‘Developer fiefdoms’: How they benefit Washington’s emerging neighborhoods

Author:

Philip Langdon

New Urban Network

Washington, DC, is sprinkled with mini-neighborhoods that blossomed during the past decade, a period in which the city gained nearly 30,000 additional residents. But how, exactly, did those sections of DC manage to do so well?

Lydia DePillis, who writes the interesting “Housing Complex” feature in Washington CityPaper, says one of the critical factors has been the willingness of certain developers to invest in multiple real estate projects all within close proximity.

The Chevy Chase, Maryland, development firm JBG, for example, “quietly bought up nearly all of the remaining empty land in the U Street corridor,” DePillis observes. Another firm, Jim Abdo’s Abdo Development, carried out several residential projects around 14th Street NW and Rhode Island Avenue. Yet another developer, Chris Donatelli, “created a town center in Columbia Heights where there had been little but empty lots,” DePillis says. And several other development firms similarly have concentrated much of their work on small pieces of the reviving city.

DePillis raises two questions: Why does a developer concentrate much of the firm’s work in a particular neighborhood? And is this good for the neighborhood that ends up being heavily influenced by a single firm?

On the first question, she quotes Ed McMahon, a scholar with the Urban Land Institute, to the effect that “developers in general are risk-averse.” Says McMahon: “So if a developer does a successful project in one neighborhood, there’s a logic to doing additional projects in that same neighborhood.”

Avoiding risk is only one factor. Another is action by the DC government. “After years of underinvestment, the city’s development arm was able [during the past decade] to pick and choose between developers, apportioning large chunks of land to folks who could propose compelling concepts — thereby spurring master plans for places like McMillan Reservoir and Southwest Waterfront,” DePillis writes.

Yet another important factor is “D.C.’s ultra-empowered Advisory Neighborhood Commission [ANC] system,” she says. “While these hyperlocal bodies can’t directly kill a project, they can certainly slow it down. In a business where investors get spooked when things drag on too long, that’s often the same thing — which is why a long record of working with the locals is especially helpful.”

In support of that contention, Calvin Gladney of the development consulting group Mosaic Urban Partners observes: “You have to get the ANC to weigh in, so the more you can leverage previous relationships, the better.”

DePillis adds to this still another factor:

Owning large swathes of a neighborhood also helps developers avoid the sort of adjacencies that can imperil projects. The best way to ensure your new condo development abuts retail property aimed at the same target demographic? Own the retail land, too.

And clustering lets developers build a local brand name, something that helps when it comes time to actually sell their units to the public. “People in the neighborhood specifically know his brand as being a clear type of product that they can rely upon,” community relations consultant Tania Jackson says of William C. Smith’s Congress Heights units. “If you’re a for-profit developer, that’s pretty great.”

According to DePillis, “rapid acquisitions in close proximity are not out of the ordinary among big-time D.C. developers. It’s a pattern that explains why the city looks like it does today.”

To the second question — is this good for the neighborhoods? — she answers in the affirmative: “It means that deep-pocketed types who often reside elsewhere can create better micro-neighborhoods for the people who have to live with what they build. JBG, with several lots in that little area of U Street, will pay attention to the area between its buildings, not just each building in isolation.”

The power wielded by the Advisory Neighborhood Commissions plays a role, she suggests:

ANCs can leverage concessions from large landowners, knowing that the company will have to come back looking for support for their next project. In Shaw, for instance, Douglas Development scatters tens of thousands of dollars every year in donations to local organizations, like a manor lord might spread charitable donations around the adjacent village.

That can be a discomfiting image, but the bottom line is that there’s a lot to like about the fiefdom model of development. When developers double-down on an area, their interests become the residents’ interests. It’s to their advantage to advocate for transportation and streetscape improvements, or amenities like parks and recreation centers, because they have a larger financial stake in a neighborhood’s success.

Others’ perspectives

Some Washington CityPaper readers took issue with DePillis’s appraisal. One point of contention was whether residents and business tenants might in fact be better off if there were more developers competing in a neighborhood. Greater competition might generate lower prices, some argued.

One critic of the current system, Matt Yglesias, wrote on his blog:

… a big problem comes in the “investors get spooked” phase. The spookiness of investing in DC means the cost of capital is higher than it would otherwise be and the total quantity of investment is lower. That’s good for incumbent landlords, and it also particularly disadvantages potential start-up firms which helps shelter large developers from competition. What’s more, the ANC uncertainty factors also deters outside firms from coming into the city with projects, thus further sheltering DC’s developers from competition. The upshot is that while I think ANC members think they’re being “tough on developers,” a large amount of what they’re doing is creating monopoly rents for developers and then very partially splitting the proceeds with neighborhood nonprofits.

Another reader said:

I would argue that if you really want to achieve a competitive marketplace, the solution is to 1) have community involvement in the drafting of a plan, 2) set all of the rules in accordance with that plan (zoning, design, etc), and 3) allow everything else that happens in accordance with both the rules and the plan to occur by right and without any interference from the community.

What we see, all too often, is that a plan is made, but the rules aren’t changed. Therefore, a developer may be in line with the plan but still needs a rezoning, which opens the door for more community input — which adds cost to the process and pushes the end result away from that competitive marketplace and more towards monopolies.

This isn’t just about development, either — the same dynamic plays out with businesses, as well. When your potential business is at the whims of the ABRA and the ANC’s voluntary agreement process, you end up crowding out entrepreneurs in favor of larger, more established operators who have the resources to navigate the complicated approvals processes.

Another reader lamented, “The article presents the developers as a kind of Jane Jacobs, creating neighborhoods, in contrast to impersonal developers (like Robert Moses?).” Are there some other options?” the reader asks.

Interspersed were statements from other readers disagreeing about the quality of the work by some the developers who were praised in the article. Whether or not DePillis got everything right, she certainly identified an interesting urban phenomenon and sparked a worthwhile discussion of how to achieve high-caliber design.