable access to the town center and retail shops via a pedestrian bridge. Proj ect Description The Englewood City Center TOD is built on a 55 acre parcel bounded by Santa Fe Drive, Hampden Avenue, Floyd Avenue, and South Elati Street in Englewood. The site was developed by the City of Englewood (master developer), Trammell Crow (re sidential developer), Miller Weingarten (retail/commercial developer), and the RTD (transit infrastructure/pedestrian bridge developer). The completed development, approximately 840,000 square feet in size, includes 438 residential rental units, retail sh ops totaling 350,000 square feet, civic center/city offices of 140,000 square feet, and approximately 2800 parking spaces. The residential centerpiece of the City Center TOD is the 438 market rate rental unit project called Alexan City Center. The Alexan developed by Trammell Crow

PAGE 96

81 Residential, is situated on ten acres of land at the intersection of South Inca Street and Englewood Parkway in the heart of the City Center TOD. This residential development is located only 100 yards from the light rail trans it platform. The total cost of Alexan development, completed in 2002, was approximately $45 million. The complex consists of two three story buildings with 29,000 square feet of ground floor retail space. It also includes one four story parking garage a ccommodating 629 parking spaces. The total site preparation costs paid by the City of Englewood for the City Center project came to approximately $37 million. The city financed the preparations with the sale of a land parcel to Wal Mart for $3.7 million ; the sale of a long term lease of a land parcel to Mil ler Weingarten for $4.2 million; the s ale of ten acres t o Trammell Crow for $5 million; a s ale of bonds to investors in the form of Certificate s of Partici pation (COP) for $19 million; and finally, a grant from the RTD to build a pedestrian bridge and transit platform for $5.7 million The se $37.6 million in funds were used for the site re development including demolition, grade and fill, as well as the development of the public plaza, streets, parks, civic center, pedestrian bridge and transit platform. Moreover, upon completion of the c $110 million dollars in additional private investment s followed with Trammell Crow providing $46 million to dev elop the Alexan City Center apartments while Wal Mart, Sports Authority, Hobby Lobby, Jamba Juice, GNC, and others added $60 millio n in investments. In 2003, when the City Center development was completed, public and private investment s in th is TOD site t otaled almost $150 million.

PAGE 97

82 Photos Pedestrian bridge with Alexan City Center apartments in the background.

PAGE 98

83 Public fountain in the town center with Alexan City Center apartments in the background.

PAGE 99

84 Alexan City Center apartments with ground floor retail.

PAGE 100

85 Background The City of Englewood considered a first ring suburb of Denver is located approximately ten miles to the southwest of D stock consists of older single family homes as well as condominiums townhomes and apartments w hich are nearly 55 percent owner occupied and 45 percent rented. Like many first tier, post World War II suburbs of major U S cities, Englewood saw much of its residential and commercial gr owth from the 1960s through the 197 0s. One significant the Cinderella Mall. When the Cinderella Mall opened in Englewood in 1968, it was the first enclosed shopping m all we st of the Mississippi. Cinderella instantly became th e pride of the strongest financial engine. D uring the 1970s and 1980s, it was generating an average of $2.5 million in annual tax revenues comprising approximately 50 pe rcent of the entire tax revenue (S titt, 1997) However, as the mall aged and significant competition emerged, Cinderella began a period of steep decline. By 1994, the mall was only seven percent occupied with just 35 tenants remaining out of the 275 available retail spaces Moreover, it was generating almost no tax revenue. In early 1997, after years of negotiations between the City of Englewood a nd the mall owners, Cinderella filed for bankrupt cy whereupon the owners g ave the property to the City of Englewood. By that point, t he abandoned 55 acre site was badly in need of redevelopment, containing as it did numerous dilapidated buildings a nd decaying parking structures. In the mid 1990s when the C ity of Englewood realize d that the mall was heading

PAGE 101

86 for bankruptcy the former began to engage community and ci vic leaders i n discussions about what type of development might best replace the mall (S titt, 1997) Many of the city leaders argued for a TOD development at the site o f the defunct mall, since it was close to the newly planned Englewood Transit stop slated to open in late 1999 or early 2000. Based on this interest in a possible TOD, Englewood city leaders and other key players participated in the 1997 Transit Oriented Communities initiative of the Center for Regional and Neighborhood Action and Compass RPI. The participants included Englewood civic leaders, local citizens, officials from the RTD, architects, urban planners, local business owners, developers, and real e state consultants among others Following th is TOD conference, Englewood city leaders and the City C ouncil were convinced that the TOD concept matched their desire for a unique, mixed use development built on the foreclosed Cinderella mall site (M. Utter personal communication, September 2, 2010). Following the City C City Center TOD was launched, with remediation and redevelopment beginning in 1998. In July 2000, with the City Center development in full swing, the S outhwest C orridor light rail line and the Englewood T ransit Station opened for service. The 8.7 miles long S outhwest C orridor L ine started at I 25 and Broadway in Denver and terminated at Mineral Avenue in Littleton. Shortly after the opening of the Englewood Transit Station in August 2000 the first phase of the Englewood City Center TOD was completed, with a grand opening celebration for the Englewood Civic center. In that same year, Trammell Crow broke ground on their mixed use, multi family rental developm ent called the Alexan City Center. By 2002, the 438 market rate rental unit project was completed, and with it the City Center TOD. This new development was

PAGE 102

87 considered the crown jewel of the Englewood community as well as a symbolic triumph for the RTD a nd the Denver light rail community (M. Utter, personal communication, September 2, 2010) While the completion of the City Center TOD was a significant source of pride for the City of Englewood, one criticism levied against the development was its lack of affordable housing ( R. Simpson personal communication, July 21, 2011) Peter Calthorpe, a founde r of the new urbanism movement and respected TOD advocate, was among the critics. Mr. Calthorpe an architect based in San Francisco who had coined the te rm TOD, had consulted with the City of Englewood durin g the planning of the City Center He believed that TODs should incorporate affordable housing to help create more diversity and residential price points in locations close to public transit. He was t hus disappointed that the City Center development did not contain affordable housing particularly in a working class community like Englewood which was in n eed of newer affordable housing Englewood officials responded to this criticism by claiming th at affordable housing would have added significant risk to the City Center development ( G. Sears, personal communication, July 28, 2011) The city claimed that it would have been difficult to find developers willing to include such housing because of the uncertainty of the TOD concept and their retail markets Finally, the city had been concerned that affordable housing might negatively affect the u pscale design and quality of the overall development ( D. Shepherd personal communication, July 27, 2011; G. Sears, personal communication, July 28, 2011 ) In spite of its lack of affordable housing, the City Center TOD was still

PAGE 103

88 considered a significan t success by developers and planners in the region since it proved that the TOD concept could work in a suburban context (M. Utter, personal communication, September 2, 2010) Trammell Crow was able to sell their Alexan City Center development for a recor d $7 million profit, while the retail and commercial leases in and around the City Center TOD outperformed expectations. These outcomes created confidence for developers considering mixed use TODs. The success of the City Center concept in fact initiated a TOD boom in the region. One development that originated from that boom was the Vallagio TOD, built within the Inverness golf course and corporate community. Case 2 The Vallagio at Inverness TOD Transit Station The Vallagio at Inverness TOD, located within a half mile of the Dry Creek Transit Station, is connected to the station by a pedestrian bridge that spans I 25 at Dry Creek Road. The Dry Creek Transit Station, located at 9450 E. Dry Creek Road, opened in 2006 and has been operating as part of the E and F Lines (See Fig. 4.1.). The E and F Lines both depart from Downtown Denver (the E from Union Station and the F from 18 th and California) and terminate at the Lincoln Station in Lone Tree, Colorado. The Dry Creek Station is located between the Arapahoe S top to the north and the County Line S tation to the south. The Dry Creek S tation has 235 park and ride spaces as well as walkable access to the Vallagio retail shops via a pedestrian bridge. Project Des cription The Vallagio TOD site is located on a 30 acre parcel at the intersection of Inverness Drive West and Inverness Main Street at Dry Creek Road in Arapahoe County.

PAGE 104

89 The TOD sits directly within the Inverness Business Park and golf course community. The site, zoned for a mixed use TOD, received approval from the Board of the Arapahoe County Commissioners on November 23, 2004 (Arapahoe County Board of County Commissioners, 2011) The Vallagio at Inverness development cons ists of approximately 287 upscale lofts as well as condominiums and townhomes priced from $200,000 up to $900,000. An additional 272 luxury rental apartments were completed in 2014. The Vallagio development has approximately 42,000 square feet of office and retail space. Moreover, 287 of the residential units have secure underground parking. The total development cost for the Vallagio i s estimated to be $200 million. Photos

PAGE 105

90 ( Photo by meekspartners.com) Pedestrian Bridge linking the Vallagio to the Dry Creek Transit Station. (whitecg.com)

PAGE 106

91

PAGE 107

92 Interior Pictures of the upscale lofts and t ow nhomes at the Vallagio. ( Photos by kephart) Background The Vallagio development is located in the Inverness corporate office park and golf course community. George Beardsley, who passed away in August 2011, began developing Inverness at the beginning of corporate office growth along the Southeast Denver/I 25 corridor in the early 1970s. He envisioned a world class, upscale business park that would provide corporate office space to Fortune 500 type companies (Rebchook, 2011) He was able to see the fulfillment of his vision before he passed away, including the full 1000 acre development with its championship golf course, 300 unit luxury hotel and conference center, and over 2 million square feet of office and commercial space (Inverness Properties 2013) Many prominent corporations have offices at Inverness. They include Comcast, DirecTV, The Wall Street Journal, Dow Jones, Kraft General Foods, Georgia Pacific, Raytheon, and others (Inverness Properties,

PAGE 108

93 2013) George Beardsley (Inverness), George Wallace (Denver Tech Center), and John Madden (Greenwood Village) were together considered the three most important developers of the Denver Southeast Office Park corridor (Rebchook, 2011) Mr. Beardsley, whose vision for Inverness was strictly as a golf community and corporate office headquarters, never thought of it as including a residential development ( P. Mulhern, personal communication, December 14, 2012) Mr. Beardsley was reluctant to allow residential development because he feared it might lower the prestigious nature of Inverness and reduce the amount of th e open space which he so valued Furthermore, he and his development partners benefit ed from the lack of residential groups within Inverness since there would thus be more space for additional commercial development Without any residential groups to protest or raise concerns regarding development decisions, the development process within Inverness went smoothly and was mostly had zoning restrictions against nearby resi dential development a fact which served to discourage residential developers from pursuing projects in this area. In spite of his desire to keep residential development out of Inverness, Mr. density housing was challenged i n the late 1990s and early 2000s with the emergence of a light rail line along the I 25 Southeast Corridor The building of transit stops along I 25 created a new demand for mixed use developments (Cantwell, 2006) New transi t stops located at Belleview, Orchard, Dry Creek, County Line, and Lincoln Avenue in fact inspired mixed use, transit oriented development. These newly developed transit stops included pedestrian bridges over I 25 into the various office parks located on the east side of I

PAGE 109

94 interest in TOD and mixed use development in the area. In his interview, Pat Mulhern of the Inverness Metropolitan Improvement District recalled the importance the pedestrian bridges had played in stimulating interest in the TOD concept at Inverness: So we lobbied big time for these bridges, and we had to fight them [CDOT and the RTD] for it. bridge into Inverness. Once we got these bridge connects, we really had these ( P. Mulhern, perso nal communication, December 14, 2012) Along with light rail development, another factor that helped reduce Mr. conditions for commercial development. During the late 1 980s through the mid 1990s, commercial development in Southeast Denver was booming. There was thus significant office development at the Denver Tech Center, Greenwood Village, and Inverness, among others. However, in the late 1990s, the overbuilding of o ffice space in both Downtown Denver and the Southeast Corridor led to a major drop in the commercial real estate market. Mr. Beardsley and his development group were holding more than 100 acres of prime land undeveloped in the Inverness community which th ey could no longer use for office space. Mr. Beardsley thus began to feel pressure from his partners and investors to sell this remaining valuable land, but the only type of project commanding premium dollars at the time was mixed use, residential develop ment. Thus in the face of mounting pressure from his partners, Mr. Beardsley reluctantly agreed to sell the last 100 acres of Inverness to residential developers Peter Kudla, a prominent multi family housing developer in Denver, was one of the first p ersons interested in purchasing property at Inverness. A member of the Inverness Golf and Country Club, he became interested in developing land at Inverness while playing the course in the early 1990s ( P. Kudla, personal communication,

PAGE 110

95 December 5, 2012) When he approached George Beardsley in 1997 and offered to purchase a 60 acre parcel for greater than the market value at the time, Mr. Beardsley quickly declined and stood firm in his refusal to sell any Inverness land for residential development. In an interview, Mr. Kudla recounted his 1997 meeting with George Beardsley: Back then he [George Beardsley] was trying to sell the ground for $5.50 per square foot. That was a lot of money back in 1995 to 1997. There was absolutely no office activity goin foot. Well, he threw me out of the office, and it [the deal] was toast. There was product . office[s]. He had a d ifficult, and the lender said you got to do something about it ( P. Kudla, personal communication, December 5, 2012) In 2003, under mounting pressure from his partners to sell, Mr. Beardsley finally relented and offered to sell the parcel to Mr. Kudla. H owever, Mr. Kudla was over leveraged at the time and could not purchase the property. So Mr. Beardsley sold the land to an investment group called Opus Northwest. In 2004, Opus approached Mr. Kudla to see whether he was still interested in purchasing the parcel. Having meantime acquired the financial means to do so, he agreed to purchase 30 acres of the Inverness parcel at $10 per square foot with the intent to develop a mixed use TOD. As founder and CEO of Metropolitan Homes, Peter Kudla was familiar with high density, multi family developments like TODs. He had created a niche in Denver by developing communities with smaller upscale residential homes like lofts, row homes, townhomes, and condominiums targeted to urban professionals and retirees. Si nce 1996, Metropolitan Homes had built more than 10,000 units of luxury residential housing in the Denver region including high end lofts at the Neustater Building in Downtown Denver and exclusive multi family developments in the Lowry Neighborhood (Huspen i, 2012)

PAGE 111

96 By 2005, Metropolitan Homes had grown to be one of the prominent high density, multi family boutique development companies in the Denver region, with annual revenues and profits of more than $100 million (Huspeni, 2012 ) s success in the multi family development sector, he still longed to develop a mixed use neighborhood similar to the ones in which he grew up (Huspeni, 2012) As a member of an Italian family in New York, he lived in high density residential communities w ith narrow streets, neighborhood markets, and shops all within easy access to public transportation. Having never lost his fondness for this type of neighborhood, he wanted the Vallagio development to be an urban village with residences, restaurants, and shops within walking distance of the light rail stop at Dry Creek (Grady, 2008; Huspeni, 2012 ; Walsh, 2008 ) Following his dream to create an urban village, Mr. Kudla and Metropolitan Homes broke ground on the Vallagio TOD in 2005 and proceeded to develop a high density, mixed use development with residential units, retail stores, and offices within walking distance to the Dry Creek Transit Station. As of 2014, the fu lly developed Vallagio consists of 287 upscale for sale residential units and an additional 272 luxury rental units. The development contains more than 42,000 square feet of retail, office, and commercial space with a variety of boutique shops, restaurant s, and small offices located on the ground floor of one of the four story multi family residential buildings in the community. Vallagio also has a pub l ic piazza, dedicated open space, and pedestrian and biker friendly trails and paths. Although Mr. Kud la had originally considered affordable housing at the Vallagio development, he ultimately decided not to pursue it because of opposition at Inverness.

PAGE 112

97 Many TOD advocates who had lobbied for affordable housing in TODs were disappointed to see such a signi ficant residential development forego the inclusion of any affordable housing within its precincts (C. Everett, personal communication, April 23, 2012 ) In response to this criticism, the business and political leaders of Inverness claimed that affordable housing would not have been an appropriate fit for their upscale development ( P. Mulhern, personal communication, December 14, 2012 ; N. Sharpe, personal communication, December 12, 2012 ) They feared that substandard quality in end image. Despite its lack of affordable housing, Vallagio has won numerous awards for its high density, pedestrian friendly mixed use concept. Among these citations were the Denver Regional Council of Governments 2011 Live, Work, Play People's Choice Association of Metro Denver; the Neighbourhood of the Year; the Condo of the Year; the Town Home of the Year; and the prestigious BAR award for the 2008 Premier Residential Development (Metropolitan Homes, 2013) Case 3 The Gates TOD Transit Station The Gates TOD is situated a half mile from the I 25 and Broadway Transit Station upon the former grounds of the old Gates Tire and Rubber factory. The I 25 and Broadway Transit Station, located at 901 South Broadway, opened in 1994 and at that time was th e terminal for the original central corridor. The station, which now serves the C, D, E, F, and H Lines, is the key transfer point for passengers traveling from Littleton/Englewood and redirecting to the Southeast Lines serving the Denver

PAGE 113

98 Technological Ce nter on to Lincoln Station (See Fig. 4.1.). The I 25 and Broadway Transit Station falls between the Alameda Station to the north and the Evans (Southwest Line) and Louisiana/Pearl (Southeast Line) Stations to the south. The I 25 and Broadway Station has 1248 park and ride spaces. Project Description The only significant residential development located at the Gates TOD site are the 419 market rate rental units that comprise the Alexan Broadway Station complex and the 60 affordable rental units which make up Broadway Junction. Both projects, developed by Trammell Crow Residential, share the same five acre parcel located near the intersection of South Broadway and West Mississippi Avenue in Denver. The zoning code for the Gates site is TMU 30 (Transit Mixe d Use), which allows for a variety of high density, mixed use development near transit. The Trammell Crow development includes 12,500 square feet of ground floor retail space. The total project cost is approximately $84 million $10,356,332 for the Broadw ay Junction affordable housing project and $73,706,459 for the Alexan Broadway market rate development. The residential development consists of four buildings and a shared six story parking garage with approximately 590 parking spaces. The project was co mpleted in late 2010.

PAGE 114

99 Photos Broadway Junction affordable units with 11,850 sq uare feet of ground floor retail space

PAGE 115

100 The Alexan Broadway Station market rate apartments A light rail train passing behind the Alexan Broadway/Broadway Junction project.

PAGE 116

101 Background The initial planning for the redevelopment of the Gates site began in December 2001 when Cherokee Investment Partners purchased a 50 acre parcel from the Gates Industrial Rubber Company (Flynn, 2002) The property was considered a good location because it was located near I 25 and Broadway, only three miles from Downtown Denver. Cherokee was committed to remediating the contaminated parcels at Gates and developing the land into a world class TOD. C apartments, 1,500 condominiums, two million square feet of office space, 250,000 square feet of retail space, two hotels, and a multiplex movie theater (Rebchook, 2002) Cherokee estimated that the development would take fifteen years and an investment approaching $1 billion to complete (Rebchook, 2002) and infrastructural redevelopment of the old factory site, the Denver Urban Renewal Authority awarded Cherokee a tax increment fina ncing (TIF) subsidy of $126 million (Kilzer, 2006) As part of their TIF agreement with the Denver Urban Renewal Authority and the City of Denver, Cherokee committed to a generous affordable housing plan for their TOD. This proposal was negotiated by the non profit organization FRESC and the Denver Housing and Neighborhood Services along with other city and community leaders (Read, 2006) The plan called for ten percent of all the for sale residential units to be afford able for households earning between 80% and 110% of the area median income. More importantly, the plan called for more than 10% of all rental units to be affordable for households earning between 30% and 60% of the area median income. The plan also requi red the Gates site to include over 200 affordable rental units for

PAGE 117

102 households earning less than 50% of the area median income and 150 for sale units affordable for household earning less than 110% area median income. This affordable housing agreement was considered a major victory by housing activists in light of housing ordinances. late 2010 the company had declared bankruptcy, with all the land th ey had owned given back to the Gates Corporation (Jackson, 2009) The TIF subsidies were never used by Cherokee since the redevelopment never got off the ground. Marilee Utter, a successful urban planner and TOD consultant in the Denver community, claime lack of capacity as a vertical developer together with negative market conditions doomed the development plans for Gates (M. Utter, personal communication, September 2, 2010) Crow Residential did follow through on its commitment to develop 479 rental units at the Gates site, of which 60 were set aside for households earning less than 60% of the area medi an income. Trammell Crow, having purchased 5.1 acre parcel from Cherokee in 2007, had gathered all the financing for the development before the Great Recession hit in 2008. They were thus able to move forward with development plans at Gates in spite of w orsening market conditions. Trammell Crow completed its multi family projects in 2010. Its mix of market rate and affordable residential units is considered a success story, even if a small one, to have come from the failed redevelopment.

PAGE 118

103 Case 4 So uth Lincoln TOD Transit Station The South Lincoln TOD is situated one quarter mile from the 10th and Osage Transit Station in the South Lincoln Park neighborhood near Downtown Denver. The 10 th and Osage Transit Station, at 975 Osage Street, opened in 1994 as part of the original Central Corridor Line but now serves the C, D, E, F, and H Lines (See Fig. 4.1.). The 10 th and Osage Station is the northernmost transit stop serviced by all trains co ming from the I 25 and Broadway Station. It is located between the Auraria West and Auraria Colfax Stations to the north and the Alameda Station to the south. The 10 th and Osage Station, which lies within a residential community, has no RTD designated pa rk and ride spots for commuters. The station is noted for its location directly across the street from the old Buckhorn Exchange Restaurant, a Denver landmark. Project Description The South Lincoln Park TOD is located on a fifteen acre parcel just south of the Auraria Campus in Downtown Denver. The site is bounded by 11 th Avenue on the north, 9 th Avenue on the south, Mariposa Street on the east, and Osage Street on the west. The zoning code for the site, recently updated by the City of Denver, is covere d under the new form based zoning code which has made it possible for the South Lincoln site to be developed for high density, transit oriented development. The master developer for the South Lincoln TOD, the Denver Housing Au thority (DHA), owns the parcel which is currently home to 270 public housing units under demolition and redevelopment. The redevelopment of South Lincoln Homes is progressing within a phased approach so as not to displace any of the low income residents n ow living in the 270 units.

PAGE 119

104 The first phase of the South Lincoln redevelopment, completed as of this writing, consists of 94 one bedroom units and six two bedroom units with an average unit size of around 800 square feet. The 100 units are all designate d as affordable housing for senior households earning less than 60% of the area median income. The ground floor of the Osage multi family building consists of 16,000 square feet of commercial space targeted for community services like a youth center, a li brary kiosk, computer labs, and a workforce training site. The total cost of the development was approximately $20 million, or nearly $200,000 per unit (Colorado Housing and Finance Authority, 2010) The building was funded with $10 million from Low Inco me Housing Tax Credits and $10 million from ARRA stimulus funds (DeCristoforo, 2009) The second through fourth phases of the South Lincoln development have been funded and will be developed between 2013 and 2016 ( K. Crangle, personal communication, September 7, 2011) The forthcoming 3 5 0 units will be a mix of affordable rental units for households earning less than 60% of the area median income and market rate rental housing. The total budget for the first four phases is ap proximately $100 million for the development of approximately 4 5 0 residential units and nearly 60,000 square feet of commercial/retail/office space (Denver Housing Authority, 2010 ) Additional phases will follow after 2016 depending on market conditions a nd available public and private investment. Once the entire South Lincoln TOD redevelopment is finished in 2016/2017, the DHA estimates a total of 900 new residential units will exist at the site (Denver Housing Authority, 2010) The se will be a mix of approximately 450 market rate and 450 affordable rental units. The new affordable units will represent an increase of 180 more affordable units than the original 270 units that are being demolished

PAGE 120

105 Photos 10 th and Osage Transit Stop with 1099 Osage Street Senior Center in the background 1099 Osage Senior Center with 16,000 square feet of ground floor office and retail space.

PAGE 121

106 Background The South Lincoln TOD redevelopment is located in the Lincoln Park neighborhood southwest of downtown Denver and directly south of the Auraria Higher Education Campus. As home to approximately 7,000 residents, Lincoln Park is one of the first and oldest n eighborhoods in Denver, with many houses built in the early 1900s (Denver Community Planning and Development, 2010) Included in the Lincoln Park neighborhood is the Santa Fe Arts District, Denver West High School, the Hispani c Chamber of Commerce, Denver Health and Hospital Medical Center, the Sunken Garden Park, and Lincoln Park. The residents of the neighborhood are 52% Latino, 33% White, 8% African American, 4% Asian, and 2% Native American (The Pit on Foundation, 2011) The poverty rate in Lincoln Park is nearly 33%, or close to three times higher than that of the average Denver neighborhood. Blueprint Denver, a comprehensive land use plan for the city adopted in 2002, classified South Lincoln Park as an urban neighborhood in transitional, or change oriented, status, which gave it the possibility for

PAGE 122

107 positive redevelopment (Denver Community Planning and Development, 2011) In 2009, the City of Denver created a neig hborhood redevelopment plan for the 10 th and Osage Transit Stop, which was located directly across from the South Lincoln Park neighborhood (Denver Community Planning and Development, 2010) The idea behind this plan was to find ways to leverage the 10 th and Osage Transit Stop to revitalize the community with high density, mixed use development. In 2010, the completed neighborhood plan recommended a zoning change that would encourage the development of a mixed use TOD. This plan called for redesigning th e street grid and development guidelines to produce a more pedestrian friendly, walkable neighborhood with easy access to the 10 th and Osage Transit Stop. One of the key partners in Lincoln Park neighborhood plan was the Denver Housing Authority (DHA). T he DHA owned the South Lincoln Homes project located directly adjacent to the 10 th and Osage Station South Lincoln Homes was a 270 unit public housing facility located on fifteen acres of land directly across from the transit stop. The South Lincoln Homes units, built in the 1950s, were dilapidated and in need of significant renovation. The community had become an area of concentrated poverty Throughout the neighborhood planning process, the City of Denver and the DHA began to see an opportunity fo r redeveloping the South Lincoln Homes public housing complex into a mixed use, mixed income TOD (Denver Community Planning and Development, 2010) Once the decision had been made to target South Lincoln Homes for redevelopmen t, the DHA began looking for funding. In 2009, the U.S. Congress passed the American Recovery and Reinvestment Act (ARRA) to stimulate the economy through investing federal dollars in local infrastructure

PAGE 123

108 projects (U.S. Government Printing Office, 2011) redevelopment of South Lincoln Homes provided a perfect match for ARRA stimulus funds. In 2009 the DHA applied for and received a $10 million grant from ARRA for investment in Phase I of the redevel opment of South Lincoln Homes. The $10 million in ARRA funds were then leveraged to raise more than $100 million in public and private financing for the redevelopment of the first four phases of the South Lincoln TOD. The South Lincoln TOD was seen as a significant boon to the TOD markets in Denver that had been stalled by the Great Recession. The influx of significant federal stimulus funding helped stimulate a development that became one of the c significan t TOD redevelopments. The project was also a source of pride for the federal government as it pushed to stimulate the economy through nationwide cutting edge investment in transit infrastructure, the White House sent high level officials to Denver for a walking tour and press conference at the South Lincoln Homes site. These emissaries included the Secretary of Housing and Urban Development, Shaun Donovan; the Secretary of the Department of Transportation, Ray LaHood; and the Secretary of the Environmental Protection Agency, Lisa Jackson. Case 5 Evans Station Lofts TOD Transit Station The Evans Station Lofts TOD is situated directly across the street from the Evans Transit Station at 2150 South Delaware Street, Denver. The Evans Station, which opened in July 2000 as part of the Southwest Corridor Line, now serves the C and D Lines, which originate at Union Station (C Line) and 16 th and Stout (D Line), respectively, and

PAGE 124

109 terminate at the Littleton/Mineral Station (See Fig. 4.1.). The Evans Station is located between the I 25 and Broadway Station to the north and the Englewood Station to the and ride lot can accommodate 99 vehicl es. Project Description The Evans Station Lofts TOD, in the Overland neighborhood community, is zoned C MX 5 (mixed use) under the new Denver Zoning Code adopted by the Denver City Council in June 2010 The Evans Station Lofts building includes 50 affordable rental units targeted to households earning less than 60% of the area median income. The multi family apartment building has a loft style design with brick exterior and approximately 8 ,000 square fe et of ground floor retail/office space The property, a five story elevator building with four stories built on top of a first floor cement podium, includes 42 on site parking spaces for the 50 residential units (.75 parking spaces per unit). The total c ost of the development was $12.4 million, with $10.2 million of those funds coming from LIHTCs.

PAGE 125

110 Photo s ( photo by Urban Land Conservancy) ( Photo by insiderealestatenews.com) ( Photo by westword.com)

PAGE 126

111 Background When the Englewood and the Evans Transit Stations opened for service in July 2000, there were great expectations regarding the TOD concept and the potential economic development that would occur near these stations. While the Englewood Station had significant success with the mixed use development that occurred at the City Center TOD, the Evans Station did not have the same results. Except for the light rail platform and the park and ride lot developed by RTD, the Evans Station saw very little development during the past decade. T his lack was a significant disappointment to the community there who were expecting more economic growth and development near the station (The City of Denver Office of Community Planning and Development, 2009) In response to the lack of development near the station, in 2009 the City of Denver embarked on a community wide visioning project to develop strategies to

PAGE 127

112 promote a mixed use TOD near the Evans Station stop. This initiative culminated in the Denver City outcome of eighteen months of community meetings with the City of Denver and stakeholders from the Evans Station community, this plan called for the promotion of a pedestrian friendly mix of retail stores, offices, and residential and entertainment options all within walking distance for the residents in the community. Also included were improvements to the streetscapes to promote walkability and biking. The plan encouraged a full ran ge of housing at various price points, to include both market rate and affordable housing options. Finally, the plan called for the updating of the zoning code to encourage high density, mixed use development, reduced parking requirements, and subsidies a nd economic incentives to encourage development. During the time that the Evans Station area plan was being developed (2007 2009), several affordable housing advocacy groups were meeting with Denver city officials to discuss how to encourage affordable ho using development near transit. development of low income rental housing, the Enterprise Foundation and the Urban Land Conservancy (ULC) began to discuss land banking as a strate gy to encourage affordable housing near TODs (C. Everett, personal communication, April 23, 2012 ) Following years of advocacy efforts by Enterprise and ULC with the City of Denver, the Denver TOD Fund was created in March 2009 (Ci ty of Denver Office of Strategic Partnerships, 2012) The Denver TOD Fund had the purpose of land banking parcels near light rail stops to be used for affordable housing developments. The amount of capital available in the Denver TOD Fund was approx imately $15 million (The Urban

PAGE 128

113 Land Conservancy, 2012) The fund was established as the source of revolving loans that could be drawn on for the purchase of land, with the funds repayable once the land was sold to an affordable housing developer. In 2010, while the Denver TOD Fund was being set up, an affordable housing developer in Lakewood named Troy Gladwell was in the process of looking for potential properties for development. Mr. Gladwell, the founder and CEO of a for profit affordable housing development company called Medici Communities, had created multiple affordable housing developments in the Denver region and was respected for his high quality projects (Steele, 2012; B. Weinig, personal communication, April 20, 2012) In late 2010, Mr. G ladwell located the one acre parcel across from the Evans Station that he considered a prime candidate for affordable housing development. Although Mr. Gladwell did not have the funds to purchase the property straightaway, he was familiar with the recentl y created Denver TOD Fund. So he approached the Urban Land Conservancy about purchasing the property with a loan from the Denver TOD Fund and holding it for him while he searched for subsidies from which to create an affordable housing development there. request. In June 2011, the ULC purchased the one acre parcel at 2140 South Delaware Street with money from the Denver TOD Fund. One year later, in June 2012, Medici Communities purchased the property fro m ULC and broke ground on the Evans Station Lofts development (Steele, 2012) The Evans Station Lofts project represents the first significant development in the Evans Station area and the first mixed use, multi family building in the Overland/Evans Sta tion neighborhood. Many leaders in the Denver community view the Evans Station

PAGE 129

114 project as an outstanding example of affordable housing developed near transit. The City of Denver is particularly proud of this project since the Evans Station Lofts represen ts a successful affordable ( B. Weinig, personal communication, April 20, 2012) The City of Denver is optimistic that the Evans Station Lofts project will be a catalyst for future Affordable TOD Fun d developments ( C. Eve rett, personal communication, April 23, 2012 ) Case Study Summary Table Table 4.1 on the following page gives a comparative overview of all the important details regarding the five Denver TOD cases. The table includes the total budget for each development as well as the number of units (affordable and market rate), retail sq uare footage requirements, distance from the closest light rail stop, location, transit station, name of developer, and completion date. The case study summary table, below, concludes Chapter 4 Chapters 5 through 7 then, analyze the impact of the economic, affordable housing

PAGE 130

115 Table 4.1 TOD Case Study Summary Total Budget Total Units Affordable Units Retail Distance from Light Rail Stop Transit Station Developer Status of Development Englewood Alexan City Center $45,000,000 438 0 29,000 sq. ft. Less than mile Englewood Trammell Crow Residential/City of Englewood C ompleted 2002 Vallagio at Inverness $200,000,00 0 559 0 42,000 sq. ft. Less than mile Dry Creek Peter Kudla/ Metropolitan Homes Completed 2014 Gates $84,000,000 479 60 12, 5 00 sq. ft. mile I 25 and Broadway Trammell Crow Completed 2010 South Lincoln $99,400,000; First four phases 45 0 2 5 0 300 60,000 sq. ft. Less than mile 10 th and Osage Denver Housing Authority First Phase Completed 2012; 2 nd Phase under construction Evans Station Lofts $12,400,000 50 50 8 ,000 sq. ft. Less than mile Evans Station Troy Gladwell/Medici Communities Completed August 2013

PAGE 131

116 CHAPTER V ANALYSIS OF THE ECONOMIC FACTOR Introduction This chapter will analyze the economic factor and its variables land cost, housing markets, public subsidies, and return on investment and their impact on making processes regarding the provision of affordable housing withi n each of the five Denver TOD cases being studied. The analysis will proceed in chronological order from the first TOD development, Englewood City Center in 2000, to the final one, Evans Station Lofts, in 2013. The chronological ordering of the cases is used to convey the changing economic conditions within the region and how they impacted the five TOD cases. The scoring analysis for each TOD case will focus on its pre development time period when the variables most influenced the residential decision making process. The pre development period consisted of the two years leading up to the groundbreaking for each TOD project. A brief post development analysis of each case follows. The chapter will conclude by examining the impact of the econo housing decisions in terms of satisficing. Research Question and the Economic Factor The research question for this dissertation is the following: How do the economic, regulatory, and advocacy factors influence a provision of affordable housing in a TOD ? The general hypothesis is that if these factors interact to create satisfactory profits and lower risks for the developer, the more likely it is that affordable housing will be developed. Furthermore, as discussed in Chapter 3, this study holds that the economic factor is the dominant one and that some positive

PAGE 132

117 combination of reasonable land costs, stable housing market conditions, availability of public subsidies, and a solid expectation of return on investment is required for a developer to consider the inclusion of affordable housing. This particular chapter is whether or not to produce affor dable housing in their respective TOD. Table 5.1, below, provides the template and scoring categories for the economic factor and its variables that will be analyzed in this chapter. A positive score reflects economic conditions favorable to the developm ent of affordable housing. Table 5.1 Economic Factor Scoring Categories Economic Variables: 1 = Negative 0 = Neutral +1 = Positive Land Cost Above fair market value Fair market value Below fair market value Housing Market Conditions Negative housing market conditions Stable housing market conditions Positive housing market conditions Public Subsidy Negative subsidy; developer pays financial penalty No public subsidy Positive public subsidy available Return on Investment Negative ROI Neutra l/break even ROI Positive ROI Englewood City Center TOD Economic Context The economic context for Trammell Crow at the Englewood City Center TOD from 1998 2000 was characterized by solid economic conditions for the Denver region redevelop the Cindere lla Mall site into a TOD was the first experiment with the TOD concept in the Denver region. Many developers and planners in the area were unsure of

PAGE 133

118 how successful the TOD concept would be in an older inner ring suburb like Englewood (M. Utter, personal c ommunication, September 2 2010 ; G. Sears, personal communication, July 28, 2011 ) In addition to their concern in this regard, Trammell Crow was worried about its lack of experience with the mixed use residential/retail development that characterized a TOD. Trammell Crow had very little experience in building the sort of multi famil y, ground floor retail/commercial development required by a TOD. Despite these added risks and concerns, Trammell Crow, intrigued by the chance to gain familiarity with the TOD development, committed to the creation of a 438 market rate rental unit projec t called the Alexan City Center as their way to gain expertise in the cutting edge TOD concept. Table 5.2 Economic Factor Score for Trammell Crow at Englewood City Center Economic Variables: *Score: Rationale for Score: Land Cost +1 Trammell Crow paid $5 million, approximately $10 per sq. ft., for a 10 acre parcel. Interviews and land comps confirmed this price as below fair market value. Housing Market Conditions +1 market reports for 199 7 2000 showed strong housing markets for the Denver region. Public Subsidy +1 TC received $19 million in COP bonds from the City of Englewood for infrastructure improvement and site design and preparation. Return on Investment +1 Trammell Crow projected a 10% ROI for their Alexan development. Final Factor Score (Average) +1.0 This final score reflected positive economic conditions for Trammell Crow at Englewood. *Scores are based on the impact of economic variables on Trammell Crow during 1998 2000 as drawn from interviews with developers and reviews of primary source documents related to the Englew ood City Center TOD development.

PAGE 134

119 Scoring the Economic Variables The first economic variable impacting Trammell Crow at the Englewood City this score based on interviews and land sales comps for 1998 2000 retrieved from the LoopNet re al estate database. The $10 per square foot price paid by Trammell Crow was below the range of fair market value for similar land parcels at the time. Alan White, the current community development director for the City of Englewood, stat ed in an intervie ( A. White, personal communication, July 21, 2011) Furthermore, Robert Simpson (the former commun ity statement by foot. Simpson went on to s ay that the market value for similar parcels of land at the time w as ne ar $13 to $15 per square foot ( R. Simpson, personal communication, July 21 2011) The second economic variable impacting Trammell Crow at the Englewood This score, based on housing market conditions indeed strong during 1997 1998 ( HUD 1997; 1998) markets and such positive housing indicators as an increase in building permits for both single and multi family construction, a rise in home prices and rents, low vacancy rates, and record research for 1997 and 1998, respectively:

PAGE 135

120 In Colorado, multi family building permit acti vity totaled 5,911 units permitted in the Denver metropolitan area . a record high for the 1990s. The sales market in the Denver area was very strong in 1997. A boost in condominium sales in the second half of the year pushed total sales for 1997 to an all time high. . The average price for a single family home was up to almost $170,000, and the price for condominiums exceeded $100,000 for the first time ( HUD 1997) Multi family housing permits in 1998 in [the] Denver area were up 22 percent t o housing market has remained firm throughout the surge in activity. A study by a local real estate firm indicates that Denver had the largest percentage increase in average rent amon g 30 major cities during the 1990s ( HUD 1998) The third economic variable impacting Trammell Crow, public subsidies, also commitment to provide $24.7 million in public funding for infrastructure and site improvements for the development (City of Englewood: Community Development Division, 2011) The c ity expected to receive approximately $19 million in public funding via the issue and sale of c ertificate of p articipation bonds. The remaining $5.7 million in public funds were expected to come from the contribution of RTD for the development of a pedest rian bridge to and transit infrastructure improvements at the Englewood Transit Station. These funds were a significant advantage to Trammell Crow because they provided important investments for the Englewood City Center site from sidential development benefited. One particular benefit was the RTD subsidy which helped develop the pedestrian bridge from the Englewood Transit Stop which ended a mere 50 yards from the entrance to the Alexan City Center apartments. This pedestrian ame nity was a significant selling point for the new residences. Moreover, the extensive public subsidies from the City of Englewood enabled site development and design of pedestrian walkways, roads and buildings, street

PAGE 136

121 lamps, and other amenities that signif icantly benefited the development and Trammell Crow The last economic variable impacting Trammell Crow s Englewood development, Interviews with Englewood City leaders as well as a review of p rimary source documents reveal that Trammell Crow expected to receive approximately $1.16 per square foot in monthly rental revenue for their residential units as well as $16 per square foot in annual rental revenue for their ground floor retail (Guimond, 2010) Based on these revenue estimat ions Trammell ROI projection for the property was approximately 10%, which was slightly lower than for its other suburban multi family residential products in the Denver region owin g to uncertainty about the customer attractiveness of the TOD concept ( S. Johnson, personal communication, March 24, 2011 ) Impact of the Economic Factor on Affordable Housing As stated earlier, a positive economic factor creates conditions favorable for affordable housing but does not guarantee it. In the case of the Englewood City Center TOD, the economic factor did score positively, but Trammell Crow ultimately decided against affordable housing. While political opposition played a significant role, an other important reason for this decision was the overall risk related to the then unproven TOD concept. Trammell Crow was worried by the unpredictability of the TOD housing markets. While housing markets in the Denver region were strong, Trammell Crow wa s uncertain how well TOD housing markets would perform in an older suburb like Englewood ( G. Sears, personal communication, July 28 2011) Trammell Crow was unsure if it would be able to acquire rental revenue and property appreciation values at a

PAGE 137

122 simila r level to those of its other suburban multi family rental developments in the region. With these housing market uncertainties, Trammell Crow wanted to reduce its exposure to risk and were unwilling to take on the additional risk of an affordable housing development. Post Development Economic Context While the City of Englewood and Trammell Crow were both concerned about the untested TOD concept, ultimately the City Center TOD developmen t turned out to be a significant success ( M. Utter, personal communication, September 2, 2010 ) Interviews with Englewood City leaders as well as a review of the relevant primary documents reveal that the City Center development exceeded expectations in t he majority of its economic projections ( R. Simpson, personal communication, July 21, 2011) For example, Trammell Crow expected to lease out its ground floor retail space for approximately $16 per square foot. When its Alexan development opened in 2002, however, Trammell Crow was able to secure over $24 per square foot for its retail and $1.30 per square foot for its residential units ( G. Sears, personal communication, July 28, 2011) Moreover, Trammell Crow proceeded to sell the Alexan City Center apartments in 2003 for $52 million a sale which netted them a profit of $7 million and a 16% return on investment. The ROI of 16% far of 10%. Jeff Hawks of Apartment Realty Advisor, who helped broker the sale for Trammell Crow, claimed that his client was able to achieve $5,000 to $10,000 more per project stabilization in 2002, the annual sales tax revenue fo r the entire City Center development had reached $2 million and by 2005, $2.5 million. In only three years

PAGE 138

123 tax revenue (not inflation adjusted) from its entire commercial, retail, and residential develop ments nearly equaled that of the Cinderella Mall during its peak years (Simpson, 2007) The surprising success for Trammell Crow from its Alexan City Center development and the overall success of the Englewood City Center TOD reveal that Trammell Crow wou ld have been able to take on the provision of affordable housing and would still have made a significant profit. Interviews with the mayor pro tem of Englewood, Jim Woodward, show that if the leaders of Englewood had known how successful the TOD concept w ould prove to be, they would have pushed harder for Trammell Crow to provide affordable housing ( J. Woodward, personal communication, July 21, 2011) Vallagio at Inverness TOD Economic Context The noteworthy success of the Englewood City Center TOD sent a positive message throughout the development community in the region. While most planners and developers believed that TODs would succeed in Greater Denver, there were uncertainties about whether the market timing and population densities in an older inner ring suburb like Englewood were strong enough to support one ( M. Utter, personal communication, September 2 2010) With the financial success of the Englewood City Center TOD, however, many other develope rs in the area were eager to start mixed use projects near available transit stops. One such developer was Peter Kudla. Mr. Kudla, the Founder and CEO of Metropolitan Homes, was a Denver area developer whose company was skilled at building smaller, low maintenance homes that appealed to empty nesters, retirees, and urban professionals (Huspeni, 2012) Mr. Kudla

PAGE 139

124 density luxury residences. With the TOD concept in mind, Mr. Kudla purchased a 30 acre parcel within the exclusive Inverness Business Park located directly across from the new Dry Creek T ransit S top. While many citizens and business leaders along the I 25 corridor were excited about the potential of mixed use developments, there were also those who were hesitant to support such developments in the corporate office parks of the southeast I 25 corr idor. The founders and business owners within Inverness were one group that was uncertain about how the mixed use residential concept would fit with their reserved, use residenti al development created tension for Peter Kudla and Metropolitan Homes. Table 5.3 Economic Factor Score for Vallagio at Inverness TOD Economic Variables: *Score: Rationale for Score: Land Cost 0 Metropolitan Homes paid $13 million, $10 per sq. ft., for a 30 acre parcel. Interviews and land comps confirmed this price as the fair market value. Housing Market Conditions +1 market reports for 200 3 2005 showed strong housing markets for the Denver region. Public Subsidy 0 No public subsidies or TIFs were available for the project. Return on Investment +1 Metropolitan Homes projected a 30% ROI on a $200 million investment for an expected profit of $60 million. Final Score (Average) +.50 This final score reflected positive economic c onditions for Vallagio. *Scores were based on the projected impact of these e conomic variables on the developer, Metropolitan Homes, during the pre development period from 2003 2005. Scores were determined from interviews with developers and key playe rs as well as a review of primary source documents related to the Vallagio TOD development.

PAGE 140

125 Scoring the Economic Variables The land developer acquired the Vallagio parcel at f air m arket v alue (See Table 5.4.). Metropolitan Homes purchased the 30 acres in September 2005 for approximately $13 million, a price of approximately $10 per square foot. Interviews with key informants as well as land sale comparisons for the area confirmed the fai r market rate since at the time land parcels of similar size and location were selling in the same price range $9 to $11 per square foot (Arapahoe County Asses sor, 2006; S. Beasley, personal communication, December 12, 2012 ). Scott Beasley of Inverness Pr operties, one of the brokers involved in the land transaction for the Vallagio development, confirmed the fair market value: zoned most of the land, and then we sold it for market value . which at the time (2004 2005) was between $9 and $11 per S. Beasley, personal communication, December 12, cited a comparable eight acre land parcel targeted for mixed use development at Dry Creek and Yosemite, about one mile from the Vallagio development, which sold in September 2004 for approximately $4 million, or around $11 per square foot (Arapahoe County Assessor, 2006) The second variable impacting the Vallagio development, housing market conditions, market conditions for the Denver region from 2004 and 2005 revealed strong activity in all the major housing indicators including new building permits, single and multi family development, rising home prices and ren ts, strong levels of home ownership, and low vacancy rates ( HUD 2004; 2005). Mr. Kudla in an interview confirmed the market conditions that both led to the

PAGE 141

126 explosive growth of his company and created the positive projections for the Vallagio development. He stated, We witnessed a spectacular change in the marketplace starting in about 1995. It was a very visible change. We saw a demographic profile change. The housing market, both for sale and for rent, started to rebound in a big way. Population growth was hug e, job growth was huge. We took, from 1997 to 2005, a company that did zero to over $100 million in gross sales (P. Kudla, personal communication, December 5, 2012) The third economic variable impacting the Vallagio development, publi c subsidy, 2003 2005 pre development timeframe. Metropolitan Homes considered applying for a TIF subsidy but was unable to acquire these funds since the project could not guarantee enough sales tax revenue for timely repayment. Peter Kudla projected a 30% return on his Vallagio investment (P. Kudla, personal communication, December 5, 20 12) Such a return on an overall investment of approximately $200 million would translate into $60 million in profits. These strong projections were based on Metropolitan Homes past successes in developing luxury housing in the region as well as the positive market feedback from successful sale of its Alexan City Center apartments at the Englewood City Center TOD in 2002 Impact of the Economic Factor on Affordable Housing Similar to the Englewood City Center development, the sco ring of the economic variables for the Vallagio reveals the kind of positive economic context which creates favorable conditions for affordable housing. Still, no affordable housing was provided at Vallagio. The main reason turned out to be staunch oppos ition from the political actors

PAGE 142

127 revealed that he would have considered affordable housing at Vallagio to create more residential price diversity had Inverness not provided so much opposition. (More discussion on this point is presented in Chapter 7.) Post Development Economic Context Metropolitan Homes broke ground for the Vallagio development in 2005 while the housing markets in Denver were still quite strong. Solid economic conditions for the region continued through 2006 and into early 2007 ( HUD 2007) Then, from late 2007 through 2008 the nation and the Denver region experienced one of the most precipitous housing busts in decades ( HUD 2008; 2009) Metropolitan Homes and the Vallagio development suffered significant negative consequences from the Great Recession. By 2008, the company had constructed and sold only around 280 units, or half their luxury condominiums and lofts at Vallagio ( C. Grady, personal commu nication, November 30, 2012) When the recession hit in 2008, capital markets dried up, and Metropolitan Homes was unable to acquire the financing needed to complete the final 300 for sale units. As market conditions deteriorated, development at Vallag io stalled while Metropolitan Homes waited several years for the situation to improve. Ultimately in early 2014 Metropolitan Homes was able to finish its Vallagio development with the addition of 272 rental units. Mr. Kudla and Metropolitan Homes neverth eless had lost a significant amount of money because of the delays caused by the recession. As Mr. Kudla put it in an interview, I think there is something called seven digits and then it goes to eight digits. I am just going to let you know that I hav e lost over eight digits of money on Val lagio.

PAGE 143

128 I will never make back what I lost. Never make that back . never. When I tell you I have had a piece of my soul and my body and my wallet carved, I am not kidding (P. Kudla, personal communication, December 5, 2012) The significant financial losses suffered by Metropolitan Homes provide a dramatic example of why developers are so concerned about housing market conditions and are fearful of taking on an additional risk like affordable housing in th eir projects. The housing recession that hit Mr. Kudla and Metropolitan Homes at Vallagio was a situation that could have just as easily happened to Trammell Crow in Englewood. Since developers are always dealing with the uncertainty of the housing marke t, it is no surprise that they wish to reduce their risks as much as possible. Gates TOD Economic Context In late 2001 Cherokee Investment Partners purchased 50 acres of real estate located near downtown Denver at the old Gates Rubber Factory (Rebchook, 2002) Realizing that the industrial parcel was a brownfield site needing significant remediation, Cherokee immediately began lobbying the City of Denver for significant public subsidies. In 2003, while Cherokee was negotiating with the c ity for financial help, Trammell Crow sold its Alexan City Center apartments at Englewood for a record $52 Gates site spurred a development boon for TODs in the region ( M. Utt er, personal communication, September 2 2010) By 2005, Metropolitan Homes had broken ground on the $200 million Vallagio development at Inverness, and Trammell Crow had begun additional TOD developments at Louisiana and Pearl Streets (29 luxury condomin iums )

PAGE 144

129 and Lone Tree/Lincoln Station (a 600 unit mix of apartments and condominiums near Park Meadows M all in South Suburban Denver). In an effort to leverage the booming TOD markets to help remediate one of the c enver awarded Cherokee a $126 million TIF subsidy for the remediation and redevelopment of the Gates site in 2006 (Kilzer, 2006) Soon after winning approval of the TIF subsidy, Cherokee selected Trammell Crow as one of its residential developers for the Gates site. In return for the significant subsidy, Cherokee and Trammell Crow agreed to a generous affordable housing provision negotiated with the City of Denver and the non profit organization FRESC In December 2007 Tram mell Crow broke ground on the 479 unit multi family project which included 419 market rate rental units (Alexan Broadway) and 60 affordable rental units (Broadway Junction). Table 5.4 Economic Factor Score for Trammell Crow/Gates TOD Economic Variables: *Score: Rationale for Score: Land Cost 0 The cost of $6 million for 5 acres ($23 per square foot) was the fair market value based on similar locations near downtown Denver. Housing Market Conditions +1 Market surveys and HUD research for 2005 2007 showed strong housing market conditions. Public Subsidy +1 Some $8.3 million were available in affordable housing subsidies (LIHTC, HOME) as well as $125 million in TIF subsidy. Return on Investment +1 Projected ROI of 20%. Final Factor Score (Average) +0.75 Strong economic conditions prevailed. *Scores were based on the projected economic variable impact on the developer, Trammel Crow, during the pre development period of 2005 2007. Scores were determined from interviews with developers and key players as well as a review of primary source documents related to the Gates/Trammell Crow development.

PAGE 145

130 Scoring the Economic Variables Trammell Crow purchased the five acre parcel for its 479 unit project from Cherokee in November 2 007 for approximately $6 million (Colorado Housing and Finance Authority, 2007) The parcel was one of the few sections of the Gates property that had been fully remediated and was considered a clean parcel with very few land pre parations required. At the time of purchase the parcel was especially attractive because of its location near downtown Denver and its significant potential for appreciation. Based on land sale comps for 2006 and 2007 retrieved from the LoopNet real estate database, the $23 per square foot price paid by Trammell Crow was within the range of fair Table 5.5 (LoopNet, 2006; 2007). The second economic variable, housing market surveys and housing research revealed strong housing mark et conditions for the Denver region during the pre development time frame of 2005 to 2006 ( HUD 2005; 2006) A market survey from National Valuation Consultants in 2005 reported strengthening market conditions for multi family housing development s in the Denver region. The report stated that Gates is located in a central metro area location where land is limited for residential development. . Vacancy rates are reaching levels on a market wide basis which will support new multi family construction. . Demand for apartment units is increasing as evidenced by decreasing vacancy rates in the market. This trend should continue as interest rates increase, impacting the affordability of home ownership. As demand for apartment units increases, rental ra tes should soon follow (National Valuation Consultants, Inc., 2005) Furthermore, a housing market survey conducted by RREEF in 2006 confirmed the solid market conditions for multi family housing in the Denver region:

PAGE 146

131 Indicators across all fronts suggest this is a good time to buy and own quality apartments in metro Denver: solid employment gains and prospects in grow th sectors; increased venture capital flows; impressive infrastructure investment; strong net absorption of apartments and office space; l imited new supply and pipeline; and effective rent increases achieved while maintaining occupancy (RREEF Research, 2006) The public to receive approximately $8.3 million in LIHTC sub sidies for the funding of the 60 unit Broadway Junction affordable apartments (Colorado Housing and Finance Authority, 2007) Trammell Crow likewise projected it would receive approximately $1 million in developer fees from the $8.3 million in subsidies to offset its planning and development time and cost for the affordable units. In addition to this subsidy, Trammell Crow be lieved it would benefit from the $126 million TIF subsidy awarded to Cherokee for infrastructural remediation and development at the Gates site. The final economic variable for the Gates site, return on investment, was also Crow projected a 20% ROI from the sale of their 419 unit Alexan Broadway Station development. Trammell Crow had recently sold its Alexan City Center luxury apartment development in the Englewood TOD for a $7 million profit and a 16% return on investment o nly one year after completion. The company consequently believed that their market rate dev elopment at Gates would outperform its development in Englewood because of its superior location closer to downtown Denver ( S. Johnson personal communication, March 24, 2010) Trammell Crow thus projected that its market rate rental units at Gates would achieve rents in e xcess of $1.50 per square foot ( a level comparable to similar developments near downtown Denver ) and a 20% return on investment

PAGE 147

132 Impact of the Economic Factor on Affordable Housing The positive score for the econo mic factor recorded in Table 5.4 demonstrating supportive economic conditions for Trammell Crow at Gates, played a significant role in their decision to provide affordable housing at the Gates TOD. TOD housing markets during 2005 2006 were peaking in the Denver region. Trammell Crow h ad already experienced significant success through the sale of their Alexan City Center property in Englewood and had just finished two other succe ssful TOD projects in the area ( Pearl St. Station and Lone Tree) Of all these projects, the Gates TOD devel opment was expected to perform the strongest because of its location and projected public and private investment likely to exceed $750 million (S. Johnson, personal communication, March 24, 2010) These conditions in addition to the significant public sub sidies Trammell Crow expected to receive ultimately led to their positive decision on affordable housing. Post Development Economic Context While Trammell Crow began to notice by mid 2007 some worrying signs for the economy in the near term, it had alrea dy acquired all the financing needed for its market rate and affordable residential units, so Trammell Crow moved forward with the project and broke ground in late 2007. In 2008, the housing markets and economic conditions in the Denver region began to sl ide. When Cherokee declared bankruptcy in late 2009, it gave the remaining 25 acres back to the Gates Corporation (Jackson 2009) At the grand 2010, the dilapidated Gates fact ory buildings were still standing nearby and no pedestrian friendly walkways or parks had as yet been developed. Besides Trammell

PAGE 148

133 at Gates. Moreover, the $126 million i n TIF subsidies granted to Cherokee (not Trammell Crow) were never used. Thankfully for Trammell Crow, the small 5 acre parcel where the Alexan and Broadway Junction Apartments were located was a clean parcel and had already been remediated by Cherokee (S Johnson, persona l communication, March 24, 2010 ) re development, and the declining economic conditions in the region created significant losses for Trammell Crow (S. Johnson, personal communication, March 24, 2010) For example, the $23 per square foot that Trammell Crow paid Cherokee for their five acre land parcel was based on premium priced land parcels located near downtown Denver. Trammell Crow did not get full value for the price it paid for the pa rcel owing to the lack of remediation and re development of the nearby parcels. Furthermore, Trammell Crow had strong expectations for the rental market at Gates and was looking forward to receiving more than $1.50 per square foot in monthly rental revenu e. However, upon the grand opening of the Alexan Broadway luxury units, Trammell Crow was able to get only around $1.30 per square foot per month, 20 cents below its expectations. This cost Trammell Crow nearly $854,000 per year (S. Johnson, persona l com munication, March 24, 2010 ) Trammell Crow exhausted its entire $1million developer fee on legal fees and administrative costs related to the delays in completing the affordable housing component. In addition, the company incurred unexpected legal fees as a result of the complicated nature of the affordable development. Finally, owing to the lack of development at Gates, as of late 2013 Tramm ell Crow had not been able to sell the prop erty and achieve the projected 20% return on investment

PAGE 149

134 Like Metropolitan Homes at Vallagio, Trammell Crow was the victim of the housing at Gates further exemplifies the risk caused by unpredictable housing markets that can turn at any given moment. This unpredictability is why developers require such significant incentives to take on an additional risk like the development of affordable housing. One such developer that did receive significant subsidies to help offset the risks associated with affordable housing was the Denver Housing Authority at its South Lincoln development. South Lincoln TOD Economic Context The recession of 2008 se rved to halt the momentum of TOD development in the because it had already broken ground while the Metropolitan Homes development at Vallagio was stalled. Most TOD developments in the Denver region that were not currently under construction were put on hold while developers waited for better market conditions. Moreover, as the economic situation deteriorated across the nation, the U.S. government began to stimulate the national economy with the passage of the 2009 One focus of this initiative was so called smart growth construction projects like sustainable development. South Lincoln was a prime candidate for ARRA redevelopment funds since it was a badly deteriorated neighborhood locate d directly

PAGE 150

135 across from the 10 th and Osage Transit Stop. Perceiving that ARRA funds would be a great fit for the South Lincoln redevelopment, the Denver Housing Authority applied to the federal program for $10 million. On approval of its application in Se ptember 2010, the DHA broke ground on Phase I of the South Lincoln redevelopment, a 100 unit affordable senior housing project near 10 th and Osage (Steffen, 2009) Table 5.5 Economic Factor Score for South Lincoln TOD Economic Variables: *Score: Rationale for Score: Land Cost +1 DHA owned all 17 acres of the redevelopment site. Hence there was no debt on the land and no land cost Housing Market Conditions 0 HUD research for 2008 2010 reveals that h ousing sales were soft but stable, while rental markets were balanced to tight in the Denver region. Public Subsidy +1 The phase 1 project received $20,890,000 in subsidies: $12,015,000 in ARRA/HOME, $8,875,000 in LIHTC (CHFA) funds. Phases 2 4 are expected to acquire an additional $60 million in subsidies. Return on Investment +1 ROI is positive based on a projected $102,851 in annual rental income plus a $1,664,945 developer fee for phase I. Additional developer fees and positive rental revenue are projected for phase 2 4. Final Score (Average) +0.75 Strong economic conditions prevailed. *Scores were based on the projected positive impact of the economic variables on the developer, Denver Housing Authority, for Phase I (100 unit senior housing apartments) of the South Lincoln project during the pre development period of 2008 2010. Scores were determined from i nterviews with developers and key players as well as a review of primary source documents related to the South Lincoln TOD development. Scoring the Economic Variables Phase I of the South Lincoln redevelopment was a 100 unit senior housing project locat ed on 2.2 acres at 1099 Osage Street, Denver. The land, owned by the Denver Housing Authority was considered attractive real estate since it was located in a TOD

PAGE 151

136 redevelopment project directly across from the 10 th and Osage Transit Stop near downtown Den ver. Since the DHA owned the property free and clear, the land cost market conditions f or the Denver region were balanced and stable for the 2009/2010 period. While existing home sales were still soft in Greater Denver, rental markets continued to stabilize and tighten as more households chose to rent rather than buy. rket Conditions Report testified to this stabilizing effect from late 2009 through 2010: Housing market conditions continued to show signs of stabilizing during the fourth quarter of 2009. . Rental market conditions were balanced to soft throughout the Rocky Mountain region during the fourth quarter of 2009 ( HUD, 2009 ) The Denver area rental market is currently balanced. . In the second quarter of 2010, [the] apartment vacancy rate in the Denver metropolitan area averaged 6.4 percent, down from 8.3 percent a year earlier. . Monthly rents in Denver averaged $862, up slightly from $855 ( HUD, 2010 ) Economic conditions in the Rocky Mountain region have stabilized in recent months. . Rental market conditions were balanced to tight in most areas of the Rocky Mountain region in the fourth quarter of 2010. Demand for rental units has increased as more households have shifted from owner to renter occupancy. . The apartment market in the Denver Aurora area was balanced to tight, with [a] 5.4 percent vacancy rate ( HUD, 2010 ) The public DHA received significant subsidies to fund the development of the 100 unit senior housing apartments. A total of $20,890 ,000 in subsidies was acquired for Phase One of the project including approximately $11 million in ARRA federal stimulus funds in addition to $8,875,000 in LIHTC funding and $1 million in HOME funds (Colorado Housing and Finance Aut hority, 2010) Furthermore, the DHA projected an additional

PAGE 152

137 $60 million in subsidies for Phases Two through Four of their development (Denver Housing Authority, 2010) The DHA had no capital outlay for the first phase since it was 100% funded by subsidies. While P hase Two through Four is still in the planning stages, source document s reveal that the DHA expects to carry approximately $15 million in permanent debt to go along with the $60 million in additional subsidies The final economic variable for the DHA, return on investment, was scored +1 because the Denver Housing Authority projected a positive return on investment based on its projections for developer fees and rental revenue generated from the first four p hases of the South Lincoln development. For the first phase of the development (10 th and Osage) the DHA expected to receive approximately $102,851 in annual rental revenue in addition to a developer fee of $1,664,945 (Colorado Hous ing and Finance Authority, 2010) Moreover, additional developer fees and positive rental revenue is expected a s a part of the remaining $60 million in subsidies from LIHTC, HOME, and HOPE VI funds projected for Phases Two through Four of the South L incoln development (Denver Housing Authority, 2010) It is important to note that the ROI for the DHA is calculated differently than for previous developments (Trammell Crow and Metropolitan Homes) because of the nature of its investment and its role as an affordable housing provider. Most for profit, market rate multi family residential developers like Trammell Crow and Metropolitan Homes calculate its projected ROI based on the percentage of profit they expect to receive upon the sale of its m arket rate product. These types of developers seek to build its product s, hold them for three to seven years (depending on market conditions), and then sell the m for an expected profit ranging from 10% to 30% return on investment (S. Johnson,

PAGE 153

138 persona l com munication, March 24, 2010; P. Kudla, personal communication, December 5, 2012 ) For a developer like DHA, however, that mostly develop s publicly subsidized affordable housing, there are longer requirements for holding onto the property. For example, most LIHTC developments require the developer to commit to owning and managing these affordable units for 45 years ( Colorado Housing and Finance Authority, 2010) In these cases the DHA is not seeking to develop and quickly flip the property for an expected ROI Rather, they will develop and hold it for the long term. In order to capture and measure the ROI variable in th is case, this study thus uses the amount of developer fee and annual positive cash flow th is affordable LIHTC development will likely produce for the DHA. was minimal because the first phase was 100% funded (10 th and Osage) and the remaining three phases are estimated to be 80% funded Consequently t he investment in the project will be mostly in the form of the administrative, strategic, and logistical efforts they committed to in the application and lobbyi ng process for the LIHTC, ARRA, HOME and HOPE VI subsidies. The return on will thus come in the form of developer fees and positive net cash flow from these projects that help to pay their operational expenses and salaries. Impa ct of the Economic Factor on Affordable Housing The economic fa ctor score recorded in Table 5.5 reflects the positive economic sing at the South Lincoln TOD. The project had no land cost since the DHA already owned the parcel free

PAGE 154

139 and clear. Furthermore, the housing market conditions in the Denver region were stabilizing, while the rental market continued to strengthen. These favorable conditions augured well for future rental revenues and low vacancy rates. Moreover, the DHA was the beneficiary of a 100% public subsidy that allowed them to construct the entire Phase One 100 unit project without any debt financing. This strong subsidy additionally enabled th e DHA to double its minimum operating reserves for the property from $140,592 to $290,677. Finally, the agency expected to secure a developer fee of $1.6 million on top of a positive cash flow exceeding $100,000 per year. This optimistic economic forecas t thus created conditions of limited risk and strong economic incentives its initial 100 unit affordable senior housing unit. Furthermore, their future projections for additional subsidies for the last three phase s created even more positive economic signals and reduced risks for its planned additional development at South Lincoln. affordable housing at South Lincoln, moreover, it is impo rtant to discuss the distinctions between for profit developers like Trammell Crow and Metropolitan Homes, both of which are primarily market rate residential developers, on the one hand, and a quasi public, nonprofit developer like the DHA whose mission i s primarily the development of affordable housing. In this regard, the positive economic factor at South Lincoln did not impact decision regarding affordable housing development in general for they were always going to provide affordable housin g in accordance with their mission. However the positive i mpact of the economic factor did lead to their decision to produce affordable housing at the specific South Lincoln TOD site as opposed to another site

PAGE 155

140 Interviews with the lead developer for the DHA, Chris Parr, confirmed that the DHA was initially hesitant to redevelop the South Lincoln site because of the extraordinary site c osts for TOD developments ( C. Parr, personal communication, September 7, 2011) He stated that if it had not been for the significant subsidy package, the DHA would have foregone the redevelopment at South Lincoln and focused its affordable housing development elsewhere. The research question for this study is advocacy factors inf The important part of the question for the DHA was the phrase in a TOD If the DHA had not received the significant economic package that was expected to subsidize m ore than 85% of the first four phases of the development, they would have not produced affordable housing in the South Lincoln TOD and would instead have searched for another site. So the positive economic factor while not impacting its general decision to provide affordable housing, decision to do so at the South Lincoln TOD site. Post Development Economic Context The first phase of the South Lincoln development opened in early 2013. The 100 un it affordable senior housing development is currently leased to capacity with a waiting list for those seeking units. With the successful development of Phase One of the South Lincoln TOD, the DHA has now broken ground on the second phase. Meanwhile, eco nomic conditions in the Denver region have continued to strengthen while rental markets have tightened, vacancy rates have dropped, and rents continue to rise.

PAGE 156

141 Evans Station Lofts TOD Economic Context Following the successful development of Phase One of the South Lincoln TOD development, the economic and housing market conditions for the Denver region continued to improve ( HUD 2012; 2013) With the Denver Fas Tracks light rail build out in full swing, TOD developers in the region were once again seek ing opportunities for development near existing and future transit stops. As local economic conditions strengthened, many land parcels near transit stops were escalating in price and thereby causing unease amongst housing advocates troubled by the lack of affordable real estate and housing close to public transportation (Enterprise Community Partners, 2012) In response to these concerns, Enterprise Community Partners and the Urban Land Conservancy began to work with the Cit y of Denver to create an affordable housing TOD Fund which would allow for land banking near TODs (The Urban Land Conservancy, 2012) At the same time as the TOD Fund was being developed, Troy Gladwell (founder and CEO of Medici Communities a for profit affordable housing development company ) located a land parcel near the Evans Transit Station that proved an excellent location for an affordable residential development. Mr. Gladwell approached the ULC about using Denver T OD funds to purchase the property near the Evans Station. The ULC agreed to buy and hold the land for Mr. Gladwell while he applied for Low Income Housing Tax Credits. In 2012 Medici Communities having been approved for the LIHTC funds, purchased the la nd from ULC and broke ground on a 50 unit affordable housing project called Evans Station Lofts.

PAGE 157

142 Table 5.6 Economic Factor Score for Evans Station Lofts TOD Economic Variables: *Score: Rationale for Score: Land Cost 0 Medici purchased one acre for $1,125,734 at $26per square foot, which was fair market value. Housing Market Conditions +1 HUD research reveals that r ental housing markets in the Denver region remained strong in 2011 2012. Public Subsidy +1 The project received $10,244,926 in LIHTC equity. Return on Investment +1 A positive ROI was based on a $1,145,581 developer fee as well as a projected $58,000 annual net positive cash flow from rental revenue. Final Factor Score (Average) +0.75 Strong economic conditions were in place. *Score s were based on the projected impact of the e conomic variables on the developer, Troy Gladwell and Medici Communities, during the pre development period of 2010 2012. Scores were determined from interviews with developers and key players as well as a review of primary source documents related to the Evans Station Lofts TOD development. Scoring the Economic Variables The Urban Land Conservancy purchased the one acre parcel for the Evans Station Loft project in June 2011for approximately $1,125,734 (The Urban Land Conservancy, 2012) The ULC then, after holding the parcel for one year, sold it for the same price to Medici Communities in June 2012. Land comps from the commercial real estate service LoopNet confirmed that the $26 per square foot price was fair market value at the time in light of the values of other properties similar in size and location (Loopnet, 2011; 2012) Based on these conditions, the land Table 5.7, abo ve. The second economic variable, housing the rental housing market in the Denver region was strong in late 2010 through 2011. As households moved away from home homeownership in the area, the rental markets cont market conditions in Denver

PAGE 158

143 for that time period thus revealed significant tightening in the rental market. The same report, moreover, showed that rental vacancy rates in the Denver/Aurora community h ad dropped from 7.5 percent in 2007 ( HUD 2007) to less than 5 percent in 2011 ( HUD 2011) activity report for Denver indicated that the average rents had risen from $770 per unit in 2009 to $900 by the third quarter of 2011 ( HUD 2011). The third economic variable, public subsidies, was also scored +1 because Medici Communities was able to acquire $10,244,926 in Low Income Housing Tax Credit equity for the development of the Evans Station Lofts (Color ado Housing and Finance Authority, 2011) The final economic variable, return on investment, was scored +1 since Medici Communities projected it would receive $1,145,581 in developer fees as well as a $58,000 annual net positive cash flow from future rental revenue (Colorado Housing and Finance Authority, 2011) Similar to the DHA, the return on investment variable for Medici was scored based on the amount of developer fee and positive net cash flow that the develo per projected Like the DHA, the primary investment that Medici had made for the Evans station property was their time invested in developing the plans for the project as well as the fees and costs related to the LIHTC application process. The LIHTC application process can take up to three years. The developer s return on this investment of time and administrative expenses is the de veloper fee he receives in addition to the positive cash flow from the project.

PAGE 159

144 Impact of the Economic Factor on Affordable Housing The final score for the economic factor ( S ee Table 5. 6 ) reflects positive economic conditions which strongly contributed to Medici Communities decision to provi de affordable housing at the Evans S tation site. Moreover a closer look at each variable shows even stronger economic conditions than the score indicates. For example, although Medici Communities received no discount on the land purchase, the company ga ined a significant benefit in the land transaction. Namely, the Urban Land Conservancy purchased the parcel for the future site of the Evans Station Lofts with Denver TOD funds and held the parcel at no cost for a year while Medici applied for and receive d LIHTCs. ULC in fact had been prepared to hold the land long term if Medici had been denied the LIHTC subsidy. Once Medici Communities received its subsidy for the development, they purchased the land from ULC. The company paid no out of pocket expense for the land since the funds for the purchase had come entirely from the LIHTC subsidy. Furthermore, Medici anticipated receiving $1 million in developer fees from the LIHTC subsidy as well as a positive cash flow in excess of $50,000 per year plus the o wnership of an appreciating asset (Colorado Housing and Finance Authority, 2011) These profit margins along with equity ownership presented significant benefits for a small developer like Medici with only three full time staff ( T. Gladwell, personal communication, April 19, 2012) Similar to the DHA Medici C ommunities is an affordable housing developer Thus the positive economic factor did not housing given that that is the only type of housing they provide. However the positive economic factor did at the

PAGE 160

145 specific Evans S tation TOD site as opposed to another less attractive location Without the advantageo us buy and hold land acquisition process and the significant subsidies targeted for this particular TOD, Medici would have likely sought a different site to produce affordable housing (T. Gladwell, persona l communication, April 19, 2012 ) Post Development Economic Context As of August 2013 the Evans Station Lofts project was completed, with all the units fully leased and a significant waiting list. The affordable loft units are in high demand given the above average amenities for affordable housing and the attractive loft style design In addition, the building is located directly across the street from the local light rail station. Satisficing and the Economic Factor The theoretical framework for this dissertation holds that developers are satisfice rs, businesspeople who make development decisions based on a strategy of reducing risks and achieving satisfactory profits. The literature on satisficing claims that most developers avoid high risk developments like urban infill/TODs. Their preference is to seek out more predictable, lower risk developments on the suburban fringes (Lucy & Phillips, 2000) This section examines the actions that the local municipalities took with regard to reducing risks and incentivizing satis ficing developers to produce affordable housing in the respective TODs. Th is section specifically focuses on how the economic variables impacted the satisficing conditions for each TOD developer. The City of Englewood understood that Trammell Crow would be concerned about the risks associated with TODs since Englewood was the first community to attempt the untested concept in an inner ring suburb of Denver. To convince Trammell

PAGE 161

146 Crow to take the ri sk as the residential/ground floor retail developer at the City Center project, the City offered them a discount on the purchase price of the land parcel as well as nearly $24 million in public subsidies to invest in infrastructure that would benefit Tramm strong enough to convince Trammell Crow to go forward with a market rate residential development but they still decided against affordable housing The decision against affordabl e housing was partly related to political opposition at Englewood but also related to the risks associated with the then untested TOD residential and retail market s One of the keys to reducing risks for developers is their ability to have some certainty regarding housing market conditions. The more predictable the latter are, the more likely a developer will make profits from rental revenue, vacancy rates, and property appreciation. For Trammell Crow at Englewood, the general housing markets were predi ctably solid for Denver from 1997 to 2000. However, the specific TOD housing markets were untested, particularly in an older, inner ring suburb like Englewood. Trammell Crow felt like it was taking somewhat of a risk by agreeing to a market rate resident ial development in the untested TOD market at Englewood, an unconventional situation for them. Unlike the City of Englewood, the Inverness community did not feel the need to offer any economic incentives to Metropolitan Homes for its Vallagio developmen t. One of the major reasons for its decision was the success of the Englewood City Center TOD. When Trammell Crow sold its Alexan development for a record profit, the TOD concept clearly showed that it could be successful and that TOD residential markets were sustainable, even thriving. The master developers at Inverness, having witnessed this

PAGE 162

147 growth in regional TOD markets, determ economic incentives to Metropolitan Homes to convince them to invest in the Vallagio TOD. The proven TOD markets and the prime Inverness location were enough to provide significant profit incentives to the develo per without additional economic inducements. Further, the Inverness community was not supportive of affordable housing at the Vallagio development (more on this in the discussion of advocacy in conomic incentives to Metropolitan Homes for this sort of development. As a result, Metropolitan Homes received neither a land discount nor a public subsidy for its Vallagio development at Inverness. Unlike the Inverness community, The City of Denver w orked to provide economic benefits to reduce risks for Trammell Crow at Gates. Even though the TOD markets were strengthening in the Denver region, there were still considerable risks involved in the complex undertaking of remediating and redeveloping the Gates factory. Furthermore, the City of Denver wanted to ensure that affordable housing would be developed at the Gates site. To help reduce risks and incentivize Trammell Crow to agree to the latter, the City of Denver saw to it that Trammell Crow bene fited from significant public subsidies for its planned development. The c ity thus helped Trammell Crow acquire nearly $8 million in LIHTC and HOME subsidies for the development of the Broadway Junction affordable apartments. Furthermore, Trammell Crow e xpected to benefit from the $125 million TIF subsidy which was committed to infrastructure and property improvements at Gates.

PAGE 163

148 Similar to Trammell Crow at Gates, the Denver Housing Authority was also the beneficiary of reduced economic risks at its Sout h Lincoln development thanks to requesting $10 million in federal ARRA stimulus funds. In addition, the City of Denver assisted the DHA in receiving $70 million more in subs idies from LIHTC, HOME, and HOPE VI, among other sources. Finally, Medici Communities too had reduced economic risks thanks to the City c ity, in conjunction with Enterprise and the Urban Land Conservanc y, used its TOD F und to make nearly $1 million available to the ULC to buy and hold the Evans Station parcel for Medici while the latter was acquiring LIHTC financing for the Evans Station Lofts development. In each of the three Denver TOD cases where a ffordable housing was provided, the local communities worked to reduce the risks to the developers by helping them gain significant public subsidies for affordable housing development. In the case of Medici, the City of Denver itself offered economic assi stance with the land acquisition process. In all three, the local community worked to provide satisficing conditions to the developers to incentivize them to provide affordable housing. Without these economic incentives and the subsequent satisficing con ditions they presented for affordable housing development, Trammell Crow would have likely foregone affordable housing development at Gates and focused only on market rate development, while the DHA and Medici would have pursued affordable housing developm ent at another site. In the case of Trammell Crow at Englewood, while the community offered economic incentives in the form of a land cost discount and public subsidy benefits,

PAGE 164

149 Trammell Crow still decided against affordable housing. The underlying risks imposed by the still untested TOD concept and political opposition would not allow for satisficing conditions for Trammell Crow when it came to affordable housing development. Finally, in the case of Metropolitan Homes at Inverness, that community did not provide any economic incentives. The ir to affordable housing created non satisficing conditions for Metropolitan Homes and thus effectively precluded affordable housing development at Inverness

PAGE 165

150 CHAPTER VI ANALYSIS OF THE REGULATORY FACTOR Introduction This chapter analyze s the regulatory factor and its variables zoning, infrastructure, parking, and retail requirements and their impact on residential making processes regarding the provision of affordable housing within each of the five Denver TOD cases being studied. As in the previous chapter, the scoring analysis for each TOD case focus es on the pre development time period consisting of the two years leading up to t he groundbreaking for each project. A brief post development analysis of each case follows. The chapter conclude s by examining the impact of the regulatory housing decisions in terms of satisficing. Research Question and the Regulatory Factor As discussed in Chapter 3, this study holds that the regulatory factor is a mediating one which serves to enhance or diminish the dominant economic factor. If th e regulatory requirements for a particular TOD are costly, this condition will diminish the economic factor and reduce the likelihood that affordable housing will be developed. Conversely, if regulatory requirements are reduced, the economic factor will b e enhanced and more favorable conditions for affordable housing will be created. Table 6.1, below, provides the template and scoring categories for the regulatory factor and its variables. A positive score reflects regulatory conditions favorable to the devel opment of affordable housing.

PAGE 166

151 Table 6.1 Regulatory Factor Scoring Categories Regulatory Variables: 1 = Negative 0 = Neutral +1 = Positive Zoning Requirements Above average zoning requirements (e.g., full rezoning). Average zoning requirements ( partial rezoning). Below average zoning requirements (no rezoning). Infrastructure Requirements Above average infrastructure requirements (more than 10% of total budget). Average infrastructure requirements (between 5% and 10% of total budget). Below average infrastructure requirements (less than 5% of total budget). Parking Requirements Above average parking costs (more than $12,000 per residential unit) Average parking costs ($8,000 $12,000 per residential unit ). Below average parking costs ( less than $8,000 per residential unit) Ground Floor Retail Requirements Above average retail requirements (more than 60 sq. ft per residential unit). Average retail requirements (40 60 sq. ft. per residential unit ). Below average retail requirements (less than 40 sq. ft. per residential unit.). Englewood City Center TOD Regulatory Context When the City of Englewood took on the responsibility for being the master developer of the former Cinderella Mall site, it knew there would need to be significant infrastructu re remediation and zoning changes to attract private development. Moreover, since the TOD concept was untested in the Denver region, the City of Englewood felt compelled to reduce risk levels as much as possible to incentivize priv ate developers to

PAGE 167

152 commit to the City Center TOD project ( R. Simpson personal communication, August 6, 2013 ) One way the c ity believed it could reduce risks was to remediate and rezone the site to make it market ready for development. Upon realizing the magnitude of infrastructural and site remediation needed for the 55 acre project the c ity issued approximately $19 million in certificate of participation bonds The majority of the funds raised by the COP s were invested in site remediation, including the demolition of the entire mall; removal of thousands of pounds of concrete; construction of roads, sidewalks, civic space, a public plaza, pedestrian walkways, public art, landscaping and lighting as well as the development of water, sewage, and electrical utilities (Stitt 1997) The city also completely rezoned the site from single use commercial/business to mixed use/TOD zoning. This substantial commitment from the City of Englewood was a significant reason for Trammell Crow to agree to undertake residential and retail development at the City Center TOD site. Table 6.2 Regulatory Factor Score for Englewood City Cente r TOD Regulatory Variables: *Score: Rationale for Score: Zoning Requirements +1 Below average zoning costs: The City of Englewood completely rezoned the City Center residential/mixed use development. Infrastructure Requirements +1 Below average infrastructure costs: The City of Englewood completely remediated the City Center TOD site and built infrastructure. Parking Requirements 1 Above average parking costs: $20,700 per unit based on a four story p arking garage with 348 spaces, 92 attached garages, and 239 surface parking spots for 438 residential units. Ground Floor Retail Requirements 1 Above average ground floor requirements: 66 sq. ft. of retail requirement per residential unit. (29,000 sq. ft divided by 438 residential units) Final Score (Average) 0 Neutral regulatory conditions: minimal infrastructure and zoning costs offset by above average parking and retail costs.

PAGE 168

153 *Scores are based on the impact of the regulatory requirements on Trammell Crow during 1998 2000 as drawn from interviews with developers and reviews of primary source documents related to the Englewood City Center TOD development. Scoring the Regulatory Variables The first regulatory variable for the Englewood City Center TOD development, its zoning requirements, was scored The variable received this score because Trammell Crow incurred no zoning costs or requirements since the City of Englewood had already rezoned the site from B 1 (single use, business) to the new mixed use/TOD zoning code in 1998 ( R. Simpson personal communication, July 21, 2011) This new zoning code, referred to a PUD 2, was specifically designed to accommodate mixed use developments comprised of residential, retail, and office space integrated into the Englewood Transit Stop. The second regulatory variable impacting the Englewood development, its infrastructure requirements, also received a This score was based on the reduced site preparation and infrastructural costs incurred by Trammell Crow. The City of Englewood had invested the majority of its $19 million in COP s to fund the remediation and infrastructur e development of the City Center TOD site to make it build ready for private development ( Englewood 2010) The third regulatory variable, parking requirements, received a since the total cost per residential unit equaled approximately $20,700. This score resulted from the significant parking costs imposed on Tram mell Crow because they were required to build a four story parking garage that contained 348 parking sp ots at an approximate cost of $20,000 per sp ot ( Guimond, 2010; G. Krause, personal communication, December 5, 2012) In addition to the garage, Trammell Crow had to provide 92 attached garage

PAGE 169

154 parking sp ots at an approximate cost of $10,000 per spot as well as 239 surface spots at an average cost of $5000 per spot The last regulatory variable impacting Trammell Cro w, ground floor retail requirements, also received a 1 This score resulted from the above average ground floor retail requirement of approximately 66 square feet of retail/office space for every residential unit Because of the mixed use requirements of the TOD concept, the City of Englewood compelled Trammell Crow to develop approximately 29,000 square feet of ground floor retail space for small businesses, offices, and boutique shops. As previously stated in C ha pter 3, this requirement was considered above average for mixed use TOD types of developments in the Denver region (R. Simpson, personal communication, July 21, 2011) Impact of the Regulatory Factor on Affordable Housing While political opposition at Engl ewood was the most significant driver of he higher risks associated with the parking and ground floor retail requirements contributed to that decision as well While Trammell Crow was the beneficiary o f reduced zoning and infrastructure requirements, these benefits were more than offset by increased costs for parking and ground floor retail. The latter were much higher for Trammell Crow than those of its typical multi family non TOD development. T he c typical suburban multi family apartment developments in the Denver region required only two basic surface parking spots per unit (S. Johnson, personal communication, March 24, 2010 ) These surface lot parking spots cost on average, $5,000 per sp ot ( G. Krause, personal communication, December 5, 2012 ; Rick Williams Consulting, 2007 ) However,

PAGE 170

155 story parking garage with 348 garage parking spaces in addition to 92 attached garages and 239 surface spaces for the significant cost of $20,700 per unit. In addition to the risks imposed by parking specifications the ground floor retail requirements created even more risk for Trammell Crow. When the company initially agreed t o residential and retail mixed use for the City Center project, they had hoped they could provide the typical free standing retail stores separate from the residential building ( R. Simpson personal communication, July 21, 2011) However, the TOD design s tandards for the City Center called for Trammell Crow to build retail space on the ground level of the residential buildings to create a more pedestrian friendly environment. The company considered backing out of the development because of concerns about adequate density and foot traffic to support retail stores on the ground floor. Through significant negotiations, the developer was ultimately able to convince the City of Englewood to reduce its retail requirements from 45,000 to 29,000 square feet. Nev ertheless, 29,000 square feet was still large enough to cause Trammell Crow to worry that they might take losses on its ground floor retail leases (R. Simpson, personal communication, July 21, 2011) The risks imposed by the parking and ground floor retail requirements created significant concerns for Trammell Crow when they were originally considering the development of affordable housing at Englewood. While Trammell Crow was desirous of the developer fees and small rental revenue to be gained from the development of an affordable LIHTC development, the increased risks related to the parking and ground floor retail requirements at the City Center TOD caused them to balk at taking on another

PAGE 171

156 distraction like affordable housing. These regulatory risks combined with the Englewood that later emerged (more in C hapter 7) le d to decision against it. Post Development Regulatory Context Interviews with Englewood City leaders as well as a review of primary documents reveal that Trammell Crow matched or exceeded its expectations for ground floor retail revenues ( R. Simpson, person al communication, July 21, 2011 ) The company had estimated its spaces would lease for $13 to $16 per square foot per year upon opening. However, when the Alexan City Center apartments actually opened, the ground floor retail space was leasing for $19 per square foot ( G. Sears, personal communication, July 28, 201 1 ) This better than expected result doubtless helped Trammell Crow sell its property in 2003 for a $7 million profit (Rebchook, 2003) As previously stated, the unexpected success of the ground floor retail leases for Trammell Crow and the subsequent sa le of its Alexan product revealed that they likely would have been able to develop affordable housing at the City Center TOD and still have enjoyed a nice profit. However, at the time of decision making, Trammell Crow believed that the parking and retail requirements along with political opposition created too much risk for them to move forward with affordable housing. Vallagio at Inverness TOD Regulatory Context that for Trammel reduced zoning costs and infrastructure requirements but encountered significant costs

PAGE 172

157 related to parking and ground floor retail requirements. Metropolitan Homes nevertheless had the advantag which, as has just been shown, included better than expected retail revenues. The about the risks and uncertainties relate d to the ground floor retail requirements facing them. Table 6.3 Regulatory Factor Score for Vallagio at Inverness TOD Regulatory Variables: *Score: Rationale for Score: Zoning Requirements +1 Below average zoning requirements: property completely rezoned for mixed use TOD in 2004. Infrastructure Requirements +1 Below average infrastructure requirements. Parking Requirements 1 Above average parking costs: $ 34,900 per unit based on 585 underground garage parking spaces 202 attached garages and 572 surface parking spots for 5 59 residential units. Ground Floor Retail Requirements 1 Above average ground floor requirements: 7 5 sq. ft. of retail requirement per residential unit. ( 42 ,000 sq. ft. divided by 559 residential units) Final Score (Average) 0 Neutral regulatory conditions. *Scores were based on the projected impact of the regulatory variables on the developer, Metropolitan Homes, during the pre development period of 2003 2005. Scores were determined from interviews with develop ers and other key players as well as a review of primary source documents related to the Vallagio TOD development. Scoring the Regulatory Variables The zoning requirement variable for the Vallagio development was scored since the Inverness site had been completely rezoned for mixed use by the time Metropolitan Homes purchased the parcel in 2005 (P. Kudla, personal communication, December 5, 2012) Mr. Kudla, the CEO of Metropolitan Homes had made this

PAGE 173

158 rezoning a requirement before he would agree t o purchase the property from the Opus Investment Group. The new zoning classification allowed for densities of 50 units per acre with a maximum building height of 120 feet. The rezoning of the property, which saved Mr. Kudla much time and energy, was a c ritical incentive for his purchase of the land The second regulatory variable at the Vallagio development, the infrastructure requirement, also received a because the Vallagio parcel at Inverness had already been improved and made ready for development by the Inverness Metropolitan Improvement District ( P. Mulhern, personal communication, December 5, 2012) Since the major nearby roads, Inverness West Driv e and Dry Creek Road, were already developed, there was no need to build new roads on the parcel. Moreover, there were no excessive fees for developing community parks or schools required from the developer. In an interview with Peter Kudla, he explained how the reduced infrastructural costs were part of the reason he purchased the property: I think one of the advantages of the site was that all of the open space was already West, was in, and Dry Creek Road was in. No parks and school. No special district allocations. The site $10 per square fo ot for the land ( P. Kudla, personal communication, December 5, 2012). The third regulatory variable impacting the Vallagio development, the parking requirement, received a since the average parking cost per unit was approximately $34,900 ( G. Krause, personal communication, December 5, 2012) The cost per unit was based on 585 underground spots at $25,000 per spot, 202 attached garages at $10,000 per spot, and 572 surface spots at $5,000 per spot for a total cost of $19,505,000 divided by

PAGE 174

159 559 residential units. These significant parking costs for the Vallagio development were related to this high density development located on a relatively small footprint and Arapahoe Coun ty insisted that Vallagio provide the standard two parking spaces per unit even though the development was a TOD (many TODs are allowed reduced parking requirements because of their proximity to transit and the expected reduced automobile usage on that account). c onstruction, commented on the impact of these required parking expenses for the Vallagio development: What we have done to achieve the parking requirements is the mo st expensive parking spaces you can have. Your parking is driven by municipalities, so goes exponentially up from surface parked to detached garages to attached park to un derground. . [The] 1 st level and 2 nd levels [were] underground, and each one [represents] an increase in cost. You have to go underground so it drives the cost of construction which in the end drives the cost of the unit. So how did we achieve th e parking? We went underground with most of it ( G. Krause, personal communication, December 5, 2012) The final regulatory variable impacting the Vallagio development, the requirement for ground floor retail, also received a development required 75 square feet of retail space for each residential unit. The Vallagio development plan called for approximately 42 ,000 square feet of retail space for 559 units an above average amount in relation to the size of the development. Mr Kudla was aware of the risks of such a significant portion of commercial/retail but was convinced the upscale restaurants and small boutique shops would succeed (P. Kudla, personal communication, December 5, 2012)

PAGE 175

160 Impact of the Regulatory Factor on Affordable Housing Similar to Trammell Crow at Englewood, while advocacy opposition was the main driver of Metropolitan Homes decision to forego affordable housing (more in Chapter 7), the significant parking requirements and risks related to the gro und floor retail requirement also contributed significantly against it Arapahoe County had insisted that Metropolitan Homes provide slightly more than two parking spots for every residential unit at the Vallagio developmen t. Owing to the high density development and small footprint at Vallagio, Metropolitan Homes was thus forced to build parking garages two stories underground, a circumstance which made the sks increased because of the Vallagio ground floor retail requirement of 42 ,000 square feet for the 559 units, a significant amount of retail/commercial space in a suburban/office area development with unproven pedestrian foot traffic. Post Development Reg ulatory Context The most significant negative regulatory outcome for the Vallagio development was the complete failure of the ground 42 ,000 square feet of ground floor retail space posed a significant risk for a development located in the suburbs with the lack of foot traffic necessary to support so many stores. Further complicating the ground floor retail requirement was the Inverness Planning and refusal to allow Metropol itan Homes to develop signage and design standards that would have made the new retail venues visible to vehicles on Interstate 25 ( N. Sharpe, personal communication, December 12, 2012) The lack of visibility of the retail development at Vallagio leading to the subsequent failure of

PAGE 176

161 that aspect of the development was a significant setback for Metropolitan Homes, which had to subsidize these stores in their struggle to stay afloat. Gates TOD Regulatory Context The regulatory context for Trammell Crow at the Gates TOD in 2005 to 2007 was characterized by less risk than the developments at Vallagio and Englewood. The Gates site was similar to Englewood and Vallagio in that it had been completely rezoned for mixed use development and required no remediatio n. However, the big difference for Trammell Crow at Gates was that its ground floor retail requirement (12,500 retail square feet /26 square feet per residential unit ) was much more manageable than the more significant requirements at Vallagio (75 square f eet per unit ) and Englewood ( 66 square feet per unit ). Furthermore, Trammell Crow had the advantage of witnessing its own than expected ground floor retail leases that helped moderate con cerns about the retail requirement at the Gates TOD. Table 6.4 Regulatory Factor Score for Trammell Crow/Gates TOD Regulatory Variables: Score: Rationale for Score: Zoning Requirements +1 Below average rezoning requirements as property was completely rezoned for mixed use by Cherokee in 2003/2004. Infrastructure Requirements +1 B elow average infras tructure requirements and costs as land parcel was remediated by Cherokee. Parking Requirements 1 Above average parking costs: $24,630 per residential uni t based on six story parking garage with 590 parking spots for 478 residential units. Ground Floor Retail Requirements +1 Below average ground floor requirements: 26 sq. ft. of retail required per residential unit. (12,500 sq. ft. divided by 4 7 8 residential units) Final Score (Average)* +0.50 Positive conditions resulting from reduced zoning, infrastructure, and retail requirements which offset higher parking costs.

PAGE 177

162 developer, Trammel Crow, during the pre development period of 2005 2007. Scores were determined from interviews with developers and other key players as well as a review of primary source documents related to the G ates/Trammell Crow development. Scoring the Regulatory Variables The zoning and infrastructure requirements for the Trammell Crow/Gates TOD development were both scored inasmuch as these variables represented below average requirements and served to reduce costs for Tramm ell Crow at Gates (See Table 6.4 above.). In June 2003 the Denver City Council approved a newly created zoning classification, TMU 30, for the 50 acre western Gates parcel (Vaughan, 2003). Then, in December 2004 the Council voted to rezone the 30 acre east parcel at Gat es as TMU 30 (Hudson 2004) The new zoning code (Transit Mixed Use 30) allowed for residential, retail, office, hotel, and light commercial development at Gates within the context of the adjacent mass transit stop. This rezoning of the Gates development benefited Trammell Crow since the developer did not have to use its time and money for rezoning. Furthermore, the infrastructural costs were significantly reduced for Trammell Crow because the five acre parcel was one of the few clean pieces of land at th e former Gates factory site that needed only partial remediation and site preparation which Cherokee had provided before selling the parcel to Trammell Crow (S. Johnson, personal communication, March 24, 2010) The third regulatory variable for the Trammell Crow development, parking, received a however, $24,630 per unit above average (S. Johnson, personal communication, March 24, 2010) ba sed on the required development of a six story garage with 590 parking spots at a cost of approximately $20,000 per spot. The

PAGE 178

163 total cost of the parking garage was close to $11,800,000 for the 479 unit project. The parking garage was shared by both the re sidents of the 60 unit affordable development (Broadway Junction) and those of the 419 market rate units (Alexan Broadway). The final regulatory variable, the ground floor retail requirement, was scored since the 2 6 sq uare feet of required retail per residential unit was a below average requirement (See table 6.1.). Trammel Crow self financed the retail space for $ 2,221,606 Impact of the Regulatory Factor on Affordable Housing The final score of +. (See table 6. 4 above.) presented favorable regulatory conditions for the development of affordable housing and indeed weighed positively in it on at the Gates development. While Trammell Crow projected significant parking costs, these we re offset for them by the reduced zoning and infrastructure requirements Furthermore, Trammell Crow was required to develop only 12,500 square feet of ground floor retail (26 square feet per unit) an amount that struck them as much more manageable than the 29,000 square feet (66 square feet per unit) requirement at Englewood. With this reduced square footage and the higher density and foot traffic projection at Gates, Trammell Crow believed that its ground floor retail risks would be manageable. Post D evelopment Regulatory Context The post development analysis of the regulatory conditions at Gates revealed a much different set of circumstances for Trammell Crow than they had originally hoped for. Trammell Crow had agreed to develop affordable housing in 2005 2007, a period when market conditions were strong, the regulatory context was positive, and the master developer, Cherokee, was moving forward with grand development plans for Gates. By

PAGE 179

164 the time Trammell Crow had finished its development at Gates in late 2010 to early 2011, however, Cherokee had filed for bankruptcy, and no redevelopment had taken ruptcy, and the lack of redevelopment surrounding the Gates site, there was not enough population density and foot traffic to produce demand for the retail stores. As a consequence, the space remained vacant for two years. Trammell Crow expected to earn approximately $19 per square foot from the 12,500 retail square footage, yet this empty space produced no income in 2011 and 2012 while Trammell Crow had to pay its taxes and utilities. As a result, Trammell Crow lost approximately $30,000 per month during these 24 months (S. Johnson, personal communication, March 24, 2010) South Lincoln TOD Regulatory Context During the pre development period (2008 2010) for the South Lincoln TOD, the Denver Housing Authority had the advantage of observing the significant problems that supporting the ground floor retail requirement ( C. Parr, personal communication, September 7, 2011) While the South Lincoln development plan called for extensive ground floor retail square footage which increased the risks for the DHA using the lesson learned from Vallagio and Gates, the DHA was able to slightly reduce these risks by working to modify its retail space for better market flexibility. The agency consequently created ground floor retail /office spaces that were less depen dent on pedestrian foot traffic as they set aside a portion of the space for community service

PAGE 180

165 providers and the vendors that worked with them. The space could then be converted to retail shops like restaurants and gift shops once the foot traffic prove d strong enough to support them Table 6.5 Regulatory Factor Score for South Lincoln TOD Regulatory Variables: *Score: Rationale for Score: Zoning Requirements +1 Below average zoning requirements for South Lincoln TOD ; t he City of Denver helped DHA with the rezone. Infrastructure Requirements 1 Above average infrastructure and site preparation owing to maj or demolition, road creation, and flood plain issues. Parking Requirements 1 Above average parking costs: $ 15,309 per unit based on parking garage with 422 spots and 192 surface parking spots for 450 residential units. Ground Floor Retail Requirements 1 Above average ground floor requirements: 133 sq. ft. of retail requirement per residential unit. ( 60 ,000 sq. ft. divided by 450 residential units) Final Score (Average) .50 This score reveals negative regulatory conditions related to infrastructure, parking, and retail/office. *Scores were based on the projected impact of the regulatory variables on the developer, Denver Housing Authority, during the pre development period of 2008 2010. Scores were determined from interviews with developers and other key players as well as a review of primary source documents related to the South Lincoln TOD development. Scoring the Regulatory Variables The zo ning requirement variable for the South Lincoln TOD development received a since the Denver Housing Authority was the beneficiary of reduced zoning requirements for the South Linc oln redevelopment (See Table 6.5 .). During the master planning of the S outh Lincoln redevelopment in 2009, the DHA invited Kristin Krasnove of the Denver Community Planning and Development Department to be on the

PAGE 181

166 person for creating the new zoning code for the c ity and c ounty She worked with the code revisions to reflect the mixed use TOD context for the South Lincoln development ( K. Krasnove Fritz, personal communication, September 8, 2011) Having Ms. Krasnove work with the DHA on the zoning code helped the Denver Housing Authority avoid extensive time and expenses in DHA, speaks to the beneficial ti ming of the rezoning and the regulatory cost savings to the DHA in these words: One of the good benefits that South Lincoln had with [the] timing for regulations was that the city was doing their zoning code update while we were in the master planning for this. . So because we did the station area planning together . we are not seeing any macro things that are going to hit us in the head from a rezoning standpoint ( C. Parr, personal communication, September 7, 2011) Kimball Crangle, the program director for the DHA, confirmed this cost saving: . We were finalizing our master plan when the City of Denver was finalizing their form based zoning code so we worked very closely with the Denver Planning Department. They basically took o ur master plan and matched it to the zoning code. So we are totally entitled now. . That was pretty lucky and reduced our expense regarding time ( K. Crangle, personal communication, September 7, 2011) The second regulatory variable impacting the South Lincoln development, infrastructure requirements, was scored because the Denver Housing Authority projected significant infrastructure costs and site preparations for the South Lincoln redevelopment. Owing to the fact that the South Lincoln neighborhood was located in a flood plain, it needed significant technical and engineering expertise to prevent flooding and to properly control drainage in the community. Further, the roads and utilities in the n eighborhood, which were in bad disrepair, needed to be completely redeveloped. The

PAGE 182

167 ture costs when she stated that our infrastructure plan for this neighborhood is expensive. We are having to re the storm water system is costly because we are in a flood plain ( K. Crangle, personal communication, September 7, 2011) The third regulatory variable for the South Lincoln development, parking requirements, received a because units was $15,309. These costs were higher than the average in the Denver region of $8,000 $12, 000 per unit (See table 6.1.). During the process of rezoning South Lincoln, the City of Denver found that since the current parking system in the Lincoln Park neighborhood was poorly developed, it created an unfriendly pedestrian environment (Denver Community Planning and Development, 2010) To remedy the troubled parking situation there, The city required the DHA to build a parking garage and ground level parking structures that needed to be screened by landscaping to minim i ze the negative visual impact (Denver Community Planning and Development, 2010) The final regulatory variable, required ground floor retail space, also received a because of the stringent commercial and retail requirem ents at the South Lincoln TOD. As stated earlier, while the DHA was able to modify its retail /office square footage to reduce its dependence on high levels of foot traffic, the 133 square foot requirement per residentia l unit was still a large commercial space to manage. This above average retail requirement was related to the new zoning code for the South Lincoln redevelopment which required all high density multi family units within the development to have commercial and retail space on the ground floor of each building (Denver Community Planning and Development, 2010)

PAGE 183

168 Impact of the Regulatory Factor on Affordable Housing The final score of .50 (See Table 6. 5 above.) for the South Lincoln TOD development indicates regulatory conditions that were not favorable for the development of affordable housing. Significant regulatory requirements related to infrastructure, parking, and ground floor retail created cost s for the DHA that were not conducive to affordable housing development at South Lincoln. In cases like this one with high regulatory costs, the DHA would usually look for a different site to provide affordable housing ( C. Parr, personal communication, September 7, 2011) More than likely, the site would be a non TOD site with fewer regulatory costs and requirements. Despite the se high costs however, the Denver Housing Authority chose to provide affordable housing there. The most significant reason for this choice was the availability of significant public subsidies to offset these regulatory expenses ( K. Crangle, personal communication, September 7, 2011) As discussed in Chapter 5, the amount of subsidies available for the South Lincoln site w as extraordinary well beyond the usual amount the DHA typically received for affordable housing developments of similar size and scope. Both Federal (ARRA, HOPE VI, and LIHTC funds) and local subsidies (HOME) were targeted for the Sout h Lincoln development because it was considered a strategic TOD site with the potential to be a stellar example of sustainable mixed use development. Post Development Regulatory Context Phase One of the South Lincoln TOD development, completed in early 2013, is currently fully leased, with a waiting list for the 100 unit senior facility. In addition, the Phase One 1 6 ,000 square f oo community service and social service agencies. With market conditions continuing to

PAGE 184

169 strengthen, the DHA is optimistic about successfully leasing space to market driven retail shops in later phases of t he development. Evans Station Lofts TOD Regulatory Context The regulatory context for the Evans Station Lofts TOD seemed quite positive in 2011/2012. The Evans Station Lofts development had reduced zoning and minimal infrastructure costs as well as redu ced parking requirements. Moreover, t hanks to the lessons learned from Englewood and Gates regarding commercial/retail space, Medici was able to negotiate with the City of Denver to reduce the ground floor retail requirement for its TOD. The result was a n 8,000 square foot requirement versus the original 1 2 ,000 something that helped moderate the ground floor retail regulatory risks associated with the Evans Station Lofts TOD. Table 6.6 Regulatory Factor Score for Evans Station Lofts TOD Regulatory Varia bles: Score: Rationale for Score: Zoning Requirements +1 Below average zoning costs: The Evans Station area had already been rezoned for mixed use TOD development. Infrastructure Requirements +1 Below a verage infrastructure costs Parking Requirements +1 Below average parking costs: $ 4,300 per unit based on 43 surface parking spots for 50 units. Ground Floor Retail Requirements 1 Above average ground floor requirements: 1 60 sq. ft. of retail requirement per residential unit. ( 8 ,000 sq. ft. divided by 50 residential units) Final Score (Average)* +0. 50 Favorable regulatory conditions for affordable housing development. *Scores were based on the projected impact of the regulatory variables on the developer, Medici Communities, during the pre development period of 2010 2012. Scores were determined from interviews with developers and other key players as well as a review of primary source documents related to the Evans Station Lofts TOD development.

PAGE 185

170 Scoring the Regulatory Variables The z oning requirement variable for the Evans Station Lofts TOD development received a score of since the property had already been rezoned for mixed use TOD development prior to Medici Communities purchase of the parcel (T. Gladwell, personal communicatio n, April 19, 2012) In June 2010 the Denver City Council adopted a revised zoning code for the city Under this code, the Evans Station area was designated an urban center neighborhood with a recommendation for a mixed use TOD development. In an interview, Cindy Everett of the Urban Land Conservancy underscored the advantages of the new zoning code with regard to the Evans Station Lofts project as follows: Most of these deals are kind of challenging because you are working along rail lines, and [the property] has been industrial in the past or is in neighborhoods of change where street layouts and everything else needs [to] change. . In Denver did with their n ew zoning code . is they began the process to improve zoning and define density around those sites which is really helpful. Without that, the entitlement process could take a lot longer ( C. Everett, personal communication, April 23, 2012) The sec ond regulatory variable impacting the Evans Station Lofts TOD, the infrastructure requirement, received a +1 owing to the fact that Medici Communities encountered below average infrastructural costs for the project LIHTC budget documents and interviews with the developer confirm the below average infrastructure costs as the Evans station land parcel needed no significant preparations (T. Gladwell, persona l communication, April 19, 2012 ; Colorado Housing and Finance Authority, 2011)

PAGE 186

171 The third regulat ory variable for the Evans Station Lofts development, the parking requirement, received a thanks to fact that the Medici Communities was benefiting Evans Station T ransit S reduced dependency on automobile transportation. The new zoning code for the Evans Station Lofts project thus required only 43 surface parking spaces for the 50 residential units The result was a below average parking cost of only $4,300 per residential unit (The City of Denver, Office of Community Planning and Development, 2009) The final regulatory variable, the ground floor retail requirement, received a since Medici Commu nities had to develop 160 square feet of retail requirement per residential unit. However, even though this commercial/ground floor space was an above average requirement, Medici was able to modify its risks. Given the recent ground floor retail/commercial struggles of the Vallagio and Gates TODs, Medici built in the following contingency plan for its required 8,000 square feet: One, they developed a budget with no expectation of rental revenue from the retail space. Two, Medici reserved nearly 1,500 square feet of the 8,000 square foot space for its offices. Three, Medici reserved another 1,500 square feet for its property management company. By using the required retail/commercial space strategically in thi s way, Medici lowered its financial risks. In an interview Troy Gladwell explained his approach to working with the city on its ground floor retail/office requirement. Mr. Gladwell stated, You have to have retail. You have to have commerc ial on that ground floor. It is a requirement based on the location, and if you are dumb enough to maximize the amount of commercial space on the ground floor and underwrite it at $24 or $30 per square foot rents, you are probably going to be in trouble. dollars and minimized the square footage. You know you can fight the city and

PAGE 187

172 You just underwrite it properly and are realistic about what it is. You got to be smart about how you underwrite it, you know. . Figure out how to solve it without (T. Gladw ell, personal communication, April 19, 2012) Impact of the Regulatory Factor on Affordable Housing The regulatory factor score of + 0 50 recorded in Table 6. 6 reflected positive regulatory conditions for Medici Communities during the pre development period for the Evans Station Lofts. The reduced zoning, infrastructure and parking requirements along wit ground floo r retail requirements created affordable housing at Evans Station Lofts. Similar to DHA, Medici is an affordable developer, and while these positive conditions did not ultimately create their intention to produce affordable housing that being their mission the favorable conditions allowed Medici to move forward with affordable housing at the Evans Station TOD site. Without a favorable regulatory context it is likely Me dici would have searched for another site to produce affordable housing. Post Development Regulatory Context The Evans Station Lofts TOD development was fully completed and fully leased up by the end of 2013. Furthermore Medici Communities had moved th emselves and its property management company into the 3,000 square feet of office space set aside for its use. Medici had also secured office and retail leases for the remaining 5,000 square feet. Satisficing and the Regulatory Factor As previously stated, the theoretical framework for this dissertation holds that developers are satisficers who make development decisions based on a strategy of

PAGE 188

173 reducing risks and achieving satisfactory profits. The literature on satisficing claims that most developers avoid high risk developments like urban infill/TODs. Their preference is to seek out more predictable, lower risk developments on the suburban fringes (Lucy & Phillips, 2000) One contributing factor to a sati urban infill developments like TODs is the higher regulatory costs of the latter. Most developers are concerned about the time and costs associated with rezoning and the infrastructural improvements like roads, bridge s, pedestrian walkways, and utilities that are often required. Research by Mohamed (2009) concluded that satisficing developers preferred a suburban development over urban ones because of the latter predictably lower infrastructure costs. He gave the e xample of developers trying to avoid providing Developers create rules about which investments they will make and which they will avoid. The rules result in self imposed artificial liquidity constraints that protect developers from the temptation of making marginally important investments, such as roads of high standards, which do not contribute to meeting their satisficing profit targets. Thus . developers move outward in search of locations with lower regulatory costs (p. 23). projects like urban infills/TODs, government policies had s hifted toward reducing regulatory risks. He stated that satisficing developers contribute to sprawl in the form of low density . development. In response, government policymakers have designed policies aimed at reducing risks to developers. Red ucing risks is intended to help developers overcome the bounds on their rationality so that they will make decisions that result in more efficient land use. . Risk reduction policies include clear rules about zoning and allowable uses; fixed rather than negotiated exactions; transparent capital improvement programs; and predictable, streamlined approval processes (Mohamed, 2006, p. 28).

PAGE 189

174 The following section provides examples of how the ma ster developer and/or the local municipality within each of the Denver region TOD cases discussed above worked to attract satisficing residential developers by reducing the regulatory risks. The City of Englewood understood that developers would be conce rned about the risks associated with a TOD since Englewood was the first community to attempt the then untested concept in an inner ring suburb. To attract developers, the city took on the role of rezoning and infrastructure remediation of the site. In a n interview Robert Simpson, the community developer for Englewood at the time of the City Center development, related how Trammell Crow had benefited from the city regulatory risks via rezoning and infrastructural remediation. Mr. Simps on stated, From their [Trammell Crow ] standpoint . there is absolutely the value and through the uncertainty and the time process. . A lot of developers have to go through that rezoning process . and there is risk associated with that time and costs . So it is a big, significant risk . and . in the end, we [the City of Englewood] took on the risk . and beg an the remediation process and the rezoning process . and that was hard. . That is not a normal process for a city (R. Simpson personal communication, July 21, 2011) In addition to reducing the infrastructure and zoning costs for Trammell Crow the City of Englewood also worked to decrease the risks imposed on Trammell Crow by the retail requirements. The original contract from the City of Englewood bound Trammell Crow to developing 45,000 square feet of retail space on the ground floors of it s 438 unit multi family apartment buildings. Trammell Crow was worried, however, that the density and foot traffic would not support so much retail space. The city agreed to reduce the requirement to 29,000 square feet and even gave Trammel Crow some of the better

PAGE 190

175 locations with better foot traffic for its retail space (R. Simpson, personal communication, July 21, 2011) Inverness also worked with Metropolitan Homes to re duce its regulatory risks for the Vallagio development. Inverness Properties and the Inverness Metropolitan Improvement District were local organizations that worked to get the 30 acre Vallagio parcel rezoned and to have the needed infrastructure improvem ents done ahead of time so that turn key development could take place ( P. Mulhern, personal communication, December 14, 2012) Vallagio developer Peter Kudla claimed that his purchase of the Inverness parcel was contingent on successful rezoning. Moreove r, Mr. Kudla asserted that a clean infrastructure and reduced site preparations were also key incentives for him to agree to purchase the Inverness property for TOD development. The City of Denver and Cherokee Development, the co master developers at Gat es, both worked to reduce the regulatory risks for Trammell Crow there. In exchange for a significant amount of TIF funds offered by Denver, Cherokee rezoned the entire Cherokee subsequently sold Trammell Crow a choice parcel at Gates that they had remediated and required no additional site preparation. The reduced zoning and dev elop both its market rate and affordable housing units. The Denver Housing Authority was also the benef iciary of reduced regulatory risk thanks to the investment of the City of Denver and the contribution of subsidies. The city helped streamline the rezoning for the South Lincoln TOD, an action which proved significant in reducing regulatory costs. Moreover, while the DHA was not able to avoid

PAGE 191

176 the considerable infrastructure costs, they benefited from significant public subsidi es t hat helped offset these costs. (See Chapter 5.) Finally, Medici Communities also benefited from reduced regulatory risk thanks to help from the City of Denver. Medici was able to avoid zoning costs for Evans Station Lofts because the city had rezone d the site during its work on the E vans Station area TOD plan. Furthermore, the city reduced the parking requirements for Medici Communities which lowered its costs to $4,300 per unit well under the average for the Denver region. In each of the Denver TO D cases, the master developer and/ or the local community worked to reduce the regulatory risks to encourage residential developers to requirements created strong enou gh satisficing conditions that it enabled the developers to build affordable housing (Gates, South Lincoln, and Evans Station). In the two developments where affordable housing was not constructed (Englewood and Vallagio), the incentives were not strong e nough to overcome high parking and retail requirements in addition to political opposition for affordable housing (more on political opposition in next chapter) As a result, Trammell Crow and Metropolitan Homes did not have the satisficing conditions nec essary for affordable housing, and as a result it was not developed within those TODs.

PAGE 192

177 CHAPTER VII ANALYSIS OF THE ADVOCACY FACTOR Introduction This chapter analyze s the advocacy factor and its variables neighborhood, non profit, and political making processes regarding the provision of affordable housing within each of the five Denver TOD cases studied. As previou sly stated, the analysis proceed s in chronological order with the scoring analysis for each TOD case focus ing on the two year pre development period when the variables most influenced the residential developer s decision making. A brief post development analysis for each case follow s The chapter conclude s then, with a section examining the advocacy variable housing decision in terms of satisficing. The Research Question and the Advocacy Factor The research ques tion for this dissertation is the following: How do the economic, provision of affordable housing in a TOD ? The general idea related to the impact of the advocacy factor is that if its variables promote satisfactory profits and lower risks for the developer, then it is more likely that affordable housing will be developed. Furthermore, as discussed previousl y, this study holds that the advocacy factor (along with the regulatory factor) serves to m oderate the influence of the dominant economic factor. The advocacy factor can serve to enhance positive economic conditions and thus increase the likelihood for af fordable housing development, or it can weaken the impact of economic conditions and thereby reduce the likelihood of affordable housing. For instance, a

PAGE 193

178 negative advocacy environment characterized by community opposition to affordable housing can work to negate positive economic conditions by raising the costs and decreasing the predictability for a specific TOD development, with the result that the developer decides against affordable housing. Conversely an advocacy factor characterized by community su pport for affordable housing can enhance the economic context and make it more likely that a developer will choose to provide affordable housing. Table 7.1, below, presents the template and scoring categories for the advocacy factor analyzed in this chapt er. Table 7.1 Advocacy Factor Scoring Categories Advocacy V ariables: 1 = Negative 0 = Neutral +1 = Positive Neighborhood Advocacy Oppose affordable housing development Impartial/neutral on affordable housing development/not active Support affordable housing development Non p rofit Advocacy Oppose affordable housing development. Impartial/n eutral on affordable housing development/not active Support affordable housing development. Political Advocacy Oppose affordable housing development Impartial/n eutral on affordable housing development/not active Support affordable housing development Englewood City Center TOD Advocacy Climate The advocacy climate for the Englewood City Center TOD was unsupportive of the development of affordable housing. This lack of support was related to the uncertainty hanging over the City of Englewood regarding the then untested TOD concept. The city he sitant to take on additional risk for the development, saw affordable

PAGE 194

179 housing as one such risk that was not essential to the project. Furthermore, during the planning of the City Center concept in 1997 1999, there was a stigma associated with affordable h ousing design, which was perceived as low quality. Englewood city leaders, who wanted the City Center project to be its crown jewel, were concerned about the lackluster design affordable housing might bring to the development ( D. Shepherd, personal commun ication, July 27, 2011) In addition, they believed the city already had too much older housing stock and wanted to provide new, market oriented rental units. Together, these factors contributed to a non supportive political advocacy climate for Trammell Crow developing affordable housing there. Table 7.2, below, records the advocacy factor score that led to negative decision on affordable housing at the Englewood City Center TOD. Table 7 .2 Advocacy Factor Score for Englewood City Center TOD Advocacy Variables: *Score: Rationale for Score: Neighborhood Advocacy 0 Neutral to affordable housing. Non p rofit Advocacy 0 Neutral to affordable housing. Political Advocacy 1 Opposed to affordable housing. Final Score (Average) 0.33 Non supportive conditions for affordable housing. *Scores are based on the impact of the demands of advocacy groups on the residential developer, Trammell Crow, during 1998 2000 as drawn from interviews with developers and review s of primary source documents related to the Englewood City Center TOD development Scoring the Advocacy Variables The first advocacy variable impacting Trammell Crow at the Englewood City regard ing affordable housing development at the City Center TOD. The variable received this neutral score because interviews with local officials and a review of primary documents revealed that the citizens of Englewood were ambivalent about having an

PAGE 195

180 affordabl e housing development there (Clarion Associates, 1996; R. Simpson, personal communication, July 21, 2011) Clarion A ssociates, a research group, sent out a community survey asking for residents input on the City Center TOD development. While it did not directly ask about affordable housing, the survey did request citizens to respond with their ideas about what type of residential housing they wanted at the City Center development. Only 20% said they preferred any type of residential housing while nearly 85% preferred the inclusion of shopping, retail and entertainment (Clarion Associates, 1996) Former Englewood director of Community Planning Robert Simpson type of housing, affordable or market rate. Mr. Simpson claimed that many of the local citizen groups were less concerned about developing residential housing and more interested in retail and entertainment options for the City Center These individuals apparently desired a retail/entertainment type development that would fulfill their needs in those regards (similar to the offerings of the former Cinderella Mall) and create solid tax revenue for the city. An interview with the current Englewood Directo r of Community Planning, Alan White, reinforce d neighborhood ] opposition for or against affordable housing. It was more a priority for ret A. White, personal communication, July 21, 2011). The second advocacy variable with the potential to impact Trammell Crow, non profit advocacy, also received a neutral This score was based on the fac t that there were no non profit organizations lobbying Trammell Crow or the City of Englewood for or against the provision of affordable

PAGE 196

181 housing. The absence of any organized pro affordable housing group during the planning process was confirmed in interv iews with various Englewood city leaders. Robert Simpson, for example, expressed relief at the lack of a strong non profit housing organization like FRESC a powerful non profit organization that had achieved inclusion of significant affordable housing pr ovisions at the Gates TOD. Mr. Simpson believed that an organization like FRESC could have derailed the City Center development with demands for affordable housing (R. Simpson, personal communication, July 21, 2011 ) The final advocacy variable with potential to impact Trammell Crow, political expressed by the Englewood mayor and city council members. During the planning phase of the City Center TOD, the then Englewood mayor (Tom Burns) and the city council were opposed to affordable housing. Interviews with various Englewood city C ommunity D evelopment director for E nglewood during the City Center development, stated that the R. Simpson personal communication, July 21, 2011). Alan White, the current Community D evelopment director at Englewood, confirm ed w as a pretty conscious decision not to do A. White, personal communication, July 21, 2011). Impact of the Advocacy Factor on Affordable Housing The negative advocacy for affordable housi ng at Englewood contributed significantly While neighborhood and non profit groups were neutral, the significant political

PAGE 197

182 opposition to affordable housing at the City Center development played a noteworth y role during the pre planning deliberations reveals how the decision against affordable housing was made. Interviews with Robert Simpson showed that in the early pla nning stages of the City Center, affordable housing had been considered (Simpson, 2011) Mr. Simpson explained that one of the reasons the city and Trammell Crow did so was the LIHTC subsidies and developer fees available for its inclusion. Furthermore, Trammell Crow, which had had previous experience and success with LIHTC developments in the Denver region, was willing to consider it for the Englewood City Center TOD. After discussing the affordable housing option for the City Center development, however, the city Englewood proved to be critical, so they asked Trammell Crow to forego its development (Simpson, 2011) Post Development Advocacy Climate In retrospect, one of the main concerns for the City of Englewood and Trammell Crow was their shared uncertainty about the TOD concept. There were significant questions regarding how successful multi family residential housing would be in the context of the untested TOD concept in an older inner ring suburb like Englewood. Furthermore, as mentioned earlier, surveys and feedback from the residents of Englewood revealed that most citizens preferred tha t retail, restaurant, and entertainment replace the Cinderella Mall. Many of the residents were uncertain about the mixed use concept implicit in TODs and were particularly concerned that a multi family project with 438 housing units might be too resident ial for the City Center.

PAGE 198

183 U pon seeing the significant success of the residential component of the Englewood City Center development after the grand opening and stabilization of the project in 2002, however, many of the city leaders now wished they had incl uded higher levels of residential density there ( R. Simpson personal communication, July 21, 2011 ) Furthermore, interviews with these leaders revealed that they would have considered affordable housing provisions more strongly had they known how success ful the residential element would prove to be. In an interview with current Englewood Mayor pro tem Jim Woodward, he conceded that affordable housing could have worked well within the development and should have been more positively considered ( J. Woodward, personal communication, July 28, 2011) The Vallagio at Inverness TOD Advocacy Climate Similar to the Englewood City Center TOD, the advocacy factor for the Vallagio at Inverness project did not support affordable housing development. The mai n driver of the opposition to affordable housing was resistance from political and business leaders in the area The Inverness complex was known for its posh corporate image with its upscale golf course. Thanks to the high end nature of the office park, its business owners and professional executives were hesitant to see multi family residential mixed use housing at Inverness. They w ere skeptical of the quality and aesthetics of a smaller, higher density residential development. If any residential units were to be developed, the se business leaders wanted them to be luxury housing with high end amenities to ensure that e nature be retained. Table 7.3 below, records the advocacy factor

PAGE 199

184 bout excluding affordable housing at the Vallagio TOD. Table 7.3 Advocacy Factor Score for Vallagio at Inverness TOD Advocacy Variables: *Score: Rationale for Score: Neighborhood Advocacy 1 Business leaders and business owners in neighborhood opposed affordable housing Non p rofit Advocacy 0 Neutral to affordable housing. Political Advocacy 1 Opposed to affordable h ousing Final Score (Average) 0. 66 Negative advocacy c onditions regarding affordable housing development *Scores were based on the projected impact of the advocacy variables on the developer, Metropolitan Homes, during the pre development period from 2003 2005. Scores were determined from interviews with developers and other key players as well as a review of primary source documents related to the Vallagio TOD development. Scoring the Advocacy Variables The neighborhood 1 due to the significant hostility expressed toward affordable housing by the professionals and business owners within the Inverness corporate park. This opposition was part of the culture the master developer, George Beardsley, had cultivated during his tenure at Inverness. In an interview, Vallagio developer Peter Kudla described the hostility toward affordable housing fomented by Mr. Beardsley. As Mr. Kudla put it, If you want to see a neighborhood go ballistic, just mention the word [sic!] affordable housing Inverness got to be $1 million dollars [per unit] or more. T hey wanted nothing but the best (P. Kudla, personal communication, December 5, 2012) The opposition to affordable housing that Mr. Kudla referred to was related to the upscale corporate image of the Inverness office park that Mr. Beardsley had encouraged. Pat Mulhern, CEO of Metropolitan Inverness Improvement District and owner of a civil engineering company located in Inverness, ha s worked there for the past 20 years. He

PAGE 200

185 provided engineering consulting to both Mr. Beardsley during the master development of Inverness and to Mr. Kudla for the development of Vallagio. With his extensive ne twork in the Inverness business community Mr. Mulher n had a thorough understanding of its corporate culture. He explained in an interview that the opposition to affordable housing within the Inverness corporate park was related to the fear that it would bring down the high end corporate image of the area. Mr. Mulhern stated, W e the businesses down here were supporting affordable housing but you know not within our boundaries . . W parks because of the concern with th e Class A corporate image deal. . W e always viewed ourselves as producing very high quality class A office stuff down this corridor. . W e are trying to continue to attract F ortune 500 compan y headquarters . and what not . . Y ou want everything to be high quality and look good internally so while the corridor supported affordable housing internal to the corridor that it was really supported ( P. Mulhern, personal communication, December 14, 2012) Scott Beasley a professional in the Inverness neighborhood who had also worked with LLC, for over 20 years, expressed his disdain for affordable housing at Vallagio. As he put it, O ne of the issues I have with all this affordable housing going into light rail stations is . is that the best place to live ? . I f you have kids where is the open space ? Where is the swing set? Where is the neighborhood? Where is the school? Whe re do they shop? I s that where you would want to raise a family ? . P eople get very excited about the notions of it [affordable housing], all [of] which is great but when it comes to the practical pieces of it . in residential people want to be by a park and by a school in a safe environment . prot ect their kids, . stuff like that ( S. Beasley, personal communication, December 12, 2012) The second advocacy variable with the potential to impact Metropolitan Homes, non profit advocacy, was also scored

PAGE 201

186 affordable housing. This score was based on the fact that there were no active non profit organizations lobbying Metropolitan Homes for or against the provision of affordable housing at Inverness The absence of any organized anti affordable or pro affordable housing groups during the planning process was confirmed through interviews and a careful review of source documents related to the Vallagio development. In an interview with Arapahoe Count y Commissioner Nancy Sharpe, she stated that she was very involved in the Vallagio development and was certain there were no non profit groups lobbying either for or against affordable housing ( N. Sharpe, personal communication, December 12, 2012) Furthe rmore, she stated that the lack of pro affordable housing non profit s at the Vallagio was probably related to the fact that the Inverness office park was located in a far south suburb of Denver and that most affordable housing advocacy groups were focused more on developments nearer downtown Denver. The final advocacy variable impacting the Vallagio development, politics, was affordable housing there. The most signific ant political actors in the Vallagio development were the Arapahoe County Commissioners a group of elected officials representing the constituents of Arapahoe County ( N. Sharpe, personal communication, December 12, 2012; L. Myers, personal communication, December 3, 2012) These officials were highly involved in the Vallagio development because it was a premier project in Arapahoe County. While the Commissioners were supportive of the luxury residential units at Vallagio, they opposed affordable housing. Interviews with two of the former Arapahoe County Commissioners, Nancy Sharpe and Lynn Myers, revealed that they were hesitant to support affordable housing since they both believed it would

PAGE 202

187 diminish the quality of the development. The c ommissioners felt that affordable housing would not fit with the prestigious design of the Vallagio. Scott Beasley, a real estate allow Metropolitan Homes to build a luxury rental comm unity at the Vallagio TOD, the Arapahoe County Commissioners over the developm ent of luxury rental apartments [for any type of affordable units]. Their reasoning is we have got enough rental units, and it [having more ( S. Beasley, personal communication, December 12, 2012) Impact of the Advocacy Factor on Affor dable Housing The negative advocacy factor 0. 66 for Metropolitan Homes at the Vallagio consisted of a neutral non profit impact on affordable housing together with strong political opposition and neighborhood opposition to it Furthermore, t he corporate culture of the Inverness office park was significantly hostile to affordable housing at Vallagio. decision not to pursue affordable housing at its TOD. In an interview, V allagio developer Peter Kudla expressed openness to includ ing for sale affordable housing at 80% of the and two bedroom condominiums or lofts priced at around $150K. Mr. Kudla considered developing such units because of his desire to have price the TOD concept (P. Kudla, personal communication, December 5, 2012) He explained, however, that any further consideration of affordable housing was quickly quashed by the scale of the opposition.

PAGE 203

188 Post Development Advocacy C limate In 2004/2005, Metropolitan Homes had originally planned the 30 acre Vallagio development to include only a mixture of luxury for sa le condominiums and lofts. However, in the middle of the Vallagio build out (2008/2009), the subprime mortgage crisis struck and sent the local and national economy into recession. The result was that the planned additional 250 for sale condominiums were never built. Subsequently the Vallagio development remained unfinished. By 2010, however, the recovering housing markets in the region were again strongly supporti ve of rental apartment developmen t while the for sale market was still struggling. Based on the new market realities, Metropolitan Homes proposed a luxury market rate rental development to replace the original plan calling for for sale condominiums and townhomes. This proposal was not supported by the existing Vallagio residents however, wh o had purchased for sale condominiums ranging from $200K to $1 million. These homeowners were concerned that the rental units would bring down their property values, increase traffic, and exacerbate parking issues ( P. Mulhern, personal communication, December 14, 2012 ) Furthermore, they were convinced that the design of the new rental unit buildings would not be as attractive or have the same upscale quality as their current homes. As a result, ental proposal and organized significant protests at the local planning meetings at the Arapahoe County municipal offices. Pat Mulhern explained the NIMBY sentiments of the Vallagio homeowners as follows : to be owners . people that own the places that are gonna take care of apartment people in here, they are not

PAGE 204

1 89 gonna run down our neighborhood, [and], . our land values are going to by night folks ( P. Mulhern, personal communicat ion, December 14, 2012) The emergence of NIMBY opposition to luxury rental housing at the Vallagio from its new unit owners revealed the increased community opposition to not just affordable housing at Vallagio but even luxury market rate rental units. This increased opposition to lower priced housing contributed to significant time costs and delays for Metropolitan Homes at Vallagio. These delays revealed both the level of unpredictability and risk that neighborhood advocates can cause housing develope rs and the reason the latter are so eager to avoid community opposition of any sort when it comes to residential development. Gates TOD Advocacy Climate The advocacy climate for Trammell Crow at the Gates TOD was much more favorable for affordable housing than at the Vallagio and Englewood developments. The campaign to reduce ho melessness in the city by increasing affordable housing. Upon winning the mayoral election in 2003, Hickenlooper saw the Gates development as an excellent opportunity to create affordable housing for lower income households. The Hickenlooper administrati on consequently encouraged many of the city agencies to begin promoting affordable housing at Gates and to work with Trammell Crow and Cherokee to locate subsidies to help fund it. In addition to positive advocacy from the Hickenlooper administration, the Gates development also benefited from strong support by the non profit organization F R ESC

PAGE 205

190 FRESC was founded in 2002 at nearly the same time Cherokee was lobbying the City of Denver for $250 million in TIF subsidies for the redevelopment of the Gates pro perty. FRESC saw the Gates development as an opportunity to establish its organization as a strong advocate for responsible development (Read, 2006) FRESC argued that in exchange for public TIF money for the Gates redevelopm ent, Cherokee and other developers at Gates ought to be required to commit to a sensible amount of affordable housing. FRESC thus put the full force of its organization into lobbying Cherokee and Trammell Crow to commit to affordable housing provisions at Gates. Table 7.4 Advocacy Factor Score for Trammell Crow/Gates TOD Advocacy Variables: Score: Rationale for Score: Neighborhood Advocacy +1 Supported affordable housing. Non p rofit Advocacy +1 Supported affordable housing. Political Advocacy +1 Supported affordable housing. Final Score (Average)* +1 Strong advocacy support for affordable housing. *Scores were based on the projected advocacy variables impact on the developer, Trammel Crow, during the pre development period of 2005 2007. Scores were determined from interviews with developers and other key players as well as a review of primary source documents related to the Gates/Trammell Crow development. Scoring the Advocacy Variables surrounding Gates neighborhoods were supportive of the development of affordable housing at the Gates TO D. Interviews with neighborhood leaders near the Gates site revealed solid support for affordable housing at the Gates TOD ( R. Kniech, personal communication, October 4, 2010; C. Nevitt, personal communication, September 21, 2010) Many of the nearby com munities were lower income and working class areas whose residents were encouraged that the old industrial/factory site was going to be

PAGE 206

191 redeveloped into a mixed use residential and entertainment district (Read, 2006) While some neighbors were concerned about the size of the development and the subsequent traffic and noise that would likely be associated with it, the majority were grateful that the new mixed use, market oriented development promised to bring economic growth and stability to their neighborhood (Read, 2006) Furthermore, since many of the nearby communities housed lower income renters, there was significant support for newer affordable rental units at the Gates TOD (Read, 2006 ) The second advocacy variable for the Trammell Crow/Gates TOD development, non housing advocacy provided by non profit organizations for the Gates development. The most active non profit advocacy came from FRESC FRESC is a registered 501(c) 3 non profit organization which can be found in the non profit database guidestar.org (GuideStar.org, 2014) income people in De nver by lobbying for affordable housing and responsible development (FRESC, 2011) d its political and community clout at G ates to win affordable housing and healthcare provisions for working families (Read, 2006) benefits agreement from the master developer Cherokee and the residential developer Trammell Crow which included a generous commitment to affordab le housing. Although Cherokee eventually went bankrupt during the Great Recession Trammell Crow followed through on the community benefits agreement to provide affordable housing by developing the 60 unit Broadway Junction A partments.

PAGE 207

192 The final advocacy variable impacting Trammell Crow at Gates, politics, was strongly supportive of affordable housing One particularly important political advocate for affordable housing a t Gates was the then Denver mayor and later Colorado governor, John Hickenlooper. When Hickenlooper was elected mayor, as mentioned earlier, he promised to address the growing issue of homelessness in the community. The Hickenlooper administration believ ed that the significant size of the Gates development (up to 2,500 residential units projected) offered an excellent opportunity to provide affordable housing for very low income individuals. Consequently, the mayor exerted pressure and made City funding available to create affordable rental units for households transitioning from homelessness to permanent housing (S. Johnson, personal communication, March 24, 2011 ) These efforts enabled Trammell Crow to secure significant public subsid ies for its development of affordable housing at Gates. Another noteworthy political advocacy group that provided consistent support for affordable housing at Gates was the Denver City Council (Read, 2006 ) The c ouncil wanted to create social and community benefits for the residen ts of Denver in exchange for the generous amount of TIF subsidies pledged to the Gates redevelopment. The c ouncil used its political leverage to craft a strong affordable housing plan that Cherokee and Trammel Crow agreed to in exchange fo r TIF subsidies ( C. Nevitt, personal communication, September 21, 2010) Impact of the Advocacy Factor on Affordable Housing favorable conditions for the development of affordable housing and indeed weighed

PAGE 208

193 development. Trammell C row benefited from positive neighborhood support for affordable housing, yet it was the non profit and political advocacy that was most responsible for its decision to include affordable housing in the Gates TOD. The strong lobbying efforts by FRESC helpe d convince the City of Denver to offer a significant TIF package to Cherokee for the entire redevelopment of the Gates brownfield. Trammell Crow projected that its market rate development would benefit tremendously from the TIF subsidies which served to i ncentivize them to agree to affordable housing provisions. helped Trammell Crow secure nearly $1 million in HOME funds and $8 million in LIHTC federal funds administere d by the Colorado Housing and Finance Authority. Post Development Advocacy Climate The post development analysis of the advocacy conditions at Gates revealed a very different set of circumstances for Trammell Crow than they had originally expected. Wh en Trammell Crow first agreed to generous affordable housing provisions at Gates in 2005 2007, it was based on the large amount of TIF funds that had become available for the redevelopment. Trammell Cro w was counting on that support to spur the redevelopm ent at Gates and thereby help them gain increased rental revenue from its 419 market rate unit development a s well as the equity appreciation from its building. However, the bankruptcy of Cherokee in 2010 and the subsequent collapse of the TIF funding pac kage contributed to unmet profit expectations for Trammel Crow. In addition, while the nonprofit and political support assisted Trammell Crow by helping them secure full subsidy funding for the Broadway Junction affordable development, the

PAGE 209

194 significant num ber of meetings with these groups regarding the details of the affordable housing development proved other projects ( S. Johnson, personal communication, March 24, 2010) South Lincoln TOD Advocacy Climate The advocacy climate for the Denver Housing Authority at the South Lincoln TOD was marked by significant support for affordable housing. While South Lincoln was the beneficiary of strong neighborhood and non profit advocacy favorable to affordable housing, it was the significant political support that proved the most helpful to the DHA. Strong local political advocacy for the South Lincoln TOD helped the DHA secure substantial federal funding from the American Reinvestment and Recovery Act of 2010 (ARRA). The redevelopment of the blighted, impoverished public housing project was a perfect match for the federal funds that were intended to help foster sustainable, transit oriented developments. Through the advocacy efforts of the Denver office as well as from Senator Michael Bennet and Congresswoman Diana DeGette among other political advocates from the Denver region, the DHA was able to secure nearly $80 million in subsidies including ARRA stimulus funds, HOPE VI funds, and LIHTC funding for the first four phases of redevelopment of the South Lincoln TOD. Table 7.5 Advocac y Factor Score for the South Lincoln TOD Advocacy Variables: *Score: Rationale for Score: Neighborhood Advocacy +1 Supported affordable housing. Non p rofit Advocacy +1 Supported affordable housing. Political Advocacy +1 Supported affordable housing. Final Score (Average)* +1 Strong advocacy support for affordable housing.

PAGE 210

195 *Scores were based on the projected impact of the advocacy variables on the developer, Denver Housing Authority, during the pre development period of 2008 2010. Scores were determined from interviews with developers and other key players as well as a review of primary source d ocuments related to the South Lincoln TOD development. Scoring the Advocacy Variables The neighborhood because the Denver Housing Authority was the beneficiary of solid neighborhood and commun ity support for affordable housing from the La Alma/Lincoln Park neighborhood (the South Lincoln public housing redevelopment resides within the larger La Alma/Lincoln Park neighborhood) The DHA made a strong effort to reach out to local citizens and nei ghborhood groups within the La Alma/Lincoln Park neighborhood to gather their input regarding affordable housing provisions in the South Lincoln redevelopment ( K. Crangle, peronal communication, September 7, 2011) The Lincoln Residents Council (LRC) was the main neighborhood advocacy group representing the La Alma/Lincoln Park community. The LRC formed in 2009 at the start of master planning for South Lincoln served as the official liaison group between the neighborhood and the City of Denver. Chris P arr, director of Development for the DHA, stated that the creation of the La Alma/Lincoln Park stakeholder group was one of the most important community initiatives in the creation of a successful affordable housing master plan for the South Lincoln redeve lopment: We have had a very, very vibrant stakeholder group . where we give everyone a seat at the table from all of the different representative bodies, non profits, residents, [and] neighborhood association. So we had this consistent stakeholder gro up that people have to commit to for a long time (a five to seven year commitment), and this is going to be a clearinghouse for our decision making process ( C. Parr, personal communication, September 7, 2011)

PAGE 211

196 As it turned out, the top concern of the La A lma/Lincoln Park neighborhood group was its desire to retain affordability within the new residential development and its fear of gentrification and the loss of diversity within the community (Denver Housing Authority, 2010) The second advocacy variable for the South Lincoln TOD development, non housing advocacy by local nonprofit organizations. The t wo primary non profit groups involved in the maste r planning of the redevelopment were FRESC (Front R ange Economic Strategy Center) and the DICP (Denver Inner City Parish). FRESC had the strongest impact of all the non profits at South Lincoln since it helped persuade the DHA to proceed with a phased red evelopment approach so that no low income residents would be displaced during the South Lincoln redevelopment ( A. Apodaca, personal communication, September 8, 2011) Kimble Crangle, DHA manager for the project, stated that it would have been faster, easi er, and more efficient to have demolished the entire South Lincoln neighborhood at one time and then to have proceeded with the redevelopment, since the phased approach was more costly and complicated ( K. Crangle, personal communication, September 7, 2011) Because which helped to convince the DHA to take the phased redevelopment approach, however, the South Lincoln residents were able to avoid displacement. Furthermore, FRESC and the DICP (Denver Inner City Parish) also lobbied for a one to one replacement of the affordable housing units so that no net loss of these units would take place at South Lincoln. As a result of the se efforts, the DHA agreed not only to replace the affordable units on a one to one basis but also to increase the overall

PAGE 212

197 number of affordable units in the development. The original South Lincoln affordable housing project totaled 270 affordable rental homes. The first four phases of the S outh Lincoln redevelopment however called for approximate ly 450 total units of which 320 were to be affordable for households earning less than 60% of the area median income The remaining 130 units were targeted to be market rate (Denver Housing Authority, 2010) The planned 320 units of affordable rental housing thus represent ed a net gain of 50 versus the original 270 affordable units. Furthermore, with the completion of the first phase of the 10 th and Osage affordable senior apartments 100 of these units had already been comp leted The final advocacy variable impacting the DHA at South Lincoln, political housing expressed by local political leaders in the Denver region. The DHA benefited from the support of elected city officials and city administrators who were strong advocates of the South Lincoln redevelopment. The following is a list of the local and state elected officials who actively lobbied for federal grant assi stance in the form of ARRA stimulus funding for the South Lincoln TOD redevelopment: t hen Denver Mayor John Hickenlooper, then Colorado Governor Bill Ritter, U.S. Senator Michael Bennet, U.S. Congresswoman Dianna DeGette, and Denver City Councilwoman Judy Montero (Steffen, 2009) Impact of the Advocacy Factor on Affordable Housing advocacy conditions for affordable housing at the South Lincoln TOD The DHA was impressed by the considerable neighborhood and non profit support for affordable

PAGE 213

198 housing there, yet it was the political advocacy that was the most responsible in the end for the a decision to go forward with affordable housing there The strong political advocacy efforts, both nationally and locally, helped secure nearly $80 million in grants and tax low income redevelopment focus at the South Lincoln TOD (Denver Housing Authority, 2010) Post Development Advocacy Climate Advocacy conditions remained strong for the South Lincoln TOD development following the completion of P hase One the 100 unit senior facility which recently opened in early 2013. Although full funding has been acquired for the first four phases of the redevelopment, applications to underwrite the final four phases are in progress, and the DHA expects to acquire the needed funds for the rest of the South Linc oln project. The advocacy environment, in short, remains strong for completing the South Lincoln development, with this TOD promising to be a significant positive development for affordable housing in Denver. Evans Station Lofts TOD Advocacy Climate Sim ilar to the Denver Housing Authority at South Lincoln, Medici Communities was the beneficiary of robust support for the development of affordable housing at the Evans Station Lofts TOD. The Evans Station Transit Stop had opened in July 2000 with strong ly positive community anticipation for the proposed mixed use growth around the station. This hope was not realized, however, and the area remained vacant with no significant development. When Medici Communities probed neighborhood members

PAGE 214

199 about the possibility of developing a mixed use, loft type affordable housing development the area residents were quite supportive, since such an initiative represented the first possibility for significant development in the area for some time (The City of Denver Office of Community Planning and Development, 2009) Table 7.6 Advocacy Factor Score for Evans Station Lofts TOD Advocacy Variables: Score: Rationale for Score: Neighborhood Advocacy +1 Supported affordable housing. Non p rofit Advocacy +1 Supported affordable housing. Political Advocacy +1 Supported affordable housing. Final Score (Average)* +1 Strong advocacy support for affordable housing. *Scores were based on the projected impact of the advocacy variables on the developer, Medici Communities, during the pre development period of 2010 2012. Scores were determined from interviews with developers and other key players as well as a review of primary source documen ts related to the Evans Station Lofts TOD development. Scoring the Advocacy Variables The neighborhood advocacy variable for the Evans Station Lofts TOD development was scored a +1 owing to the fact that Medici Communities received solid neighborhood and community support for affordable housing. The local neighborhood groups saw the Evans Station Lofts project as a possible catalyst for future mixed use development in the area something that would significantly benefit local business owners and reside nts ( T. Gladwell personal communication, April 19, 2012 ) The point person facilitating outreach to the Evans Station community was Denver City Councilman Chris Nevitt. Mr. Nevitt and his two legislative aides Jennifer Redies and Valerie Kerns were inst rumental in organizing neighborhood support for the Evans Station Lofts project ( C. Nevitt, personal communication, September 21, 2010) Mr. Nevitt and his staff in this regard were able to engage the following groups to back the

PAGE 215

200 Evans Station area plan and subsequent Evans Station Lofts project as well: the Evans Station Area Steering Committee, the Overland Neighborhood Association, the Platt Park ood Association, and the Godsman Neighborhood Association (The City of Denver Office of Community Planning and Development, 2009) The second advocacy variable impacting the Evans Station Lofts TOD, non profit advocacy because Medic i Communities gained strong support for affordable housing from local non profits. The two most significant of these were the Enterprise Community Partners and the Urban Land Conservancy, both of which worked together to help Medici acquire the Evans Stat ion land parcel through the use of the Denver TOD Fund. The Enterprise Denver office had worked consistently with the City of Denver and the Urban Land Conservancy over the past five years to develop the Denver TOD Fund, which was set up to provide loan s for purchasing land parcels near TODs for the development of affordable housing. The TOD Fund was then used to acquire eight TOD properties in the Denver region, including the Evans Station property. Along with Enterprise, the Urban Land Conservancy (U LC) played a vital role in the Evans Station Lofts project. The ULC was founded as a land banking organization with the mission of acquiring and preserving land parcels in the Denver region, specifically for the development of affordable housing (The Urban Land Conservancy, 2012) The ULC secured the land parcel that was to be the future site of the Evans Station Lofts. The organization then made the initial $120K down payment on the $1.2 million parcel and used a loan from the Denver TOD Fund to finance the balance. The

PAGE 216

201 ULC moreover held the land for the developer, Medici Communities, for a little over a year while the latter raised funds for the project. Medici, which purchased the land from ULC in June 2012, completed th e Evans Station project in August 2013. The final advocacy variable for the Evans Station Lofts development, political advocacy 1 from various Denver city officials. The Ci ty of Denver viewed the Evans Station Lofts project as a continuation of its goal of developing affordable housing near light rail stations (The City of Denver, Office of Community Planning and Development, 2009). The Evans Station Loft project consequent ly received significant support from Denver City Councilmember Chris Nevitt, president of the Denver City Council and representative for District 7. Councilmember Nevitt, former executive director of FRESC, applied strong political pressure to promote the Evans Station Lofts project. Along with Councilman Nevitt, the following city officials were directly or indirectly involved in advocating for the Evans Station area plan and the related Affordable Lofts project: Kristen Krasnove, senior planner for Den ver Community and Planning Department; Gordon Robertson, planning director for Denver Parks and Recreation; Cec Ortiz, deputy director for the Denver Office of Economic Development; Dace West, Denver Office of Strategic Partnerships and the Denver TOD Fund ; and Bill Sirois, TOD program manager for RTD (The City of Denver, Office of Community Planning and Development, 2009). Impact of the Advocacy Factor on Affordable Housing The positive advocacy

PAGE 217

202 While Medici benefited from solid neighborhood and political advocacy for this devel opment, it was the support of the two non profits mentioned above, Enterprise and the Urban Land Conservancy, together with the loan from the Denver TOD Fund that proved crucial. As a small affordable housing developer, Medici Communities did not have the funds or the risk capacity to buy and hold the chosen land parcel while waiting for public subsidy funding which might never have come. This waiting process tended to result in affordable housing developers losing out on choice land parcels since many at tractive TOD sites would get purchased and held by better healed private developers in the meantime. In the case of the Evans Station Lofts development, however, Enterprise and ULC were able to use the Denver TOD funds to purchase and hold the Evans Stati on land parcel for one year while Medici got approval for subsidy funding. This land banking process was of enormous benefit to Medici and really made the Evans TOD development possible. Post Development Advocacy C limate The post development advocacy conditions for the Evans Station Lofts TOD remained strong following its grand opening in August 2013. All 50 of the affordable rental units were quickly leased, with a significant number of households on the waiting lists for future vacancies. Furthermo re, the 8,000 square feet of retail/commercial space were soon fully leased. The City of Denver as well as Enterprise and the Urban Land Conservancy continued to champion the Evans Station Lofts, which they viewed as a successful model of affordable housi ng land banking and development near a TOD. Evans Station Lofts moreover represents the first affordable housing TOD development to make use of the Denver TOD Fund. The City of Denver and the non profit housing

PAGE 218

203 community are proud of this high quality, l oft oriented mixed use development, which they are eager to promote locally and nationally as a model TOD with affordable housing ( C. Everett, personal communication, April 23, 2012) Satisficing and the Advocacy Factor As previously stated, the theory of satisficing argues that developers are not looking to maximize profits but instead want to reduce risks when they make their aximum profits; thus they satisfice. In an effort to reduce risks, developers are constantly seeking to avoid the costs imposed by hostile advocacy groups. Many of these neighborhood groups dislike high density developments like TODs since they believe t hese projects will bring increased traffic and noise while diminishing the quality of their communities (as expressed previously in this chapter by the new Vallagio residents). Additionally, they fear these negative outcomes will bring down the value of t heir homes (See more on NIMBY in the literature review in Chapter 2.). Even more than their disapproval of high density developments, these neighborhood groups are critical of low income affordable housing for bringing in not only noise and crime but also poor quality design that would further diminish their neighborhoods and home values. The literature on satisficing developers claims that it is exactly these types of neighborhood advocacy groups that developers try to avoid. The costs imposed by the infill projects like TODs with affordable housing often included with them encourage satisficing developers to prefer more traditional residential developments in suburban greenfields (Lucy & Phillips, 2000) Based on the notion that

PAGE 219

204 satisficing developers seek to avoid the risks and costs imposed by advocacy groups, this section of the study seeks to understand whether the advocacy groups worked in some cases to create satisficing condition for th by reducing risks and creating the opportunity for satisfactory profits. Or did these groups contribute to non satisficing conditions which discouraged the production of affordable housing by raising some deve In the case of the Englewood City Center TOD, the advocacy climate by being unsupportive of affordable housing created non satisficing conditions for Trammell Crow in its consideration of affordable housing. The Englewood City Co affordable housing at the development would have created significant costs and risks for Trammell Crow had they more strongly pursued affordable housing at its City Center development. Thus they chose to forego affordable housing. S imilar to the Englewood City Council, the advocacy groups within the Inverness community opposed affordable housing and thus helped create non satisficing conditions for Metropolitan Homes in its consideration of affordable housing. Peter Kudla the CEO of Metropolitan Homes, at the outset of planning for Vallagio briefly thought about including affordable housing, but the strong opposition from political groups in addition to a corporate culture hostile to low income housing stymied any further consideration of affordable housing. The opposition to any type of lower end housing was further exacerbated after the initial residential owners moved into the Vallagio. These groups strongly protested the possible inclusion of even luxury rental apart ments. This opposition cost Mr. Kudla and Metropolitan Homes significant losses as a result of the delays in the approval of the luxury apartment complex.

PAGE 220

205 Unlike the cases of the Englewood and Vallagio TODs, advocacy groups at the Gates TOD acted diligen on affordable housing. The City of Denver as well as non profit advocacy groups like FRESC worked hard to secure public subsidies for Trammell Crow at Gates to help reduce the risks inheren t in their affordable housing development. Similar to Gates, advocacy groups involved at the South Lincoln development were instrumental in creating satisficing conditions for the Denver Housing Authority. Local political advocacy for the South Lincoln r edevelopment helped the DHA acquire nearly $ 1 0 million in federal ARRA stimulus funds as well as approximately $ 7 0 million in LIHTC, HOPE VI, and HOME moneys. These advocacy initiatives were critical in helping the DHA reduce its risk and achieve satisfac tory profits. Finally, advocacy groups involved in the Evans Station Lofts project provided significant support to reduce risks for Medici Communities and create satisficing forts from the non profit organizations Enterprise and the Urban Land Conservancy, moreover, leveraged over $1.2 million from the Denver TOD Fund to purchase and hold the land for the Evans Station Lofts until the developer could find the subsidies needed to buy it themselves.

PAGE 221

206 CHAPTER VIII CONCLUSIONS This chapter examines the research question and assesses the hypotheses proposed for th e making process es with regard to the theor y of satisficing and evaluates how it has impacted their decisions on whether or not to include affordable housing within each of the TOD cases. Moreover, the chapter discusses the findings of the research, suggests policy recommendations, proposes ideas contributions to the relevant literature. The chapter concludes with a discussion of the limitations of the research. Research Question, Theory, and Hypotheses The research question for this dissertation is the following: How do the economic, housing in a TOD ? The general hypothesis is that if these factors interact to create satisfactory profits and lower risks, then it is more likely a developer will choose to provide affordable housing in a TOD. The literature suggests that the economic factor is dominant in making process about the inclu sion of affordable housing, while regulations and advocacy are moderating factors that either enhance or minimize the impact of the economic factor. The theoretical framework that informs this research is satisficing a theoretical construct first devel oped by Herbert Simon (1956). The construct of satisficing is related to of bounded rationality He argued that the rationality of human deci sion makers is bounded by the limit s of their cognitive capacity. Simon concluded that this

PAGE 222

207 limitation resulted in an outcomes. Therefore when faced with a choice, they satisfice It appears probable that however adaptive the behavior of organisms in learning and choice situations, this adaptiveness falls far short of the ideal of well great deal can be learned about rational decision making by taki ng into account, at the outset, the limitations upon the capacities and complexity of the organism . (Simon, 1956, p. 129). ecause satisficing decision makers were they would attempt to reduce these complexities into a more simplified, less complicated decision scenario where they would settle for a satisfactory outcome. The terms satisficing and optimizing . are labels for two broad approaches to rational behavior in situations where complexity and uncertainty make global rationality impossible. In these situations, optimization becomes approximate optimization the description of the real world situati on is radically simplified until reduced to a degree of complication that the decision maker can handle. Satisficing approaches seek this simplification, retaining more of the detail of the real world situation, but settling for a satisfactory, rather tha n an approximate best, decision (1972, p. 170 ) holds that residential developers are bounded rationally and they make simplifying, satisficing decisions regarding afforda ble housing development in TODs. The study concludes that TODs are complicated developments characterized by uncertain markets, unpredictable regulatory requirements, and volatile advocacy conditions. The unpredictability regarding the interaction of the se factors pushes developers to the limits of their rationality. In response, developers try to reduce and simplify the situation so they can make an informed satisficing decision. Th is study argues that they will only

PAGE 223

208 decide to develop affordable housin g in a TOD if their risks are sufficiently reduced and they can make satisfactory profits. For developers to get to the place where they can confidently decide to develop affordable housing, they must be incentivized by strong, predictable economic condit ions as well as manageable regulatory requirements and low advocacy opposition to affordable housing. Following fr om the idea that developers are satisficers whose decision making is bounded rationally this resear ch has developed the following three hy potheses to help examine the impact of the three factors (economic, regulatory, and advocacy) on a making process about including affordable housing in the five Denver TOD cases studied. Each hypothesis is scored and analyzed based on the impact of the three factors during the two year period leading up to the ground breaking for the respective TOD. The hypotheses are followed by a graphic depiction of the theoretical model (Figure 8.1) in addition to a composite table containing all the final scores for the factors and variables for each case (Table 8.1). Hypothesis 1 If the economic factor is negative, then affordable housing is not likely to be produced in a given TOD. Hypothesis 2 If the advocacy factor is negative, then affordable housing is likely only if the economic and regulatory factors are both positive and strong enough to offset the advocacy costs. Hypothesis 3 If the regulatory factor is negative, then affordable housing is likely only if the economic and advocacy factors are both positive and strong enough to offset the regulatory costs.

PAGE 224

209 Figure 8.1 Theoretical Model Economic Factor (dominant) Land Costs Market Conditions Public Subsidies ROI Satisficing Decision Based on the interaction of the three factors a developer will decide whether risks are m anageable and satisfactory profits possible. Advocacy Factor (moderating) Neighborhood Non Profit Political If Developer decides that the risks are manageable and satisf actory profits are attainable, Affordable Housing will be developed in a TOD. If Developer decides that satisfactory profits are unattainable owing to higher risks and costs, Affordable Housing will not be developed in a TOD. YES NO Regulatory Factor (moderating) Zoning Infrastructure Parking Retail 1. Theory Developers are satisficers who will make the decision to provide affordable housing within a TOD if profits are satisfactory and risks manageable. 2 General Hypothesis If the economic, re gulatory, and advocacy factors meet the standards for satisfactory profits and reduced risks developers will produce affordable housing in a TOD.

PAGE 225

210 Table 8.1 Composite Scoring Table for Five Denver TOD Cases Economic Factor Regulatory Factor Advocacy Factor Land Cost Housing Markets Subsidy ROI Final Score Zoning Infrastructure Parking Retail Final Score Neighborhood Nonprofit Political Final Score Trammell Crow at Englewood (1998 2000) +1 +1 +1 +1 +1 +1 +1 1 1 0 0 0 1 0.33 Metropolitan Homes at Vallagio (2003 2005) 0 +1 0 +1 +0.50 +1 +1 1 1 0 1 0 1 0.66 Trammell Crow at Gates (2005 2007) 0 +1 +1 +1 +0.75 +1 +1 1 +1 +0. 50 +1 +1 +1 +1 The DHA at South Lincoln (2009 2011) +1 0 +1 +1 +0.75 +1 1 1 1 0.50 +1 +1 +1 +1 Medici at Evans Station Lofts (2010 2012) 0 +1 +1 +1 +0.75 +1 +1 +1 1 +0. 50 +1 +1 +1 +1

PAGE 226

211 Findings Hypothesis 1. If the economic factor is negative, then affordable housing is not likely to be produced in a given TOD. The first hypothesis for this study was based on the assumption that the economic factor is dominant and strong economic conditions are the most important determinant for a TOD developer considering affordable housing. This study argues that some positive combination of reasonable land costs, stable housing market conditions, availability of public subsidies, and a solid expectation of return on i nvestment is required for a developer to include affordable housing. Table 8.2. Economic Factor Scores for the Five Denver TODs Economic Factors Land Cost Housing Markets Public Subsidy ROI Final Score Englewood +1 +1 +1 +1 +1 Vallagio 0 +1 0 +1 +0.50 Gates 0 +1 +1 +1 +0.75 South Lincoln +1 0 +1 +1 +0.75 Evans Station 0 +1 +1 +1 +0.75 As expected, Table 8.2 above reveals that in all three of the Denver TOD cases where affordable housing was produced (Gates, South Lincoln, and Evans Station), the economic variable received a positive score. Each of these TODs had a healthy +0.75 for their economic factor score (See Table 8.1. ). Paradoxically, in the two Denver TOD cases where the developer decided against having affordable housing (Englewood City Center and Vallagio at Inverness), the economic factor also had positive scores, with 2 .) The

PAGE 227

212 positive economic factor for these two cases was to be expected since it would be unlikely for a developer to take on a complex urban infill development like a TOD without positive economic expectations. However, while Trammell Crow received a untested TOD housing market together with the political opposition encountered there contributed to the politan Homes, while they had strong housing markets and solid ROI projections, the lack of discounted land costs and public subsidies along with political opposition reduced their incentives to provide affordable housing. While it was expected that the e conomic conditions in all five TOD cases would be strong, one unexpected finding was the importance of the housing market variable and its overall impact on the economic factor. The housing market conditions variable thus turned out to be the most signifi cant driver of the economic context for developing affordable housing. Interviews with the individual TOD developers as well as an analysis of the primary data sources provide the following reasons for the significance of the housing market variable. T he first is related to the impact of the housing market on revenue projections. A multi influenced by the likely levels of rents, sales prices, and appreciation of their propert ies. Housing market conditions are among the most critical factors in determining these benchmarks. The stronger and more stable the housing market in a particular region, the lower the vacancy rates, the higher the rents, and the stronger the sale price s and equity appreciation of the residential product are likely to be. TOD developers want to break

PAGE 228

213 ground on a development in the midst of a stable to strong housing market so that they can be reasonably assured of recovering their investment with predic table sales and rental revenue and product appreciation. Affordable housing developers of low income rental units are also significantly impacted by housing market conditions since their subsidized rent levels are tied to the housing market, and stronger housing markets lead to higher rent levels for l ow i ncome h ousing t ax c redit units. Moreover, housing market conditions also have a significant impact on the LIHTC market. The equity value of LIHTCs is often influenced by the strength of the national eco nomy and housing markets (Korb, 2009) For example, strong housing market conditions usually indicate general economic growth in the country which in turn tends to produce escalating profits for corporations, banks, and priva te equity groups, among others. The significant profits reaped by these groups during times of growth lead to higher demand for tax write offs and thus a stronger market for tax credits. During times of economic growth, corporations, banks, and private e quity groups in need of tax write offs will pay close to 90 to 95 cents on the dollar for LIHTCs (T. Gladwell, personal communication, April 19, 2012) For example, a bank might purchase $10 million in LIHTCs for 90 cents on the dollar, or $9 million. This transaction gives the affordable housing developer $9 million in cash equity for affordable housing development while the bank receives a $1 million tax discount off its tax liability. However, in times of economic and housing recession, the LIHTC ca n decrease significantly in value as the demand for tax write offs drops precipitously. During the economic recession of 2008 2010, for example, there was much less demand for tax credits since corporations and banks were suffering losses and did not need tax breaks

PAGE 229

214 (Korb, 2009) During the r ecession, LIHTCs were selling for only 60 to 70 cents on the dollar ( C. Smith personal communication, October 7, 2010) Such a significant drop in their value can have a huge impact on affordable housing projects with potential developers losing up to 30% of the equity value of the tax credits a result which makes many affordable housing projects unviable since developers can not achieve satisfactory profits. The Evans Station TOD case i s a good example of how housing market conditions and the strength of the economy can impact the value of LIHTCs. Medici Communities, the developer of Evans Station Lofts TOD in Denver first applied for tax credits in 2009 and was awarded approximately $12 million worth through a competitive application process administered by the Colorado Housing and Finance Authority (Colorado Housing and Finance Authority, 2011) When the tax credits were gr anted to Medici in 2010 however, the housing market was still coming out of recession, and the $12 million tax credits could be sold to investors for only approximately 80 cents on the dollar, a rate which yielded approximately $9.6 million in equity for Medici Communities to develop the Evans Station Lofts (Colorado Housing and Finance Authority, 2011) The lower value of the tax credit s put the development on hold while Medici scrambled to find additional subsidies to fill their budget gap. By late 2011, when housing market conditions had begun to stabilize and the economy to improve, the demand for tax credits started to rise. At tha t time Medici was able to find an investor willing to pay 95 cents on the dollar for the $12 million in tax credits (Colorado Housing and Finance Authority, 2011) This improved rate increased the value of the tax credit equit y from $9.6 million

PAGE 230

215 to $11.4 million, an outcome which filled the budget gap and enabled Medici to move forward with the development (See Appendix D for further explanation of the LIHTC program.) While a strong housing market promotes TOD development s in general and also serves to increase the chances for including affordable housing within a TOD, a weak housing market can significantly stymie affordable housing development in TODs. During the Great Recession beginning in late 2007 or early 2008, ho using markets softened dramatically, and affordable housing development in TODs in the Denver region weakened significantly. As explained in the previous section, one of the primary reasons for the lack of affordable housing starts during the r ecession wa s related to the dramatic softening of the LIHTC market. As the bottom fell out of the tax credit market during the recession, developers found it less and less possible to generate enough equity to fund an affordable housing project. The only affordable housing developments in had already sold their tax credits at a higher rate in 2007 before the housing crisis hit. The first affordable ho using development in a TOD in the Denver region post recession was the South Lincoln development, which broke ground in early 2011, when the housing and tax credit markets had already begun to stabilize and strengthen. Hypothesis 2. If the advocacy fa ctor is negative, then affordable housing is likely only if the economic and regulatory factors are both positive and strong enough to offset the advocacy costs. The second hypothesis for this study was developed from the argument that a negative score on the moderating advocacy factor reflects strong opposition to affordable

PAGE 231

216 housing within the TOD in question Without significant economic incentives in addition to reduced regulatory requirements, it is unlikely that a developer will be willing or able to overcome the costs associated with advocacy opposition to affordable housing Moreover, since typical LIHTC affordable housing developments have limits on the amount of developer fees and rental revenues that can be generated from these developments, s ome form of extra economic incentive or benefit tied to these developments is likely necessary for the developer to overcome the stiff costs and barriers imposed by advocates who oppose affordable housing. The literature reveals how costly advocacy grou ps can be to a developer. Studies show that it is difficult enough to get communities to approve high density developments like TODs, but adding affordable housing to a TOD creates an additional risk which can stir up further opposition. As the Center of Transit Oriented Development (2007) put it, Denver region. Initial resistance and development delays can be expected with higher density projects, particularly without an inclusive community planning process at the outset (p. 26). Most developers try to avoid any type of public confrontation, s ince the latter can slow a project down. Lucy and Phillips (2000) argued that neighborhood opposition to high density infill developments can often discourage companies from such initiatives. Opposition by neighbors to infill development, and insuffici ent motivation for developers, lenders, and public officials to overcome opposition and higher acquisition costs compared to green space, leads development actors to avoid most major infill projects (p. 10).

PAGE 232

217 Table 8.3. Factor Scores for Englewood and Vallagio Economic Factor Regulatory Factor Advocacy Factor Land H M Su b ROI Final Zone Infra Park G R Final Neig hbor NP NP PA Final E n gl e w o o d +1 +1 +1 +1 +1 +1 +1 1 1 0 0 0 1 0.33 V al la gi o 0 +1 0 +1 +0.50 +1 +1 1 1 0 1 0 1 0.66 As expected, in both the Denver TOD cases Englewood and Vallagio where community opposition to affordable housing resulted in a negative advocacy factor (See Table 8.3, above.) the re were no extraordinary economic benefits tied to affordable housing that would have compelled the developers to be willing to try to overcome the opposition to affordable housing. Moreover, the regulatory costs related to parking and ground floor retail developments further diminished the economic context (See Table 8.3.). Be cause of these issues, the developer s in the two cases decided against affordable housing. In both cases they expressed that it was enough of a challenge just getting the community on board for the high density TOD development ( R. Simpson, personal commun ication, August 6, 2013; P. Kudla, personal communication, December 5, 2012 ) In the case of Englewood City Center, Trammell Crow was experienced in affordable housing development and was willing to consider it. The City Council members o f Englewood, h owever, were opposed to adding any risks to what they considered the still unproven TOD concept. After discussions with the City of Englewood, Trammell Crow decided against affordable housing because of the political

PAGE 233

218 opposition For Trammell Crow to push housing, they would have more than likely needed reduced parking and ground floor retail requirements as well as a strong economic package tied to affordable housing development to reduce their risks. Ulti mately, the negative moderating advocacy factor in addition to the high parking and retail requirements under the regulatory factor forego affordable housing there. Simila r to the situation with the Englewood City Center development, Metropolitan Homes decided against affordable housing at Inverness mostly because of the negative advocacy factor, which ultimately trumped a positive economic environment. In an interview Met it clear that he had been open to providing affordable for sale units in the Inverness devel opment to create price diversity However, the Arapahoe County Commissioners and the business owners in the community w ere already concerned about the lower priced starter condos for what was intended as an upscale high density development and were thus opposed to any affordable housing there. Similar to Trammell Crow at Englewood, for Metropolitan Homes to push back agai they would have more than likely needed reduced parking and ground floor retail requirements as well as a much stronger economic package tied to affordable housing development to lower their risks. Ultimat ely, the negative moderating advocacy factor in addition to the high parking and retail requirements under the regulatory factor overcame the construction of affordable hou sing at Vallagio.

PAGE 234

219 Hypothesis 3. If the regulatory factor is negative, then affordable housing is likely if the economic and advocacy factors are both positive and strong enough to offset the regulatory costs. The third hypothesis for this study was developed from the theory that a net negative score for the regulatory factor reflects some combination of high costs for zoning, infrastructure, parking, and required ground floor retail space. In order for a developer to c hoose to include affordable housing in a TOD encumbered with such costs, the economic factor and advocacy factor would need to be positive and strong enough to offset them and allow the developer to achieve satisfactory profits. Table 8.4. Factor Scores for South Lincoln Economic Factor Regulatory Factor Advocacy Factor Land HM Sub ROI Final Zone Infra Park GR Final Neighbor NP PA Final +1 0 +1 +1 +0.75 +1 1 1 1 0.50 +1 +1 +1 +1 With regard to the Denver TOD cases, the South Lincoln TOD was the only development in which the moderating regulatory factor received a negative score (See Table 8. 4 ). The developer of the South Lincoln TOD, the Denver Housing Authority, was subject to significant costs associated with infrastructure since the proj ect required major flood plain mitigation, road construction, and utility provisions (See Table 8.4.) Yet despite the negative regulatory factor at South Lincoln, the DHA moved forward with affordable housing there. Part of the reason for this decision was the strength of the economic factor highlighted by strong subsidies and low land costs. The Center for Transit Oriented Development in their report The Case for Mixed Income Transit Oriented Development in the Denver Region (2007) claimed that rising land costs near

PAGE 235

220 TODs in the Denver region created an important barrier to the development of affordable housing. The CTOD stated, Land prices are high at TOD sites. In the Denver region, developers already pay a premium on land at many planned and existing TOD sites. This presents a formidable obstacle to providing housing products at affordable p rices. Land prices are being driven up by speculative pressures. The Denver Housing Authority was able to avoid hi gh land costs at the South Lincoln site because they were the owners of 17 of the 20 acres on which the project was to be located. The land costs alone based on the market rate at th e time for land of similar location and quality (LoopNet.com, 2012) In addition to low land costs, the DHA benefited from significant political advocacy, something which helped the Agency secure substantial federal and local subsidies that came to nearly $80 million of the total $99 million project budget for the first four phases of development ( K. Crangle, personal communication, September 7, 2011) Ultimately, the positive economic factor led by low land costs and en ormous subsidies along with the positive advocacy factor helped offset the higher regulatory costs and led the Denver Housing Authority to make a positive decision for including affordable housing at South Lincoln. Without these strong subsidies and polit ical advocacy support, the DHA would likely have avoided the costly redevelopment at South Lincoln and chosen a non TOD site with less infrastructural costs ( K. Crangle, personal communication, September 7, 2011) The previous sections of this study were intended to examine these research hypotheses to show how the dominant and moderating factors interacted to shape the

PAGE 236

221 area TODs. The next section on satisficing examine s the over all risk context for each developer in the various TODs to highlight how the economic, regulatory, and advocacy factors ultimately influenced their respective decisions on affordable housing. Findings Related to Satisficing As previously stated, the theor y of satisficing holds that developers are satisficers who seek to reduce risk while obtaining a satisfactory profit before deciding to move forward on a residential development (Lucy & Phillips, 2000) According to this theor y, developers are bounded rationally as a result of limited information and a constricted time frame for making decisions (S imon, 1956; 1991) Owing to these limitations, the theory further stipulates that developers are not driven by maximizing profit but would rather settle for lower yet still satisfactory profits while minimizing their risks. This research holds that TOD developers are satisficers who will choose to develop affordable housing within a TOD only when the risks are minimized and satisfa ctory profits likely. This study further concludes that it is the interaction of the economic, regulatory, and advocacy factors that helps determine whether satisfactory profits are attainable and risks manageable for developing affordable housing. The f ollowing section assess es each satisficing behavior which in turn governed their decisions to develop affordable housing in their TOD or not Trammell Crow at Englewood Cit y Center One of the significant satisficing constraints that Trammell Crow encountered at the Englewood City Center consisted of the risks related to the still untested TOD

PAGE 237

222 markets. The City of Englewood, which was attempting the first suburban TOD deve lopment in the Denver region, offered Trammell Crow the opportunity to be the residential and retail developer at the new TOD site. Since the TOD concept was new in the region at the time, Trammell Crow had limited information regarding the land, ground f loor retail, and housing markets, and how they would behave compared with similar non TOD markets in the region. Not only was the City of Englewood considered an older inner ring suburb, but many developers believed redeveloping the vacant Cinderella Mall site to be a risky venture ( M. Utter personal communication, September 2, 2010) Moreover, while the new Englewood Station light rail stop created hopeful expectations regarding TOD development, there remained uncertainties about whether ridership and d ensities would support the new project ( R. Simpson, personal communication, August 6, 2013) Amidst these uncertainties, Trammell Crow was unsure if they would be able to rent out market rate units in the new TOD at price levels similar to their market rate units in other suburban communities. The company was also uncertain about how much appreciation they would be able to accrue for a new market rate development and whether they would be able to sell the property for a reasonable profit in the near fut ure. These uncertainties added significant risks for the development and almost caused Trammell Crow to walk away from the project altogether. Lucy and Phillips (2000) claimed that such circumstances would usually drive developers away from risky develop ment s like TODs: Uncertain outcomes from housing markets are to be expected. For the majority of developers . limiting uncertainty is a goal. A common strategy to limit uncertainty is to make conventional choices [that] will limit risk ( p. 31).

PAGE 238

223 The lack of information regarding the as yet untested TOD markets in a new development like Englewood would normally have discouraged developers like Trammell Crow from taki ng on this type of project. They would have typically preferred a development with more predictability like a strip mall or tract housing developments in a suburban greenfield. Lucy and Phillips (2000) confirmed this sentiment: In producing residential, commercial, and industrial buildings, they prefer easy development decisions with satisfactory profits to high risk projects with the possibility of maximum profits but significant potential for losses (p. 27). The tyranny of easy development decisions means that development . goes where risk is limited and profits are satisfactory. . Conditions meeting cr iteria are more prevalent in fringe locations . (p. 10). Ultimately, the City of Englewood was able to convince Trammell Crow to commit to a market rate residential development at the City Center TOD by offering them a benefit package that included economic incentives (reduced land costs together with a public subsidy) and fewer regulatory requirements (reduced zoning and infrastructure costs). However even with the benefit package offered by the City Trammell Crow still decided against affordabl e housing Interviews with Englewood leaders and key players in the City Center development revealed that Trammell Crow had considered affordable housing at Englewood. Having had positive experiences with LIHTC development in the Denver region in the pa st, they were interested in the significant developer fees that come with LIHTC projects. In addition, interviews with the City of Englewood officials made it clear that LIHTC funds were available for Trammell Crow to use at the City Center development if they had been inclined toward including affordable housing there (R. Simpson, personal communication, July 21, 2011) However, Trammell Crow ultimately decided against doing so.

PAGE 239

224 A final analysis of the Englewood City Center TOD development reveal s that Trammell Crow had been unable to achieve satisficing conditions for the development of affordable housing at the City Center development. Although the company had received a strong benefit package from the City to help incentivize them to commit to a mar ket rate residential development, the y would have needed a stronger benefit package tied to affordable housing development as well as reduced costs related to their parking and ground floor retail requirements in addition to reduced advocacy opposition to achieve satisficing conditions for affordable housing. Without these considerations, the risks imposed by uncertain housing markets were too high and satisficing conditions for affordable housing were not attainable. Metropolitan Homes at Inverness The development context for Metropolitan Homes at Inverness was characterized by less risk than that of Trammell Crow at Englewood. This reduction in risk stemmed observed how Trammell Crow had exceeded their ground floor retail and housing revenue projections at Englewood (P. Kudla, personal communication, December 5, 2012) Metropolitan Homes also watched as Trammell Crow sold their 438 unit market rate residential developmen t for a record profit in 2003. The positive market signals from TOD development boom in the Greater Denver region. Despite the increased confidence in TOD markets, Me tropolitan Homes chose not to provide affordable housing at the Vallagio. The major reason for this decision was related to the non satisficing conditions for affordable housing imposed by significant

PAGE 240

225 parking costs and ground floor retail requirements in addition to high levels of political and neighborhood opposition to affordable housing at Inverness. These conditions drove up the risks and costs for Metropolitan Homes and stymied further consideration of affordable housing at the Vallagio. Trammell Cro w at Gates Unlike Trammell Crow at Englewood and Metropolitan Homes at Inverness, affordable housing. Trammell Crow had more information and certainty regarding TOD markets than was the case with their original TOD development at Englewood in 2000. They were now armed with six years of experience regarding TOD housing markets and involved at the time in two other TOD developments in the Denver region including a large 600 unit proje ct in Lone Tree near the Park Meadows Mall and another small TOD condo project at Pearl Street near I certainty regarding the TOD housing markets at the time thus created expectations for a strong return on inv estment for their 419 market rate units at Gates. In addition to more predictability regarding TOD markets, Trammell Crow was the recipient of a benefits package that helped reduce their regulatory costs at Gates. This reduction had become a key strate gy that many municipalities were already using to attract developers like Trammell Crow to higher risk developments like TODs. the regulatory requirement for satisficing developers would help them overcome th stated, Satisficing developers contribute to sprawl in the form of low density . development. In response, government policy makers have designed policies

PAGE 241

226 aimed at reducing risks to developers. Reducing risks is i ntended to help developers overcome the bounds on their rationality so that they will make decisions that result in more e fficient land use. . Risk reduction policies include clear rules about zoning and allowable uses; fixed rather than negotiated exa ctions; transparent capital improvement programs; and predictable, streamlined approval processes ( p. 28). reducing their regulatory risks. Cherokee had rezoned the entire property before Trammell Crow purchased their land parcel. Cherokee then sold Trammell Crow a clean piece of land they had already remediated Cherokee also committed to use their TIF sub sidy to make further infrastructure improvements to the entire site, a decision that would work to the benefi t of floor retail requirements from the original 20,000 plus square feet to a more manageable 12,500 square feet. The positive regulatory situation for Trammell Crow at the Gates site was further enhanced by the positive advocacy factor there. The advocacy efforts of local nonprofit organi zations as well as political advocates from the City of Denver helped the company raise nearly $8 million in LIHTC and HOME funds to cover the total cost of the their own mone y into the affordable housing project. Their only investment was the cost associated with the administrative time spent developing the se units. Increased confidence in TOD markets, reduced regulatory requirements, and strong advocacy support for afford able housing all worked together to create positive

PAGE 242

227 Gates. Each of these factors served to reduce risks and ensure satisfactory profit s for Trammell Crow at Gates. The Denver Housing Authority at South Lincoln Like Trammel Crow at Gates, the Denver Housing Authority was the beneficiary of a positive satisficing context at the South Lincoln TOD development. This situation was again related to greater certainty regarding TOD housing markets, a circumstance that created more predictable outcomes for the DHA. In 2010/2011 as the DHA was making its final decisions regarding their South Lincoln development, the TOD markets in the Denver region had been in existence for more than ten years. The DHA was able to witness the remarkable boom during those ten years as well as the slowdown in the TOD market during the Great Recession of late 2008 to late 2010 ( C. Parr, personal communication, September 7, 2011) The agency had le arned valuable lessons from the r ecession about the TOD housing and retail markets. They were able to witness Metropolitan Homes struggle and stall out with their for sale condo products at Inverness in 2008. The Housing Authority was also able to observe the ground floor retail issue s that had plagued both Metropolitan Homes and Trammell Crow at Gates. Moreover, the which performed admirably even during the r ecession years. These lessons coupled with other information gained by the DHA allowed them to modify the first four phases of the South Lincoln development to focus on rental only units and to modify their ground floor retail risks during the beginning phases of their development. In addition to their increased knowledge about TOD housing markets and the lessons learned regarding ground floor retail, the DHA was the beneficiary of reduced

PAGE 243

228 land costs and significant public subsidies. These benefits were critica l because the DHA needed help in offsetting the significant regulatory costs including those for infrastructure and parking. Finally, the Denver Housing Authority benefited from significant support from ped them acquire the enormous subsidy package required to offset the high regulatory costs of the development. The positive economic and advocacy factors, which were thus strong enough to offset the high infrastructur al costs at South Lincoln, created pos itive satisficing conditions for the DHA at South Lincoln. The result was reduced risks and satisfactory profits for the DHA. Without these conditions, it is unlikely that the Agency would have taken on the complicated development at 10 th and Osage, for they would probably have searched for a site with fewer costs. Medici at Evans Station Like the Denver Housing Authority, Medici was able to benefit from information about the regional TOD markets leading up to and following the Great Recession of 2008. By the time Medici was making its final development decisions in 2011, they were able to learn from the mistakes of Metropolitan Homes and Trammell Crow and modify their own retail requirements, which further reduced their risk exposure. As with the DHA, contribute to a positive satisficing context for their initiative. positive regulatory factor. As prev iously stated, reduced regulatory requirements are one of the most important aspects for creating positive satisficing conditions for an

PAGE 244

229 affordable that regulatory constraints were one of the most significant barriers facing developers considering affordable housing provisions in high density, mixed used developments: Many of the developers that did not build affordable units blamed local government regulations for creating prohibitiv e expenses. Moreover, approximately half of these developers noted that local financial incentives or regulatory changes could encourage them to include affordable units in the future (p. 602). Medici benefited from dramatically reduced regulatory requ irements with regard to zoning, parking, and infrastructure. The Evans Station site had already been rezoned by the City of Denver approximately one year before the developer broke ground. In addition to lowered rezoning costs, the Evans Station parcel w as granted significant parking reductions. The latter are especially important because creating parking units is another source of high costs. As the Center for Transit Oriented Development (2007) made clear, Parking requirements often are unnecessarily high at TODs. High land prices at TOD sites, coupled with the average cost of providing a structured parking space (over $20,000), means that parking requirements can significantly affect the financial feasibility of TOD projects. Zoning requirements that assume all tenants will have cars add a great deal to the cost of building TOD housing (p. 26). The City of Denver worked with Medici to help them avoid high parking costs at Evans St ation by reducing their parking requirements from two spaces per unit to less than one. This parking reduction enabled Medici to avoid building a parking garage, a turn of events which led to significant cost savings (T. Gladwell, personal communication, April 19, 2012) Finally, the positive advocacy factor was a strong source for contributing to the satisficing conditions for Medici because they were the beneficiary of non profit

PAGE 245

230 advocates who purchased and held the Evans Station land parcel for more th an a year while Medici acquired low income tax credits. The holding period was particularly beneficial since it allowed Medici to wait until the tax credit market improved enough for them to get the maximum equity value from the tax credits they received. It was the combination of the positive economic, regulatory, and advocacy factors housing at the Evans Station site. Without these positive conditions, Medici would have likely pursued affordable housing at a less attractive, non TOD location. Additional Findings One of the most significant findings of this research is the importance of timing and the time making process. As previously stated, this research has evaluated the impact of the three factors on the pre development period (the two year s leading up to ground breaking) of a development. It is nonetheless important to examine both the pre and post development time frame for each project to affordable housing can change dramatically and unexpectedly. One important example of how timing influenced the satisficing conditions housing decision involves changing housing market conditions. Figure 8.2 on the following page provides a graph of multi family housing market con ditions from 1999 to 2013. The graph is part of the National Multifamily family housing markets in the United States. The graph provides an excellent depiction of housing market condi tions both nationally and locally in the Denver region. Furthermore, the

PAGE 246

231 focus on multi family housing conditions is helpful since each TOD project in this study was anchored by a multi family rental housing development except the Vallagio, and even it ul timately included some market rate rental units toward the end of its development period. The graph covers the entire time frame of this research, from Englewood in 2000 to Evans Station Lofts in 2012. Each Denver TOD case considered here is depicted on the graph from the ground breaking time period through the completion of the project Figure 8.2 Multifamily Housing Market Conditions in the U.S. from 1999 2013 (McBride, 2014) *Dates for each development show time of ground breaking to finish of project Analysis of the graph shows that each of the Denver TOD developers decided to break ground on their development during strong market conditions for rental housing. While Trammell Crow at Englewood had a small dip in market conditions during their Englewood 2000 2002 Vallagio 2005 2014 Gates 2007 2010 South Lincoln 2010 2016 Evans Station 2011 2013

PAGE 247

232 building period, by the time they were opening their market rate residential units (Alexan City Center) at Englewood in late 2002, the housing market was on the upswing and their rental revenues exceeded expectations. In the case of Metropolitan Homes at Vallag io and Trammell Crow at Gates, however, even though they started their development s when the housing market was strong (2005 2006), soon after their developments were underway, conditions changed dramatically because of the Great Recession. This change cr eated significant losses for both Metropolitan Homes and Trammell Crow. The Denver Housing Authority and Medici Communities avoided these losses because they began their developments after housing conditions had stabilized. A review of the timing and making processes reveals the different satisficing conditions that existed for each regarding affordable housing and th e fact that some of these conditions changed unexpectedly. For instance, although Tra mmell Crow entered their development at Englewood in 2000 with some trepidation regarding the risk of the then new TOD concept, their concerns soon disappeared when their expectations were surpasse d with the unexpected success of their grand opening in 200 2. Interviews with the Englewood City leaders showed that had Trammell Crow known how strong their residential products were going to fare, they would have more strongly considered including affordable housing at their City Center development ( J. Woodward, personal communication, July 28, 2011) Conversely thanks to the Englewood success and the strong market conditions in the region, Metropolitan Homes was highly confident about their development at

PAGE 248

233 Vallagio. They expected their luxury condos and townhomes to perform in a similarly exceptional way to their other recent successes in the region Consequently, they planned over 600 units of luxury for sale condos. Moreover, it was their confidence about the market conditions at that time that l ed Peter Kudla to consider affordable for sale housing (high quality workforce housing for 80% to 100% AMI). When the r ecession hit Metropolitan Homes in the middle of their build out in late 2007, however, it caused them both serious delays and significa nt losses. Had Metropolitan Homes known that a significant recession was around the corner, they would no doubt have drastically scaled back their for sale condos and would not have entertained even the thought of affordable housing. Similar to Metropoli tan Homes, had Trammell Crow at Gates known the r ecession was coming and that it would bankrupt Cherokee that no ne of their TIF money would be used and that no major remediation would take place at Gates, they would not have agreed to affordable housing there The timing for the decision making for each development also impacted how the regulatory factor would play out, especially with regard to ground floor retail requirements. Trammell Crow at Englewood was deeply concerned in 2000 about the retail requirements because of the uncertainty regarding the amount of pedestrian foot traffic. T hey thus negotiated their retail requirement down from 42,000 to 29,000 square feet. However, beginning at the grand opening of their Alexan project, the ground flo or retail performed much better than expected ( R. Simpson, personal communication, August 6, 2013 ) The stellar performance of the ground floor retail at Englewood led Metropolitan Homes at Vallagio and Trammell Crow at Gates to under estimate the risks related to

PAGE 249

234 their respective retail requirements ( S. Johnson, persona l communication, March 24, 2010; P. Kudla, personal communication, December 5, 2012 ) Metropolitan Homes agreed to ov er 42,000 square feet of ground floor retail at the Vallagio, a chall engingly large amount for a development located in a non residential corporate office park with very low population density. In addition, Trammell Crow thought that their 12,000 square feet at Gates was perfectly manageable considering how well they had d one with 29,000 square feet of retail at their Alexan City Center development at Englewood. When the r floor retail suffered significantly and ended up costing the company significant losses. Furthermore, when the r ecession hit the Gates project and resulted in Trammell Crow was left with an undeveloped abandoned factory sitting right next to their new residential development. The impact of the r ecession thus led to a lack of foot traffic near their ground floor retail area which sat unleased for two years. If Trammell Crow and Metropolitan Homes had been aware of the problems they would encounter as a result of the r ecession and how it would im pact their retail, they would almost certainly have negotiated to cut the ir required space back dramatically. The timing related to the decision making of each developer also impacted the advocacy factor for the developments. For instance, the advocacy factor for Trammell Crow at Englewood was negative at the time of the development because of the risk of the untested TOD concept. The political leadership in Englewood (City Council driven) was not supportive of affordable housing. However, after the C ity Center project was finished and performed so well, these city l eaders now say that if they had known how

PAGE 250

235 successful the project was going to be, they would have considered affordable housing more strongly. In fact, this positive outcome for Trammel Englewood led the company to agree to the strong demands for significant affordable housing they received from the community for their Gates development. To be sure, had FRESC and the City of Denver been able to predict the bankruptcy of Cherokee, the lack of TIF money usage, and the stalled redevelopment at Gates, these advocates would not have pushed so strongly for affordable housing and probably would not have expected Trammell Crow to follow through on their commitment in that regard. The Denver Housing Authority and Medici were fortunate in starting their development s after the Great Recession had ended. Moreover, they had the advantage of learning from the mistakes of Metropolitan Homes and Trammell Crow at Gates. B oth the DHA and Medici increased their subsidy requirements and worked to reduce their ground floor retail requirements ( C. Parr, personal communication, September 7, 2011; T. Gladwell, personal communication, April 19, 2012) They also both had advocacy groups working diligently to help them offset their risks. In this regard, concerned advocacy groups helped the DHA secure significant subsidies that insulated them from risk at the South Lincoln redevelopment while Enterprise and ULC reduce d k at the Evans Station project by acquiring and holding their land parcel while Medici finalized their LIHTC package. on their project was that market conditions can change dram atically and that these changing conditions reveal how much unpredictability and risk are involved in real estate

PAGE 251

236 housing development s The recession that hit Metropolitan Homes and Trammell Crow at Gates could easily have hit Trammell Crow at Englewood o r the DHA and Medici if they had no t been so fortunate in their timing. The unpredictability of economic conditions and regulatory risks, for example in ground floor retail in TODs, is why developers need such strong satisficing conditions before they con sider including affordable housing. TODs are complicated enough developments to begin with, but when the unpredictable nature of changing market conditions, regulatory requirements, and advocacy impact are added in, the inclusion of affordable housing oft en becomes too much of an additional risk for developers to bear. Satisficing, Learning, and Future Decision Making making process regarding the economic, regulatory, and advoc acy factors and the related risk housing in a TOD. This research has primarily focused on the impact of these factors during the two years leading up to the ground breakin g of a particular TOD. However, it learning cycle to understand how developers learn from their decision making process and how that feedback loop impacts their decis ion making in the future. Figure 8.3 on the following page examines the satisficing model within the context of the learning cycle for developers. The model depicts the impact of the three factors on the housing decision during the following three time periods: pre development (the two years leading up to ground breaking), post development (the two years following the completion of the project), and the future development.

PAGE 252

237 As discussed previously in Chapter 3, the pre development time frame represents the first period of learning and feedback for the developer regarding the satisficing conditions for affordable housing. This time frame, as mentioned above, represents the two years leading up to the ground breaking of the particul ar TOD project. During this period the developer evaluates the impact of the three factors (economic, regulatory, and advocacy) and makes a decision to produce or forego affordable housing in his TOD based on the satisficing conditions present. The second learning cycle for the developer is the post development period which, as mentioned, represents the two years following the completed development. During this time, the developer reflects on the impact of the three factors and compares the pre development projections with the post development realities to see how the three factors have ultimately influenced the satisficing conditions for affordable housing. The ure decision making regarding affordable housing as based on the totality of the feedback and information gathered from the pre and post development results. The satisficing learning cycle model (Figure 8.3) on the following page gives a graphic depictio affordable housing decisio n.

PAGE 253

238 Figure 8.3 The Satisficing Learning Cycle Economic Land Cost Subsidy Markets ROI Developers Decision: Affordable housing decision is based on the impact of these three factors during the pre development time frame. Pre development (two years leading up to groundbreaking) Regulatory Zoning Parking Infrastructure Retail Economic Land Cost Subsidy Markets ROI Post development (two years following completion) Advocacy Neighbor Nonprofit Political Learning: Developer reflects on the im pact of the three factors on the decis i on for or against affordable housing Future Development The Learning Cycle affordable housing decision is based on a continu ing cycle of learning based on feedback of the three factors. Regulatory Zoning Parking Infrastructure Retail Advocacy Neighbor Nonprofit Political Regulatory Zoning Parking Infrastructure Retail Advocacy Neighbor Nonprofit Political Economic Land Cost Subsidy Markets ROI Future Decision: Developer s future affordable housing decision s result from satisficing projections based on feedback and lessons learned during the pre and post development time frame. Decision Cycle Repeats

PAGE 254

239 Trammell Crow and the Satisficing Learning Cycle The experience of Trammell Crow at the Englewood TOD and the Gates TOD provides a good example of the learning cycle and the changing satisficing conditions for their affordable housing decisions. During the pre development period of the Englewood develop ment, Trammell Crow believed that satisficing conditions were not supportive of affordable housing because of the risk of the unknown housing markets for TOD in addition to the risk related to parking and ground floor retail requirements. These conditions against affordable housing. However, the post development time frame for Trammell Crow at Englewood revealed positive satisficing conditions for the development of affordable ho using. These conditions were reflected in the unexpected positive performance of the housing and ground floor retail markets in the Englewood TOD which enabled Trammell Crow to sell their Alexan City Center project at the Englewood TOD for a better than e xpected ROI. These satisficing conditions at Englewood proved that Trammell Crow could have provided affordable housing at the Englewood development and still had positive satisficing conditions marked by reduced risks and satisfactory profits. The pos t development time frame at the Englewood development provided feedback and learning experience that gave Trammell Crow confidence for their future decision making on affordable housing at the Gates TOD. Emboldened by their success at Englewood, Trammell Crow came to believe that the strong economic conditions together with a more propitious location at Gates would lead to a projected ROI that

PAGE 255

240 would surpass their profits at Englewood. These positive satisficing conditions thus enabled them to agree to gen erous affordable rental housing at their Gates development. The satisficing learning cycle continued for Trammell Crow at Gates as they considered the feedback and lessons learned during the post development period at Gates in 2010. From the Great Reces sion and Cherokees bankruptcy, Trammell Crow came to understand that economic conditions are unpredictable and can change quickly. The recession and lack of development at Gates contributed to significant economic losses for the company in terms of both t ime and money. Notably, their 12,000 square feet of ground developers showed they had learned from the failures at Gates and decided that in future they would avoid complic ated urban developments like Gates that involved multiple developers and significant infrastructure and remediation requirements. Learning in the Region Other developers in the Denver region were also able to learn from Trammell development at Englewood changed the beliefs of developers regarding the risk factors related to TOD development in the region. Many planners and developers were doubtful that TODs would work in olde r suburban communities like Englewood. Once Trammell Crow proved that TOD housing markets could be trusted and the TOD model did in fact work, this evidence changed the views of these developers who could then begin TODs of their own in the Denver region. Moreover, many developers now believed that affordable housing could also work in TODs.

PAGE 256

241 TOD success at Englewood, moved forward with an ambitious TOD development at Vallagio. Whi le Metropolitan Homes decided against affordable because of political opposition, without that opposition they most likely would have been amenable to providing it owing to the positive economic conditions and their anticipated strong ROI. While the Great Recession of 2007 2010 did interrupt some of the development momentum in the region, most developers still believed in the likely success of TODs even with affordable housing, though in more economically favorab le times. Two such developers in the Denver region were The Denver Housing Authority and Medici Communities. The DHA and Medici were both affordable housing developers who had no experience in TOD developments, yet both had seen the success of TODs in the Recession. The DHA and Medici were able to use the lessons learned during the recession to increase their subsidy targets while modifying their ground floor retail requirements to achieve satisficing conditions for affordable housing at South Lincoln and Evans Station, respectively. Policy Recommendations Based on the satisficing decision m odel that TOD developers follow when deciding on whether or not to provide affordable housing, this research suggests the following policy recommendations for developers considering the inclusion of affordable housing in their TODs.

PAGE 257

242 First, federal progra ms should be encouraged that contribute to stable and healthy housing markets. This research reveals that solid housing market conditions are one of the most important factors in creating satisficing conditions for developers wishing to include affordable housing in their TODs A key factor for stable housing market conditions is the continuation of low home mortgage interest rates. One program that the federal government can use to assure this beneficial situation is the continuation of the Federal Rese purchase of mortgage backed securities to keep mortgage interest rates low. Research by Northwestern University economists Arvind Krishnamurthy and Annette Vissing Jorgensen (2011) argued for strategic tapering of quantitative easing programs implem ented by the Federal Reserve. They claimed that the Fed s hould focus its tapering efforts on the purchase of Treasury securities and not mortgage backed securities. Their research showed that the buying back of Treasury securities had little effect on ho me mortgage rates versus the buy back of mortgage based security bonds, which had a significant positive impact (See Appendix E for a further explanation of their research. ) Second, federal and local governments should be encouraged to sustain and bolste r public subsidy programs that target affordable housing development in TODs. The LIHTC program funded through the U.S. Department of Housing and Urban Development has been the single most successful affordable rental housing program in the history of the United States (Korb, 2009) This program incentivizes developers to produce affordable rental units in TODs. The future of affordable housing in TODs is strongly related to the ongoing availability of LIHTC funds Unfortunately, the program has come under heavy scrutiny in the past few years during the U.S. Congressional

PAGE 258

243 budget debates. Any reduction in LIHTC funding would likely hurt the production of affordable housing in TODs. Other federal programs that have b een successful in promoting affordable housing in TODs have been HOPE VI grants and ARRA stimulus funding (The Brookings Institute, 2005; Korb, 2009) Continued policy support for local government subsidy packages in the form of TIF, HOME funds, and CDBG funds, finally, is highly recommended because these programs have been significantly effective in encouraging affordable housing development in TODs (Lubell, 2006) Third, local communiti es should be encouraged to create TOD funds to help with the acquisition of land near TODs Land banking is an important program that helps create satisficing conditions to incentivize developers to provide affordable housing near or as part of TODs. The Denver TOD Fund, a national model for TOD land banking, was created with support from the City of Denver, local non profit organizations, and local banks. Such private/public partnerships help provide capital for the acquisition of land near transit stop s funds that can be held for affordable development. The Denver Fund is not a subsidy but instead is a revolving low interest loan fund which can easily be replicated with support from local non profits, banks, and municipal organizations. Fourth, local communities should be urged to streamline and reduce regulatory requirements. TODs often need fewer parking spaces because of their proximity to light rail transportation yet many communities still require the standard parking requirements of two spaces per residential unit. Reducing the se requirements to one half to one space per housing unit w ould help bring down the regulatory costs for TOD developers. In conjunction with reducing parking requirements near TODs, local communities could encoura ge the proliferation of location efficient mortgages which enable households to

PAGE 259

244 qualify for larger home mortgages at better interest rates if they agree to reduce their automobile expenditures based on their proximity to public transportation. Communities can also work to reduce zoning costs for developer s by rezoning existing and future TOD sites to mixed use. Finally, local municipalities can work to expedite construction permit applications and approvals to help reduce the time costs for TOD developers Fifth, local municipalities should foster greater communication between affordable housing advocacy groups and the local neighborhoods that need more affordable housing Research shows that non profit advocacy groups are often able to communicate the b enefits of affordable housing better than developers and are more successful in alleviating community concerns about affordable housing (Johnson & Talen, 2008) Local residents moreover, tend to place greater trust in faith based organizations and local non profits which can communicate the benefits of mixed income affordable housing in a more credible, less threatening manner than bottom line oriented developers. Local communities that encourage non profit organizatio ns to help facilitate communication between a private developer and community members are thus often successful in increasing their supply of affordable housing (Johnson & Talen, 2008) Sixth and finally, city and county go vernments should develop stronger affordable housing laws. Many communities which have burgeoning TOD developments to address housing and transportation needs also have minimal affordable housing mandates, particularly rental housing. Denver is one such city Denver has no requirements for the inclusion of affordable rental housing ; it stipulat es only that developers of a residential property of over 30 units provide 10% of the for sale housing to households earning less than 80% of the area median incom e (Lado, 2007 ) These

PAGE 260

245 minimal affordable housing laws in Denver County along with non existent affordable housing laws elsewhere in the region place an enormous responsibility on affordable housing advocacy groups. In most cases in the Denver region, it is the sole responsibility of the advocacy community to persuade developers to produce affordable housing because no public mandates exist (Lado, 2007) To reduce reliance on pro affordable housing advocacy groups and to ensure that communities acquire sufficient affordable housing in their TODs, it is incumbent up on communities to create stronger affordable housing requirements. Policy Recommendations and the Satisficing Model This section examines how each of the policy recommendations listed above would impact their projects. A modified version of the satisficing model is included for each policy recommendation to depict how the policy recommendati on would affect the Strong Housing Markets The first policy recommendation argues that stable to strong housing markets would help create satisficing conditions for d evelopers considering affordable housing development in a TOD. Strong housing markets lead to economic conditions with more predictable outcomes for positive rental income, low vacancy rates, and higher appreciation values for the proposed development. T hese conditions would help create stronger ROI projections for developers. Furthermore, strong housing markets are also associated with strong economic conditions nationally which in turn stimulate higher demand for low income tax credits. The more compet itive the tax credit market is

PAGE 261

246 because of higher demand, the higher the levels of LIHTC equity for developers planning to use these funds to build affordable housing. (See Figure 8.4.) Figure 8. 4. Housing Markets and the Satisfic ing Model Figure 8.4, above, depicts how strong housing markets influence the satisficing housing decision. The model reveals that strong housing markets positively influence the value of low income tax credits. A stronger more equity invested in affordable development, and higher levels of rental revenue from the affordable units. Furthermore, strong housing markets also impact a develop from market rate units since such markets predict stronger rental revenue, lower vacancy rates, and higher appreciation of market rate units. The dynamic interaction of these variables within the economic factor contributes to positive satisficin g conditions for a developer considering the inclusion of affordable housing in a TOD. In all three of the Denver TOD cases where the developer included affordable housing (Gates, South Lincoln, and Evans Station), the presence of stable to strong housing markets contributed to larger LIHTC equity packages which in turn positively impacted better ROI projections for the developers in question. Housing Markets LIHTC RO I Economic Regulatory Advocacy Developer s Decision: Strong housing markets lead to higher tax credit equity and stronger ROI The result is satisficing conditions for affordable housing development.

PAGE 262

247 Public Subsidies The second policy recommendation is for federal and local communities to bolster public subsidy programs that incentivize developers to produce affordable housing in TODs. Federal subsidies like the LIHTC program along with local subsidies in the form of TIF packages and HOME funds among others are crucial for creating satisficing conditions for TOD developers considering affordable housing development. Figure 8. 5. Public Subsidies and the Satisficing Model satisficing decision regarding affordable housing. Strong subsidies create more equity for the developer to invest in affordable housing. The higher the amounts of subsidy/equit y the developer is able to acquire and apply to the affordable development, the higher the level of developer fees and the lower the conventional debt tied to the project. These conditions lead to higher rental revenue and higher ROI projections which con tribute to positive satisficing conditions for the developer. In each of the three Denver TODs that included affordable housing, the developers of those projects were awarded significant subsidy packages that created strong levels of ROI which contributed to satisficing Subsidies: LIHTC, TIF, HOME, CDBG, Etc. ROI Economic Regulatory Advocacy Developer s Decision: Strong public subsidy packages lead to more equity and stronger ROI which in turn contribute to satisficing conditions for developers considering affordable hou sing for their TOD.

PAGE 263

248 conditions for them (i.e., satisfactory profits and lowered risks) which ultimately impacted their decision to produce affordable housing. TOD and Affordable Housing Land Banks The third policy recommendation was that local communities develop affordable housing land banks to help acquire and hold parcels near transit stops before they are bought by private developers for higher end market rate housing. Buying and holding land for affordable housing development contribute to satisficing conditions for affordable housing developers in that these activities enable them to acquire LIHTC subsidies (which can be a lengthy process of two to three years) while attractive land parcels near transit are being held for them. The process also lower s the risks and transaction costs associated with land acquisition. Figure 8. 6. Land Banking and the Satisficing Model Land Cost LIHTC ROI Economic Regulatory Advocacy Developer s Decision: Non profit groups and city officials create a land banking fund. This fund is used to purchase and hold parcels near transit which reduces land transaction costs and allows the developer time to acquire LIHTC subsidies. The process contributes to positive ROI and satisficing conditions for developer to provide affordable housing. Non p rofit g roups and city o fficials create a land bank fund.

PAGE 264

249 Figure 8.6, above, shows that the advocacy efforts from non profit and political actors creating the land banking fund positively impa ct the land and LIHTC acquisition for his affordable housing decision. The Denver TOD Fund is an example of this process. This fund was created by the advocacy effor ts of non profit groups in the Denver region through their work with politicians and civil servants in the Denver community. These efforts led to the development of a $15 million private equity fund to be used to buy and hold attractive parcels near trans it for affordable housing. The Denver TOD Fund was used, for example, to access $1.2 million in funds to buy and hold land near the Evans Station transit stop. This buy and hold process gave Medici the time to acquire LIHTC funding for their development. land acquisition while contributing to their success in acquiring strong levels of LIHTC equity. The latter in turn help create both a positive ROI and strong satisficing conditions for Medici and formed the basi s for their decision to provide affordable housing at the Evans Station site. Reduced Parking Requirements The fourth policy recommendation, above, was the suggestion that cities and counties work to lower regulatory costs within TOD developments, particularly parking regulations. The standard parking requirement for most multi family suburban developments is two parking spots per residential unit. However, families living in a TOD are usually less auto dependent and need fewer parking spaces. Reducing the parking requirements in TODs from the standard two spots to one spot or less would

PAGE 265

250 reduce costs and create s atisficing conditions for developers considering affordable housing in a TOD. (See Figure 8.7, below.) Figure 8. 7. Reduced Parking Requirements and the Satisficing Model Figure 8.7, above, depicts the positive effect of lowered parking requirements on housing decision. Lowered parking costs mean lower outlays for the developer which thus contribute to better ROI projections. The combination of th housing decision. The Evans Station Lofts development in Denver is a great example of how lowered parking costs contributed to positive satisficing conditions for the dev eloper, Medici Communities, and played a strong role in their decision to produce affordable housing. The City of Denver reduced the parking requirements for Medici from two spots per residential unit to less than one. This change allowed Medici to avoid building a costly parking garage and contributed to fewer outlays for Medici which increased ROI projections. Conversely, Arapahoe County's refusal to lower parking requirements for Metropolitan Homes at the Vallagio development contributed to steep ROI Economic Regulatory Lower Parking Costs Advocacy Developer s Decision: Lower parking costs/requirements mean reduced outlays for a developer which in turn contribute to stronger ROI projections and positive satisficing conditions for the decision.

PAGE 266

251 park ing costs which made for non decision to forego affordable housing there. Communication Among Advocacy Groups The fifth policy recommendation was the fostering of communication between and among advocacy groups. The NIMBY literature reveals that many neighborhood groups are concerned about having high density TOD developments and the affordable housing developments that often come with them. These groups are concerned about the quality of a development and the possible deleterious effects on their neighborhood and home values. However, this research shows that a high demand for pedestrian friendly communities like TODs that include well desi gned affordable housing actually increase the value of homes in the neighborhood. However, it is often more effective when local churches and non profit groups help to communicate these positive effects to members of the neighborhood as opposed to the dev eloper, who is often mistrusted as being merely interested in making money. The literature suggests that communities that foster better communication with non profit advocacy groups are more likely to have affordable housing in their local TOD(s). Figure 8. 8. Communications with Advocacy Groups and the Satisficing Model Economic ROI Regulatory Advocacy Developer s Decision: Better communication between nonprofit groups and neighborhood members can reduce negative advocacy which lead to fewer outlays for the developer and a better ROI, both of which contribute to positive satisficing conditions for a housing decision. Nonprofit/Churches (C ommunication reduces advocacy costs ) Neighborhood Groups

PAGE 267

252 Figure 8.8, above, depicts how better communication between pro affordable non profit groups and neighborhood members concerned that affordable housing can lower the costs associated with a negative advocacy conditions. The lowered advocacy costs lead to fewer outlays and expenses for the developer which in turn create better ROI and housing decision. The Gates TOD in Denver provides a good example of how effective communication between advocacy groups led to lower costs for Trammell Crow. Several neighborhood groups surrounding the Gates factory area were concerned about the high density development and affordable housing development that would be taking place at Gates. The non profit group, FRESC, along with a local church, the Denver Inner City Parish, were able to communicate the positive value of the Gates development to the various neighborhood groups and thus help alleviate their concerns. The good will that FRESC and DIC P generated helped reduce advocacy costs and paved the way for ability to avoid any costs related to disgruntled neighborhood groups therefore contributed to positive satisf icing conditions at the Gates site and their decision to provide affordable housing there. Stronger Affordable Housing Mandates The sixth and final policy recommendation applied to the satisficing model is that of affordable housing mandates. The presenc e of stronger affordable housing mandates places a significant amount of responsibility on strong economic conditions to help create housing decision. If low income housing is required by mand ate, both affordable rental and for sale units, then

PAGE 268

253 positive economic conditions marked by strong housing markets, public subsidy availability, and strong ROI projections are required to help incentivize developers to agree to affordable housing developme nt. Moreover, stronger inclusionary mandates for low income rental housing would give more significance to LIHTC subsidy, since that program is the subsidy program most developers rely on for the development of low income affordable rental housing. Figure 8. 9. Affordable Housing Mandates and the Satisficing Model Figure 8.9, above, depicts the necessary satisficing conditions for each factor housing decision. Stronger affordable mandates will have an impact on all three factors of the satisficing model, but strong economic condit ions are still vital for affordable housing development. If affordable housing is required in TOD developments (either rental or for sale), developers will need strong housing markets and positive ROI projections in addition to the availability of subsidi es as well as manageable advocacy and regulatory costs to decide on including affordable housing. In the case of the Englewood and Vallagio developments, affordable housing was not provided, with political opposition the main driver of the opposition. Ho wever, Economic Housing Markets, Public Subsidy and R O I Reg ulatory Manageable Costs Advocacy Manageable Costs Developer s Decision: If affordable housing is required, the developer must have solid housing markets, strong public subsidies, and strong ROI projections in addition to manageable regulatory and advocacy costs to have satisficing conditions for their affordable housing decision.

PAGE 269

254 if stronger affordable housing mandates had existed in these communities, the political opposition would not have been able to kill affordable housing since it would have been required. In the case of Trammell Crow at Englewood, had affordable hous ing been required, they would have likely moved forward with the development of low income rental units because they were experienced LIHTC developers, and LIHTC funds were available for this development. Moreover, if affordable housing had been require d at Vallagio, Metropolitan Homes would have more than likely agreed to sell affordable workforce housing on account of their healthy ROI projection in excess of $60 million which would have helped offset their costs for providing affordable housing. In b oth cases, some healthy combination of public subsidy or strong ROI projections in addition to manageable advocacy and regulatory costs would have enabled satisficing conditions for Trammell Crow or Metropolitan Homes had affordable housing been required. Contributions of this Research This research makes a strong contribution to the literature on satisficing. Before this study, the literature on satisficing developers focused exclusively on the decision making process of land developers and their satisficing decisions regarding the risks associated with a land purchase decision (Kenney, 1972; Drewett, 1973; Baerwald, 1981; Hepner, 1983) or the behavior of satisficing developers with regard to urban sprawl (Nelson & Duncan, 1995; Lucy & Phillips, 2000; Mohamed, 2006 and 2009; Czamanski & Roth, 2011). As the first study to examine the satisficing behavior of developers with regard to their affordable housing decision making in the context of TODs the present research adds to the literature on satisficing developers. The research represents an

PAGE 270

255 making process. The research provides original models that help one understand the impact of learning and feedback on developers. Moreover, based on the satisficing models and the evidence from the Case Studies, this research has been able to provide the basis for cons tructive policy recommendations at both the federal and local levels to help incentivize developers to produce more affordable housing in their TODs. Moreover, w hen this dissertation research was initiated more than four years ago, the empirical literature on TODs was sparse, particularly that which related to affordable housing in TODs. The little empirical research that did exist in this subject area was mostly concerned with the impact of TODs on nearby land and home values (Cervero & Duncan, 2002; Weinstein & Clower, 2002) ; the impact on public ridership and reduced automobile usage (Cervero R. TOD and Carsharing: A Natural Marriage, 2009) ; and the related impact on commuting patterns to and from work (Cervero & Day, 2008) While the last few years have seen significant growth in the empirical literature regarding TODs, this research has tended to focus on the impact of TODs on local housing prices (Mandapaka, 201 2) regional economic impacts (Jacobson, 2010; Ratner & Goetz, 2010) and the environmental impact of TODs (Kimball, Chester, Gino & al., 2013; Seo, Kim, & Kim, 2013) Despite the growth of literature on TODs, th ere was still little if any empirical research on affordable housing development within TODs since most of the research on TODs and affordable housing remained about best practices and lessons learned. The model developed by this research therefore contr ibutes one of the first empirical studies on affordable housing in TODs.

PAGE 271

256 Another important contribution this study makes to the affordable housing and TOD literature is the identification of the three influential factors and the eleven variables that impact developm ent decision making: e conomic (land cost, housing market conditions, public subsidies, and ROI), regulatory (zoning, infrastructure, parking and mixed use requirements), and advocacy (neighborhood, political, and non profit advocacy). The selection of the eleven variables and the grouping of them under the three factors comprised an original model developed by the researcher after close scrutiny and examination of the literature on affordable housing and TODs. Th is model is thus a good launching point for further examination of these factors and variables in future making processes regarding these factors. Future Research One suggestion for future res question to examine affordable housing development in conventional projects as opposed to TODs. The research question could focus on how the three factors (economic, regulatory, and advocacy) impact a d affordable housing in such developments. It would be interesting to see the differences between TOD and conventional/non mixed use developments and how those differences impact the three factors in the present mod el. It would seem that the regulatory costs would be more manageable in a non TOD development on account of the fewer infrastructure, retail, and parking requirements. It would also be interesting to analyze the satisficing context and the difference in risk and satisfactory profits when comparing traditional affordable housing developments with the non conventional TOD type of

PAGE 272

257 development. Again, it would seem that the risk environment would be reduced in a more conventional development owing to the mor e predictable nature of such projects. However, there might be less subsidy funding and community driven incentives for these initiatives because of the lower risk threshold. These factors would all need to be compared and contrasted. Finally, it would also be intriguing to use the model developed in this research to examine other TODs in a different region, particularly one with stronger affordable housing mandates. It would be interesting to see how the impacts of the factors are changed if at all bas ed on affordable housing mandates. One could also observe how the advocacy factor would be impacted in a region with strong affordable housing mandates. Regions like these would be less driven by winning affordable housing since it would already be manda ted. Thus pro affordable housing advocacy groups could focus on other important issues like winning community support and assisting the developer in finding subsidies to underwrite the project. Conversely, it would seem that anti affordable housing advoc acy groups would have diminished power with affordable housing already required in these regions and would have to focus more on shaping its design, quality, and number of units versus simply lobbying against it. Limitations of the Research The most significant limitation of this research is related to the issue of generalizability. The small sample size, limited regional focus, and narrow range of developer types are some of the issue s that might weaken the use of the research findings acros s a broader spectrum of affordable housing developments within TODs. This research consists of only five TODs, a small sample that conceivably could reduce the

PAGE 273

258 strength of the findings. Each case could be considered a unique TOD with an exclusive set of circumstances where the findings m ight be applicable only in the distinct context of that particular development. Since the TODs studied are all located in the Denver region, moreover, it might be difficult to generalize the findings to other regions. De nver has its own set of political, social, and demographic contexts unique to the region. The contextual forces that shape the Denver region might not be comparable to those of other regions. Finally, two of the organizations included in the research are dedicated to affordable housing development. The fact that they are committed to affordable housing might have compromised the impact of the three factors on their decision to develop affordable housing at their respective TODs and specifically on how th ey computed satisficing On the other hand, while the sample size of five TODs is indeed small, this number is nonetheless sufficient for case study research. Many case studies focus on only one case or two or three at most (Merriam, 1988; Gillham, 2000; Yin, 2003; Stake R. E., 2006) The five cases in this study therefore present a significant body of evidence for case study research. Further, the purpose of the case study is to address specific issues to understand the nuances and details of the speci fic research question. This study making process es regarding the possible inclusion of affordable housing in their projects. One of the particular strengths of this st high level developers who rarely grant interviews because of the demands on their time. Some of the information included confidential financial details relating to their decision making process es and outc omes with regard to their respective TOD development. These

PAGE 274

259 details, which provide valuable insights, would be difficult if not impossible to gather in a non case study, non interview format. Moreover, the researcher specifically chose the Denver region for his TOD case study analysis because of the rapidly growing cities of the West and Southwest with common transportation and housing issues. Many of these cities are, like Denver, dealing with sustainability and growth issues. As a result, they too are implementing light rail and TODs. Furthermore, most of these cities resemble Denver in having minimal affordable housing regulations for the suburban communities being developed. Among the cities in question are Phoenix, Salt Lake City, Dallas, and Hous ton. Consequently, many of the findings in this research can likely be used as a basis of comparison for these communities. Finally, even though two of the developers in this study are committed to affordable housing the Denver Housing Authority and Medi ci Communities they still make satisficing decisions like market rate developers. Both the DHA and Medici required satisficing conditions in their respective developments before deciding to move forward with project plans at their particular TOD site. Li ke for profit developers, they can not afford to lose money on their projects. Even though their mission is to provide affordable housing, both these developers decided to move forward at their particular TOD site because of the satisficing conditions that existed which reduced risks and promised satisfactory profits. If these conditions had not been present within their respective developments, the developers would have chosen another location to develop affordable housing most likely a non TOD location with lower costs and more predictable outcomes.

PAGE 275

260 REFERENCES Affordable Housing Solutions for Colorado. (2006). Colorado Blue Ribbon Panel on h ousing. Denver, CO: Affordable Housing Solutions for Colorado. American Automobile Association (AAA). (2013). Your d riving c osts. Heathrow, FL: American Automobile Association (AAA). Arapahoe County Assessor. (2006). Estimate of v alue. Arapahoe County: Arapahoe County Assessor. Arapahoe County Board of County Commissioners. (2011). Public Hearing Case No. P11 004, Inverness No. 59, Lot 1, Final Development Plan. Littleton, CO : Arapahoe County. Auerbach, C., & Silverstein, L. (2003). Q ualitative d ata: An introduction to coding and analysis. New York NY : New York University Press. Baerwald, T. J. (1981). The s ite s election p rocess of s uburban r esidential b uildings. Urban Geography 2 (4), 339 357. Baron, R. M., & Kenny, D. A. (1986). Th e m oderator m ediator v ariable d istinction in s ocial s cience r esearch: Conceptual, s trategic, s tatistical c onsiderations. Journal of Personality and Social Psychology 51 (6), 1173 1182. Becker, G. (1976). The e conomic a pproach to h uman b ehavior. Chicago IL : University of Chicago Press. Belzer, D., Hickey, R., Lawson, W., Poticha, S., & Wood, J. (2007, February). The c ase for m ixed i ncome t ransit o riented d evelopment in the Denver r egion. Denver CO : Enterprise ( The Center for Transit Oriented Development ) Bentham, J. (1789). An i ntroduction to the p rinciples of m orals and l egislation. Oxford England : Oxford University Press. Bernard, H. (2006). Research m ethods in a nthropology: Qualitative and q uantitative a pproaches. Walnut Creek, CA: AltaMira Press. Bernick, M., & Cervero, R. (1997). Transit v illages in the 21st c entury. New York NY : McGraw Hill . Boarnet, M., & Compin, N. (1999). Transit o riented d evelopment in San Diego County: T he incremental implementation of a planning idea. Journal of the American Planning Association doi: 10.1080/01944369908976035

PAGE 276

261 Booth, W., Colomb, G., & Williams, J. (2003). The c raft of r esearch. Chicago IL : University of Chicago Press. The Brookings Institute. (2005). HOPE VI and m ixed f inance r edevelopments: A c atalyst for n eighborhood r enewal. Washington, DC: The Brookings Institute. Calthorpe Associates and Mintier Associates. (2011). Transit o riented d evelopment d esign g uidelines. Sacramento, CA: Sacramento County Planning Department. Calthorpe, P., & Fulton, W. (2001). The r egional c ity. Washington, DC: Island Press. Cantwell, R. (2006, February). Builders climbing aboard for transit opportunities. Home Builder 18 21. Center for Housing Policy. (2006). A h eavy l oad: The combined housing and transpor tation burdens of working families. The National Coalition for Housing. Center for Neighborhood Technology. (2012). Losing g round: The s truggle of m oderate i ncome h ouseholds to a fford the r ising c osts of h ousing and t ransportation. Chicago IL : Center for N eighborhood Technology. Center for Transit Oriented Development. (2004). Hidden in plain sight: Capturing the demand for housing near transit. Oakland, CA: Reconnecting America 's Center for Transit Oriented Development. Center for Transit Oriented Development. (2007). The case for mixed income transit oriented development in the Denver region. Oakland, CA: Reconnecting America 's Center for Transit Oriented Development. Center for Transit Oriented Development. (2013, March 15). Frequently Asked Questions: Center for Transit Oriented Development Retrieved March 15, 2013, from Center for Transit Oriented Development: www.ctod.org Cervero, R. (1989). Jobs h ousing b alancing and r egional m obility. Journal of the American Planni ng Association 55 (2), 136 150. Cervero, R. (2009, Fall). TOD and Carsharing: A Natural Marriage. Access Retrieved from http://www.uctc.net/access/35/access35_TOD_and_Carsharing.shtml Cervero, R., & Duncan, M. (2002). Transit's value added effects: L ight and commuter rail services and commercial land value. Transportation Research Record Retrieved from http://www.worldtransitresearch.info/research/839/ Cervero, R., & Wu, K. L. (1997). Polycentrism, Commuting, and Residential Location in the San Francisco Bay Area. Environment and Planning 865 886. Retrieved from http://www.envplan.com/abstract.cgi?id=a290865

PAGE 277

262 Cho, M., & Linneman, P. (1993). Interjurisdictional spilove r effects of land use regulations. Journal of Hous i ng Research 4 (1), 131 163. Choulet Nappi, I. (2006). The r ole and b ehaviour of c ommercial p roperty i nvestors and d evelopers in French u rban r egeneration: The e xperience of the Paris r egion. Urban Studies 43 (9), 1511 1535. The City of Denver Office of Community Planning and Development. (2009). Evans Station Area Plan. Denver CO : The City of Denver, Colorado. City of Denver Office of Strategic Partnerships. (2012, April 10). Denver Transit Oriented Devel opment Fund. Retrieved April 10, 2012, from www.denvergov.org: www.denvergov.org City of Englewood: Community Development Division. (2011). Transit o riented d evelopment: City Center Englewood. Englewood, CO: Arapahoe County. Choulet Nappi, I. (2006). The r ole and b ehaviour of c ommercial p roperty i nvestors and d evelopers in French u rban r egeneration: The e xperience of the Paris r egion. Urban Studies 1511 1535. Clarion Associates. (1996). Citizen i nput f orums. Denver, CO : Clarion Associates. Colorado Housin g and Finance Authority. (2007). Reserve at Gates t ax c redit a pplication. Denver CO : Colorado Housing and Finance Authority. Colorado Housing and Finance Authority. (2010). Low income housing tax credit application for 1099 Osage. Denver CO : Colorado Hou sing and Finance Authority. Colorado Housing and Finance Authority. (2011). Evans Station Lofts l ow i ncome h ousing t ax c redit a pplication. Denver CO : Colorado Housing and Finance Authority. Creswell, J. W. (2003). Research d esign: Qualitative, q uantitative, and m ixed m ethods a pproaches (2nd ed. ) Thousand Oaks, CA: Sage. Creswell, J. W. (2007). Qualitative inquiry and research design: Choosing among five approaches. Thousand Oaks, CA: Sage. Cummings, J., & DiPasquale, D. (1999). The l ow i ncome h ousing t ax c redit: An a nalysis of the f irst t en y ears. Housing Policy Debate 10 (2), 251 307. Cyert, R. M., & March, J. G. (1963). A b ehavioral t heory of the f irm. Englewood Cliffs, NJ: Prentice Hall.

PAGE 278

263 Czamanski, D., & Roth, R. (2011). Characteristic time, developers' behavior and leapfrogging dynamics of high rise buildings. Annals of Regional Science 46, 101 118. doi:1007/s00168 009 0337 0 Danielson, K., Lang, R., & Fulton, W. (1999). Retracting s uburbia: Smart g rowth and the f uture of h ousing. Housing Policy Debate 10 (3), 513 540. DeCristoforo, D. (2009, December). DHA wins stimulus grants: ARRA funds boost public housing projects across Denver. Engineering News Record: Mountain States Retrieved from http://mountainstates.construction.com/features/20 09/1201_DHA Wins Stimulus Grants.asp Denver Community Planning and Development. (2010). La Alma/Lincoln Park: Neighborhood p lan. Denver, C O: Denver Community Planning and Development Denver Community Planning and Development. (2011, November 15). Blueprin t Denver Retrieved November 15, 2011, from Denvergov.org: www.denvergov.org Denver Housing Authority. (2010). South Lincoln Redevelopment Master Plan. Denver, C O: Denver Housing Authority. Denver Regional Council of Governments. (1997). Metro v ision 2020. Denver CO : DRCOG. Denver R egional Transportation District (2010). Strategic p lan for t ransit o riented d evelo p ment. Denver CO : Regional Transportation District. Denver Regional Transportation District. (2013, May 1). Fastracks program documents and repo rts. Retrieved May 1st, 2012, from www.rtd fastracks.com: www.rtd fastracks.com Denver Regional Transportation District. (2013, May 8). Central Corridor Light Rail Line: Facts and f igures. Retrieved May 8, 2013, from www.rtd denver.com: www.rtd denver.com Denver Regional Transportation District. (2013, May 10). Facts and f igures Southeast Corridor Light Rail Line. Retrieved May 10, 2013, from RTD Denver: www.rtd denver.com Denver Regional Transportation District. (2014, February 4). RTD Light Rail System Map Retrieved February 4, 2014, from RTD Denver: www.rtd denver.com

PAGE 279

264 Dey, I. (1993). Qualitative d ata a nalysis: A user friendly guide for social scientists. London England : Routledge. Dittmar, H., & Ohland, G. (2004). The n ew t ransit t own: Best practices in t ransit o riented d evelopment. Washington, D C : Island Press. Drever, E. (1995). Using semi structured interviews in small scale research: A teacher's guide. Edinburgh, Scotland: Scottish Council for Research in Education. Drewett, R. (1973). The d eveloper s d ecision p rocesses. In P. Hall, H. Gracey, R. Drewett, & R. Thomas (Eds.) The c ontainment of u rban e ngland (pp. 163 193). Oxford England : Alden Press. Enterprise Community Partners. (2012, July 10). About u s: Enterprise Community Partners m ission Retrieved July 10 2012, from Enterprise Community Partners: http://www.enterprisecommunity.com/about/mission and strategic plan Ewing, R. (1996). Best d evelopment p ractices. Chicago, IL : Urban Land Institute. Farris, J. T. (2001). The b arriers to using urban infill development to achieve smart growth. Housing Policy Debate 12 (1), 1 30 Retrieved from http://www.china up.com:8080/international/case/case/791.pdf Fischel, W. (2004). An e conomic h istory of z oning and a c ure for its e xclusionary e ffects. Urban Studies 41 ( 2 ), 317 340 doi: 10.1080/0042098032000165271 Flynn, K. (2002, February 6). RTD won't rubber stamp plan for Gates site. Denver CO Flyvbjerg, B. (2001). Making s ocia l s cience m atter: Why s ocial i nquiry f ails and h ow i t c an s ucceed a gain. Cambridge England : Cambridge University Press. Frank, L., & Pivo, G. (199 4 ). Impacts of m ixed u se and d ensity on u tilization of t hree m odes of t ravel: Single o ccupant v ehicle, t ransit, and w alking. Transportation Research Record 1466 44 5 2 Franzen, R., & Hunsberger, B. (1998, December 13). Have w e o utgrown our a pproach to g rowth? Portland, OR: The Oregonian Frazier, P. A., Tix, A. P., & Barron, K. E. (2004). Testing m oderator and m ediator e ffects in c ounseling p sychology. Journal of Counseling Psychology 51 (1), 115 134. doi: 10.1037/0022 0167.51.1.115 Gall, M., Gall, J., & Borg, W. (2003). Educational r esearch: An i ntroduction (7th ed.). Boston MA : Allyn and Bacon.

PAGE 280

265 George, A., & Bennett, A. (2005). Case s tudies and t heory d evelopment in the s ocial s ciences. Cambridge, MA: MIT Press. Giuliano, G. (1991). Is jobs housing balance a transportation issue? Transportation Research Record 1305, 305 312. Goetz, A. (2013). Suburban s prawl or u rban c entres: Tensions and contradictions of smart growth approaches in Denver, Colorado. Urban Studies 3 1 18. Goodman, L. (1961). Snowball sampling. Annals of Mathematical Statistics 3 2 (1), 148 170. Grady, C. (2008, March/April). Creating s oulful p laces: Envisioning c ommunity. Sales + Marketing Ideas 3/4 78 82. Grady, S., & LeRoy, G. (2006, March 5). Making the c onnection: Transit o riented d evelopment and j obs. Retrieved January 13, 2011, from Good Jobs First: www.goodjobsfirst.org Green, R. (1999). Land u se r egulation and the p rice of h ousing in a s uburban Wisconsin c ounty. Journal of Housing Economics 8 144 159. GuideStar.org. (2014, February 15). About u s: G uideStar.org Retrieved February 15, 2014, from Guidestar.org: www.guidestar.org Guimond, D. (2010). Transit o riented d evelopment: Economics and b enefits. A paper presented at a meeting of the NAIOP, Albuquerque, NM Hepner, G. F. (1983). An a nalysis of r e sidential d eveloper l ocation f actors in a f ast g rowth u rban r egion. Urban Geography 4 (4), 355 363. Herriott, R., & Firestone, W. (1983). Multi site qualitative policy research: O ptimizing description and generalizability. Educational Researcher 12 (2), 14 19. Hirt, S. (2007). The m ixed u se t rend: Planning a ttitudes and p ractices in Northeast Ohio. Journal of Architectural and Planning Research 24 (3), 224 244. Horner, M. (2004). Spatial dimension of urban commuting: A review of major issues and their imp lications for future geographic research. The Professional Geographer 56 (2), 160 173. Hsieh, H., & Shannon, S. (2005). Three a pproaches to q ualitative c ontent a nalysis. Qualitative Health Research 15 1277 1290. Huspeni, D. (2012, February 17). Vallagio exemplifies Kudla's neighborhood dream. Denver Business Journal p. 2.

PAGE 281

266 Huspeni, D. (2012, February 17). Vallagio exemplifies Kudla's neighborhood dream. Denver Business Journal p. 2. Immergluck, D. (1998). Job p r oximity and the u rban e mployment p roblem. Urban Studies 35 (12), 2359. Inverness Properties. (2006, January). Vallagio at Inverness n ow u nder c onstruction. Invernews p. 2. Inverness Properties (2013, February 4). About u s: Inverness Properties LLC Retrieved February 4, 2013, from Inverness Properties LLC website: www.invernessproperties.com Jackson, M. (2005, August 10). 30 acre project lured by light r ail Inverness Business Park at Dry Creek will see homes, offices and retail added by the Vallagio development. Denver Post Jackson, M. (2007, May 22). Sundance Cinema on way Gates r enovation. The Denver Post Jackson, M. (2009, September 12). Funds foil Gates plans. The rubber firm takes land back as financing falters for developers. The Denver Pos t Jacobson, J. P. (2010). Japanese t ransit o riented d evelopment: The f ramed m arket and the p roduction of a lternative l andscapes. Minneapolis, MN: University of Minnesota Press Johnson, J. S., & Talen, E. (2008). Affordable h ousing in n ew u rbanist c ommunities: A survey of developers. Housing Policy Debate 19 (4), 583 613. Joint Center for Housing Studies. (2012). State of the n ation s h ousing. Cambridge, MA: Harvard University Press Kahn, M. (2007). Gentrification trends in new transit oriented communities: E vidence from 14 cities that expanded and built rail transit systems. Real Estate Economics 33 717 735 Kain, J. F. (1968). Housing s egregation, Negro e mployment, and m etropolitan d ecentralization. Quarterly Journal of Economics 82 (2), 175 197. doi:10.2307/1885893 Kain, J. F. (1992). The s patial m ismatch h ypothesis: Three d ecades l ater. Housing Policy Debate 3 (2), 371 460. Kantarelis, D. (2007). Theories of the f irm (2nd ed.). Genev a Switzerland: Inderscience.

PAGE 282

267 Kenney, K. B. (1972). The r esidential l and d eveloper and h is l and p urchase d ecisions ( Unpublished doctoral disseration ). University of North Carolina Chapel Hill, NC Kilzer, L. (2006, February 7). Gates plan gets boost City council oks tax subsidies to pay for roads, parks at site. The Rocky Mountain News Klyuev, V., & de Imus, P. & Srinivasan, K. (2009). Unconventional Ch oices for Unconventional Times: Credit and Quantitative Easing in Advanced Economies International Monetary Fund. Knapp, G., & Ding, C. (2001). Do p lans m atter? The e ffects of l ight r ail p lans on l and v alues in s tation a reas. Journal of Planning Education and Research 21 (1), 32 39 Korb, J. (2009). The Low Income Housing Tax Credit: HERA, ARRA and b eyond. Boston MA : Massachusetts Institute of Technology Press Krishnamurthy, A., & Vissing Jorgensen, A. (2011). The e ffects of q uantitative e asing on i nterest r ates. Chicago, I L : Northwestern University Press Lado, K. (2007, May 12). Build a ffordable h ousing n ear t ransit. Rocky Mountain News p. 1. Layder, D. (1998). Sociological p ractice: Linking t heory and r esearch. London England : Sage. Levine, J. (1992). Decentralization of j obs and emerging suburban commute. Transportation Research Record 1364 71 80. Levine, J., & Frank, L. (2007). Transportation and land use preferences and Atlanta region. Transp ortation 34 255 274. Lincoln, Y., & Guba, E. (1985). Naturalistic inquiry. Beverly Hills, CA: Sage. Lindblom, C. (1959). The s cience of "Muddling Through ." Public Administration Review 2 79 88. LoopN et. com (2011, June 5). www.loopnet.com/salescomps Retrieved July 10, 2012, from www.loopnet.com LoopNet.com. (2012, August 2). Loop n et.com/salescomps Retrieved February 7, 2012, from www.loopnet.com

PAGE 283

268 Lubell, J. (2006). Increasing the a vailability of a ffordable h omes: An a nalysis of h igh i mpact s tate and l ocal s olutions. Washington, DC : The Center for Housing Policy. Lucy, W. H., & Phillips, D. L. (2000). Confronting s uburban d ecline: Strategic p lanning for m etropolitan r enewal. Washington, DC: Island Press. Malpezzi, S. (1996). Housing p rices, e xternalities, and r egulation in U.S. m etropolitan a reas. Journal of Housing Research 7 209 241. Mandapaka, N. (2012). Impacts of t ransit o riented d evelopments (TOD) and m ixed u se c enters in Dallas Fort Worth m etroplex on h ousing v alues and d emographic c o mposition. Arlington, TX: University of Texas Arlington. Masters, S. (1974). A n ote on John Kain's h ousing s egregation, Negro e mployment, and m etropolitan d ecentralization Quarterly Journal of Economics 88 (3), 505 512. McBride, B. (2014, January 16). NMHC s urvey: Apartment m arket c onditions Retrieved February 2014, 2014, from Calculated Risk Blog: www.calculatedriskblog.com McFadden, S. (2002). Trammell Crow low income tax credit application reserve at Castle Highlands. Denver CO : Colorado Housing and Finance Authority. McFadden, S. (2006). Low income tax credit application reserve at Prospect. Denver CO : Colorado Housing and Finance Authority. McFadden, S. (2006). Trammell Crow Low income tax credit application reserve at Thornton. Denver CO : Colorado Housing and Finance Authority. McNamara, C. (2009). General g uidelines for c onducting r esearch i nterviews. Minneapolis, MN: Authenticity Consulting, LLC. Merriam, S. (1988). Case s tudy r esearch in e ducation. A q ualitative a pproach. San Francisco: Jossey Bass. Metropolitan Homes. (2013, February 10). http://www.vallagio.com/industry awards Retrieved February 10, 2013, from Metropolitan Homes/Vallagio at Inverness Web site: www.vallagio.com Mile High Connects. (2012). The Denver r egional e quity a tl as: M apping access to opportunity at a regional scale. Denver, CO: Mile High Connects. Miles, M., & Huberman, M. (1994). Qualitative d ata a nalysis. Thousand Oaks, CA: Sage. Mill, J. S. (1869). On l iberty. London England : Longman, Roberts, and Green.

PAGE 284

269 Mitchell, M., & Jolley, J. (2012). Research d esign e xplained. Stamford, CT: Cengage Learning. Mohamed, R. (2006). The p sychology of r esidential d evelopers: Lessons from b ehavioral e conomics and a dditional e xplanations for s atisficing. Journal of Planning, Education, and Research 26, 28 37. Mohamed, R. (2009). Why do residential developers prefer large exurban lots? Infrastructure costs and exurban development. Environment and Planning B: Planning and Design 36 (1), 12 29. National Low Income Housing Coalition. (2012). Out of r each. Washington, DC : National Low Income Housing Coalition. National Valuation Consultants, Inc. (2005). A m arket s tudy c onsultation o f: The p roposed a partment p roject r eserve at Gates. Denver CO : Colo rado Housing and Finance Authority. Nelson, A., & Duncan, J. B. (1995). Growth m anagement p rinciples and p ractices. Chicago IL : Planners Press. s egregation, Negro e mployment, and m etropolitan d ecentralization ." Journal of Quarterly Economics 85 147 160. Patton, M. (1990). Qualitative e valuation and r esearch m ethods (2nd ed.). Newbury Park, CA: Sage. Pendall, R. (1999). Opposition to h ousing: NIMBY and b eyond. Urban Affairs Review 35 (1), 112 136. The Piton Foundation. (2011, December 1). The Piton Foundation: Community f acts, n eighborhood s ummary for Lincoln Park Retrieved December 1, 2011, from The Piton Foundation: www.piton.org Planning Department of Plano, Texas. (2008). Transit o riented d evelopment: Mixed u se z oning o rdinance. Plano, TX : Planning Department of Plano, TX. Pogodzinski, J., & Sass, T. (1991). Measuring the effects of municipal zoning regulations. Urban Studies 28 (4), 597 621. Potter, J., & Levine Donnerstein, D. (1999). R ethinking v alidity and r eliability in c ontent a nalysis. Journal of Applied Communication Research 27 (3), 258 284.

PAGE 285

270 Prior and Associates. (2011). Housing m arket s tudy for Evans Station Lofts. Denver, CO: Prior and Associates. Ratner, K. A., & Goetz, A. (2010). The r eshaping of l and u se and u rban f orm in Denver t hrough t ransit o riented d evelopment. Denver, CO: National Center for Intermodal Transportation. Read, T. (2006). The Gates Cherokee r edevelopment p roject: "A huge step forward for low i ncome people in Denver. Denver CO : MakingConnectionsDenver.org. Rebchook, J. (2002, June 27). Gates project: A really cool urban village. Rocky Mountain News Rebchook, J. (2003, April 25). Trammell Crow s ells omplex Price for apartments likely hit $52 million because of light rail. The Rocky Mountain News Rebchook, J. (2007, December 1). Long awaited Gates project gathers steam. The Rocky Mountain News Ricardo, D. (1817). On the p rinciples of p olitical e conomy and t axation. London England : John Murray. Rick Williams Consulting. (2007). Parking m anagement: Where i t c an t ake y ou. Portland, Oregon: Rick Williams. Robson, C. (2002). Real w orld r esearch. Oxford England : Basil Blackwell. RREEF Research. (2006). Apartment m arket c onditions in Denver's Douglas County a partment s ubmarket. Frankfurt, Germany: RREEF Research. Saldana, J. (2009). The c oding m anual for q ualitative r esearchers. London England : Sage. Shoemaker, D. (2006). Tools for m ixed i ncome TOD. San Francisco: Center for Transit Oriented Development. Simon, H. (1955). A b ehavioral m odel of r ational c hoice. The Quarterly Journal of Economics. 69 199 118. Simon, H. (1956). Rational c hoice and the s tructure of the e nvironment. Psychological Review 63 (2), 129 138. Simon, H. (1972). Theories of Bounded Rationality. In C. McGuire, & R. Radner, Decision and Organization (p. 170). North Holland Publishing Company.

PAGE 286

271 Simon, H. (1991). Bounded r ationality and o rganizational l earning. Organization Science 2 (1), 125 134. Simpson, R. (2007). Suburban t ransition Englewood, Colorado. Englewood, C O : The City of Englewood, Colorado. Smart Growth America. (2014, February 5). Adopt fair share requirements for affordable housing Retrieved February 5, 2014, from Smart Growth America: www.smartgrowthamerica.org Smith, A. (1776). An inquiry into the nature and causes of the wealth of nations. London England : Methuen & Co. Stake, R. E. (2006). Multiple c ase s tudy a nalysis. New York NY : Guilford Press. Steele, J. (2012, June 11). Land for Denver a ffordable r ental s old by Urban Land Conservancy Retrieved July 18, 2012, from Multi Housing News Online: www.multihousingnews.com Steffen, J. (2009, September 19). Homes project get $10 mill ion South Lincoln Park HUD funds are going to cities incorporating green ideas in improving public housing. The Denver Post Stitt, H. (1997). Cinderella c ity Background. Englewood, CO : Sultana, S. (2002). Job/housing imbalance and commuting time in th e Atlanta metropolitan area: exploration of causes of longer communting times. Urban Geography 23 (8), 728 749. Thomas, S. G. (2010, April 23). Upstate Markets are Commuting Paradise. Business First Journal p. 1. TransAct, Inc. and Van Meter Williams Pollack, LLP. (2011). Hacienda TOD s tandards and d esign g uidelines. Pleasonton, CA: City of Pleasonton, CA Community Development Department. The Urban Land Conservancy. (2012, July 10). http://www.urbanlandc.org/denv er transit oriented development fund/ Retrieved July 10, 2012, from The Urban Land Conservancy Web site: http://www.urbanlandc.org The Urban Land Conservancy. (2012, July 24). About us : The Urban Land Conservancy Retrieved July 24, 2012, from The Urban La nd Conservancy: http://www.urbanlandc.org/about/

PAGE 287

27 2 The Urban Land Conservancy. (2012, July 25). http://www.urbanlandc.org/denver transit oriented development fund/tod fund activity/ Retrieved July 25, 2012, from The Urban Land Conservancy: www.urbanlandc.org U.S. Department of Housing and Urban Development. (1997). U.S. h ousing m arket c onditions. Washington D.C.: HUD. U.S. Department of Housing and Urban Development. (1998). U.S. h ousing m arket c onditions. Washington D.C.: HUD. U.S. Departme nt of Housing and Urban Development. (1999, January 1). U.S. h ousing m arket c onditions Regional a ctivity, Rocky Mountain region. U.S. Housing Market Conditions U. S. Department of Housing and Urban Development. (2000, January 1). U.S. h ousing m arket c ondit ions Regional a ctivity, Rocky Mountain region. U.S. Housing Market Cond i tions U.S. Department of Housing and Urban Development. (2004). Housing m arket c onditions 4th quarter Rocky Mountain r egion. U.S. Housing Market Conditions pp. 38 40. U.S. Department of Housing and Urban Development. (2005). Housing m arket c onditions, 1st quarter Rocky Mountain r egion. U.S. Housing Market Conditions pp. 41 42. U.S. Department of Housing and Urban Development. (2006). U.S. h ousing m arket c onditions 1st quarter 2006. U.S. Housing Market Conditions pp. 39 40. U.S. Department of Housing and Urban Development. (2007). Rocky Mountain r egion, 1st q uarter. U.S. Market and Housing Conditions pp. 43 45. U.S. Department of Housing and Urban Development. (201 0). U.S. h ousing m arket c onditions 1st quarter 2010. U.S. Housing Market Conditions pp. 44 46. U.S. Department of Housing and Urban Development. (2011). Rocky Mountain Region 3rd Quarter. U.S. Housing Market Conditions 46 47. U.S. Department of Housing and Urban Development. (2012). U.S. h ousing m arket c onditions. U.S. Government Printing Office. (2011, December 5). Public Law 111 5 American Recovery and Reinvestment Act Retrieved December 5, 2011, from U.S. Government Printi ng Office: www.gpo.gov

PAGE 288

273 Victoria Transport Policy Institute. (2012, February 7). Transit o riented d evelopment Retrieved February 7, 2012, from Victoria Transport Policy Institute: http://www.vtpi.org/tdm/tdm45.htm Victoria Transport Policy Institute. (2013 ). Transportation c ost and b enefit a nalysis II Parking c osts. Victoria BC Canada: Victoria Transport Policy Institute. Walsh, M. (2008, June). Suburban l iving g oes u rban. Builder and Developer 2 26. Weber, R. (1990). Basic c ontent a nalysis. Newbury Park, CA: Sage. Weinstein, B., & Clower, T. (2002). An assessment of the DART light rail transit on taxable property valuations and transit oriented development. Dallas, TX: Center for Economic Development and Research University of North Texas. W einstein, B., & Clower, T. (2005). The estimated value of new investment adjacent to DART LRT stations. Denton, TX: Center for Economic Development and Research University of North Texas. Weintraub, E. R. (2002). Neoclassical e conomics. In D. Henderson ( Ed.), The c oncise e ncyclopedia of e conomics (1st ed.). Indianapolis, IN: Liberty Fund, Inc. Wheeler, S., & Beatley, T. (2004). The s ustainable u rban d evelopment r eader. New York NY : Routledge. Rick Williams Consulting. (2007). Parking Management: Where It Can Take You. Portland, Oregon: Rick Williams. Williams, L. (2012). An a nnual l ook at the h ousing a ffordability c hallenges of America's w orking h ouseholds. Washington, DC: Center for Housing Policy. Winarso, H. (2002). Access to main roads or low cost land? Residential land developers' behaviour in Indonesia. Bijdragen tot de Taal, Land en Volkenkunde 653 676. Yin, R. (2003). Case s tudy r esearch: Design and m ethods Thousand Oaks, CA: Sage. Yusof, N. & Shafiei, M. W. (2011). Factors affecting housingdevelopers' readiness to adopt innovative systems. Housing Studies 26 (3), 369 384. Zillow Realty Research. (2013, April 25). Price to income ration in metro areas. Washington Post

PAGE 289

274 APPENDIX A LIST OF SAMPLE QUESTIONS USED FOR INTERVIEWS The semi structured interview protocol was used for all interviews (See more in the methods chapter, Chapter Three.). The following is a sample set of standardized questions used in the interview process. The follow up questions employed were based on interviewee feedback. Economic Factor 1. What was the price of the land for the TOD parcel? How did this price compare with other parcels of similar size and location? How did the pric e of the land impact the marke t rate or the affordable housing development at the project? 2. What were the national and regional housing market conditions like during the two to thre e year window leading up to ground breaking for the project? How did these conditions influence the devel opment of market rate or affordable units at the project? 3. What types of public subsidies were available to the developer for the particular project? How did these subsidies influence the development of market rate and/ or affordable units at the project? 4. W What other profit or revenue expectations did the developer have for this project? Regulatory Factor 1. What type of rezoning was required for the particular development? How much time and what costs was associated with the zoning requirements? How did the zoning requirements influence the development of the market rate and/ or affordable units at the project?

PAGE 290

275 2. What were the infrastructure costs for the particular development? Were these costs considered above average, below average, or average for developments of similar size and scope? How did the infrastructure requirements influence the development of market rate and/or affordable units? 3. What were the parking costs and requirem ents for the particular development? Were these costs considered above average, below average, or average for a project of similar size and scope? What are the typical parking requirements for this community, region, and county? What were the average co sts per spot for developing a surface parking spot, a detached garage spot, or a parking garage spot? 4. What were the ground floor retail space requirements for the particular project? Were these requirements considered above average, below average, or aver age for a project of similar size and scope? How did these requirements impact the development of market rate and/or affordable units? Advocacy Factor 1. Were any residential neighborhood or homeowners advocacy groups involved during the particular develop the development? How did these groups influence the development of a market rate and/ or affordable housing development at the particular project? 2. Were any non profit advocacy groups involved during the pl anning or execution of the particular development? How important were these groups influence on the development? How did these groups influence the development of market rate and/ or affordable housing units at the particular development?

PAGE 291

276 3. Were any politi cal actors or local elected officials involved during the planning of the development? What type of role did these actors play with regard to the development? How did these individuals impact the development in terms of market rate and/ or affordable hous ing units at the development?

PAGE 292

277 APPENDIX B LIST OF INTERVIEWEES U SED IN RESEARCH Name TOD Case Date of Interview Type Length (Hour: Minutes) Title and Job Description Marilee Utter Englewood CityCenter Sept. 2nd, 2010 in person 1:13 minutes President Citiventures LLC, TOD Consultant; First TOD manager for RTD Sue Smith Englewood CityCenter July, 18th 2011 phone 11 minutes Admin. Assistant to Gary Sears, City of Englewood Alan White Englewoo d CityCenter July, 21st 2011 in person 54 minutes Director of Community Development, City of Englewood Robert Simpson Englewood CityCenter July, 21st 2011 phone 35 minutes Director of Community Development, City of Englewood (1995 2007) Dawn Shepherd Englewood CityCenter July 27th, 2011 in person 33 minutes Executive Director, Englewood Housing Authority Gary Sears Englewood CityCenter July 28th, 2011 in person 1:18 minutes City Manager, City of Englewood Jim Woodward Englewood CityCenter July 28th, 2011 in person 1:18 minutes Mayor Pro Tem, City of Englewood Harold Stitt Englewood CityCenter Aug. 5th, 2011 email Planning Community Coordinator, City of Englewood Chris Grady Vallagio at Inverness Nov. 30th, 2012 in person 1:01 minutes Land Planner, Kephart Architects, architectural firm that designed Vallagio Lynn Myers Vallagio at Inverness Dec. 3rd, 2012 in person 47 minutes Arapahoe County Commissioner (2000 2007) Peter Kudla Vallagio at Inverness Dec. 5th, 2012 in person 1:28 minutes Founder/CEO of Metropolitan Homes, Lead Developer of Vallagio Greg Krause Vallagio at Inverness Dec. 5th, 2012 in person 1:28 minutes President of Construction, Metropolitan Homes Scott Beasley Vallagio at Inverness Dec. 12th, 2012 in person 22 minutes Principal and Partner, Inverness Properties LLC. Nancy Sharpe Vallagio at Inverness Dec. 12th, 2012 phone 27 minutes Arapahoe County Commissioner, Former Mayor of Greenwood Village Pat Mulhern Vallagio at Inverness Dec. 14th, 2012 in person 59 minutes General Manager, Inverness Metropolitan Improvement District Marilee Utter Gates Sept. 2nd, 2010 in person 1:13 minutes President Citiventures LLC, TOD Consultant; First TOD manager for RTD Tony Robinson Gates Sept. 8th, 2010 in person 57 minutes Associate Professor and Dept. Chair, Political Science UCDenver Chris Nevitt Gates Sept. 21st, 2010 in person 20 minutes Denver City Council (District 7), President of FRESC (2002 2007) Scott Johnson Gates Sept. 29th, 2010 in person 1:33 minutes Director of Mountain West Region, Trammell Crow Residential Robin Kneich Gates Oct. 4th, 2010 email Denver City Council; Program Director for FRESC (2005 2011) Josh Russell Gates Oct. 5th, 2010 in person 1:43 minutes Executive Director, Archdiocesan Housing; owner of affordable at Gates Chris Smith Gates Oct. 7th, 2010 in person 41 minutes Housing Program Manager, City of Denver Scott Johnson Gates Oct. 12th, 2010 in person 37 minutes Director of Mountain West Region, Trammell Crow Residential Scott Johnson Gates March 24th, 2010 in person 27 minutes Director of Mountain West Region, Trammell Crow Residential Ishmael Guerrero South Lincoln Sept. 6th, 2011 phone 10 minutes Executive Director, Denver Housing Authority Chris Parr South Lincoln Sept. 7th, 2011 in person 1:23 minutes Director of Development, Denver Housing Authority; Lead Developer Kimball Crangle South Lincoln Sept. 7th, 2011 in person 46 minutes Senior Developer, Denver Housing Authority

PAGE 293

278 LIST OF INTERVIEWEES USED IN RESEARCH Aurita Apodaca South Lincoln Sept. 8th, 2011 in person 20 minutes Community Organizer, FRESC Kristin Krasnove South Lincoln Sept. 8th, 2011 phone 16 minutes Senior City Planner, City and County of Denver Aaron Miripol Evans Station Lofts April 19th, 2012 email CEO and President, Urban Land Conservancy Denver Troy Gladwell Evans Station Lofts April 19th, 2012 in person 51 minutes CEO/Founder of Medici Communities, Developer of Evans Station Melinda Polla ck Evans Station Lofts April 20th, 2012 email Vice President of TOD Program, Enterprise Community Partners Bradley Weinig Evans Station Lofts April 20th, 2012 in person 37 minutes TOD Program Director, Enterprise Community Partners Cindy Everett Evans Station Lofts April 23rd, 2012 in person 37 minutes Senior Associate, Urban Land Conservancy Denver

PAGE 294

279 APPENDIX C SUMMARY TABLE OF CODES USED IN THE MANUAL QUALITATIVE DATA ANALYSIS The following codes were used in the direct content analysis of source documents and interview transcripts for this research (See further discussion in the methods chapter, Chapter Three.). The codes were developed to help manage and organize the research ly related to the research question, hypotheses, and theoretical framework as possible so that the codes c ould be easily used and understood. Also, Miles and Huberman recommended keeping the code list short so as not to inundate the researcher with too many codes. Miles and Huberma n further suggested restricting the number of codes to fewer than 40 for the m anual data analysis so that they would remain manageable for and accessible to the researcher. Code Description of Code AFFORDABLE Refers to affordable housing. The code was used to designate any discussion in the text or interviews referring to affordable housing. ADVOCACY Refers to the main advocacy factor category. The code was used to designate any discussion in the text or interviews referring to the advocacy factor, including the neighborhood, non profit, or politics variable. DECISION R making process regarding affordable housing. DEVELOPER Refers to the key developers involved in particular TOD projects. ECONOMIC Refers to the main economic factor and the related economic variab les of land cost, housing market conditions, public subsidy, and ROI. HOUSEMARKET Refers to the housing market conditions variable included within the economic factor. INFRASTRUCTURE Refers to the infrastructure variable included within the regulatory factor. This code is used to designate any discussion of infrastructure or site preparations related to roads, sidewalks, utilities, remediation, etc. LAND Refers to the land cost variable included within the economic factor. This code is used to designa te anything related to land cost, location of land, or land description of a particular TOD parcel. NEIGHBORHOOD Refers to the neighborhood variable included within the advocacy factor. This code is used to designate anything related to neighborhood advo cacy groups and their involvement in the TOD development. NONPROFIT Refers to the non profit variable included within the advocacy factor. This code is used to designate any type of discussion regarding a non nt. PARKING Refers to the parking requirement variable included within the regulatory factor. This code is used to designate any discussion related to parking requirements for a particular TOD.

PAGE 295

280 SUMMARY TABLE OF CODES USED IN THE MANUAL QUALITATIVE DATA ANALYSIS POLITICS Refers to the political variable included within the advocacy factor. This code is used to designate any discussion related to political actors and their involvement in a particular TOD. PREDICTABILITY Refers to the concept of predictability. This code is used to designate any discussion related to the three par ticular TOD development. REGULATORY Refers to the regulatory factor. This code is used to designate any discussion related to the regulatory requirements within a particular TOD, including the zoning, infrastructure, parking, and retail requirements. RE TAIL Refers to the ground floor retail variable included within the regulatory factor. This code is used to designate any discussion related to the ground floor retail requirements for a particular TOD. ROI Refers to the return on investment variable inc luded within the economic factor. This code is used to designate any discussion related to profit expectation and ROI for a developer of a particular TOD. SATISFACTORY Refers to satisfactory profits in relation to the concept of satisficing. This code is used to designate any discussion related to the concept of satisfactory profits as opposed to maximum profits with regards to the SUBSIDY Refers to the public subsidy variable included within the economic factor. This code i s used to designate any discussion related to public subsidies targeted for a particular TOD project. RISK Refers to the over all concept of risk for the developer in making decisions for a particular TOD. This code is used to designate any discussion or text related to the risk environment and risk conditions that a developer encounters during a TOD project. SATISFICE Refers to the theoretical concept of satisficing used in this research. This code is used to designate any text or discussion related t reducing risks and obtaining satisfactory profits. TIMING Refers to the concept of timing and the time making process. This making process with regard to market timing and economic conditions. TOD This code is used to designate any discussion or text related to the concept of a TOD, which is often described as mixed use, residential retail and office development located within a half mile of a transit stop. ZONING Refers to the zoning variable included within the regulatory factor. This code is used to designate any discussion or text referring to zoning regulations related to a particular TOD project.

PAGE 296

281 A PPENDIX D THE LOW INCOME H OUSING TAX CREDIT PROGRAM The following is a basic description of the LIHTC program. The section seeks to give a brief explanation of how low income tax credits are acquired by developers and sold to finance affordable rental housing development s For a more detailed explanation of the LIHTC The Low Income Housing Tax Credit: HERA, ARRA and Beyond. Introduction The LIHTC is a federally subsidized (HUD) program created to stimulate the development of affordable multi family rental housing development s in the U nited States (Korb, 2009) The program first enacted with the Tax Reform Act of 1986 (TRA86) offers a dollar for dollar tax reduction to corporations and other private equity groups to help stimulate the development of affordable housing. The LIHTC program is responsible for almost 90 percen t of all affordable rental housing created in the U.S. The program stimulates the development of affordable housing to serve low income households that earn between 30% and 80% of an area median income. A Description of H ow the LIHTC P rogram W orks 1. The d eveloper applies for low income housing tax credits through the local housing authority. The a pplication process is competitive with the best developer being awarded the tax credits ( Example : Medici Communities submit ted its successful application to the Colorado Housing and Finance Authority for LIHTC s to fund the development of 50 affordable units at the Evans Station site in Denver, Colorado )

PAGE 297

282 2. The highest scoring LIHTC application is awarded these tax credits by the local housing authority. ( Example : Medici Communities was awarded approximately $12 million in LIHTCs by the Colorado Housing and Finance Authority ) 3. Once awarded LIHTCs, a d eveloper must seek a buyer for the tax credits. (The tax credits awarded to the develo per are not cash. The credits must be sold to an investor like a corporation or private equity group. Once the tax credits are sold to the investor, the developer receives cash which can then be applied to the ir development project.) ( Example : Medici Com munities found a buyer for their $12 million in tax credits. The corporate investor purchase d the $12 million in tax credits for approximately .95 cents on the dollar. The sale g ave Medici $11.4 million in cash equity for their affordable development whi le the investor receive d $12 million in tax credits. When the corporate investor pa id their tax bill, they use d their $12 million in tax credits which were purchased for $11.4 million for a saving s of $600,000 in corporate taxes.) 4. The d eveloper uses t he cash equity from the sale of the tax credits to fund the affordable housing development. ( Example : Medici use d the $11.4 million received via the sale of their tax credits to f und the development of the affordable Evans Station Loft apartments. )

PAGE 298

283 APPENDIX E QUANTITATIVE EASING AND MORTGAGE BACKED SECURITIES Introduction This section gives a basic explanation of the quantitative easing program and the term assets as treasury bonds and mortgage ba cked securities. The purpose of the QE program was to help stabilize and strengthen housing markets and the national economy following their collapse during the subprime mortgage crisis in the U.S. which began in 2007 2008. For a more detailed understand mortgage backed securities, refer Klyuev, Imus, and Srinivasan Unconventional Ch oices for Unconventional Times: Credit and Quantitative Easing in Adv anced Economies The Quantitative Easing Program implemented by the Federal Reserve is related to this research because it seeks to stabilize and strengthen housing markets and the national economy. Strong, stable housing markets lead to more predictabl e and increased profits for TOD developers. Therefore they become more likely to consider affordable housing in their TOD. Furthermore, stronger housing market conditions lead to stronger tax credit markets which in turn produce more LIHTC equity for dev elopers considering using it to fund affordable housing development in a TOD. Higher LIHTC equity margins thus increase the likelihood that a developer will produce affordable housing in a TOD.

PAGE 299

284 Quantitative Easing Quantitative easing (QE) is a monetary policy used by central and government banks to lower interest rates to stimulate the national economy. QE refers to the federal term assets like long term treas ury bonds or mortgage backed securities. QE is often used when standard monetary policy (lowering the federal interest rates) is exhausted. The U.S. Federal Reserve under the chairmanship of Ben Bernanke first introduced Quantitative Easing in 2008 to he lp stimulate the economy during the start of the subprime mortgage scandal. QE1 was introduced when the Fed had exhausted standard monetary policy by lowering the federal fund interest rate to 0. Since the Fed could not reduce the federal interest rate b elow 0, additional monetary policy was deemed necessary. The Fed thus instituted QE1 as an additional measure to help hold down interest rates in the hope of stimulating the economy. QE1 QE2, QE3, and QE4 The Fed introduced QE1 in November of 2008 to he lp address the economic using $600 billion to purchase long term treasury bonds and mortgage backed securities. QE2, QE3, and QE4 followed from 2010 through 2013 with s imilar amounts of funds. In early 2014, with the economy showing several years of stability and modest growth, the Fed announced that it would begin to taper its quantitative easing purchases by approximately $10 billion per month from the standard $40 bi llion it had been authorizing. The Fed will continue to taper the quantitative easing program as long as

PAGE 300

285 the U.S. housing markets and the national economic remain stable and show signs of modest growth. Mortgage Backed Securities Some economists argue th at of the two long term assets purchased by the Federal Reserve in the QE programs (treasury bonds and mortgage backed securities), the purchase of the latter is more influential in holding down interest rates (Krishnamurthy & Viss ing Jorgensen, 2011) These economists argue that as the Fed embarks on its tapering program, it should taper its buyback of long term Treasury bonds more than mortgage backed securities to keep interest rates as low as possible and to continue to stimulate the development of affordable housing.