Metro Below Us, Above Us Only Sky

Yesterday marked the official groundbreaking for Washington’s CityCenter project. The land on which it will rise, which used to house the old convention center, has been an undeveloped parking lot for the last few years — the last great swath of building-free, developable lots in the downtown area. With the completion of CityCenter, an enormous stretch of land comprising the nation’s fourth largest central business district will be essentially built-out. From Rock Creek in the west, to Massachusetts Avenue in the north, to North Capitol on the east, and the Mall on the south every bit of commercial land will have a building on it, and most of those buildings will rise to the height limit. There are available lots in NoMa, adjacent to the central business district, but buildings are appearing on those lots quite rapidly, and by the time CityCenter is completed NoMa, too, will be nearly full. The area around the ballpark, south of the Southeast-Southwest Freeway, offers more free commercial land, but that space is a poor substitute for downtown and is also being picked apart by developers.

There’s no getting around it — Washington’s central business district is essentially at capacity. Additional growth in commercial space will mostly be piecemeal and will mostly be in places that aren’t good substitutes for the region’s primary office core.

It’s difficult to see what the long-run effect of this may be, but over the next two decades or so the likely impact is easy to guess: rents will rapidly increase. Indeed, Washington’s commercial vacancy rate is already among the lowest, and its rents among the highest, in the country. High rents will have a stultifying effect on the local economy, will limit new job creation, and will represent foregone tax revenues.

As I’ve made clear before, I think this will prove very costly for the District and should be a matter of grave concern for its residents. Defenders of the height limit often respond that it has some value to residents. I don’t disagree, but I’ve been disappointed at the unwillingness of these defenders to think hard about what that value is and how it compares to the policy’s costs. Saying, “X has benefits”, is not enough; one has to show that the benefits of X justify the costs associated with X.

So I want to suggest a little thought experiment for local urbanists that should help us make progress on this question:

Divide the District into two areas: the office zones mentioned above (CBD, NoMa, Ballpark), and the rest. In each area, all limits on height will be eliminated. In their place, the city will level a “floor tax”; a developer can build as high as he or she likes, but must pay a one-time fee for each floor-equivalent (say, for each 10′ of height) above the currently existing development limits. This is not in lieu of other city taxes, which would still be paid; the city would basically be selling height permits. So downtown, a developer could tear down a 13-floor building and replace it with a 20-floor building, provided that it paid the floor tax for each of the 7 floors above the previous height. In Brookland, a developer could build an 8-floor building on land currently zoned for 2-story construction, provided it paid the floor tax on the 6 additional floors.

The resulting revenue would be divided equally between the city treasury and the neighborhood in which the project is to be built, where the money would go toward local amenities and infrastructure improvements.

My question is: where would you, urbanists and District residents, set the two tax rates (one for the office zones, one for the rest of the city)? You’re not allowed to reject the system out of hand; given that this policy will be put in place, but given the freedom to set the tax rates however you like, which rates would you choose?

UPDATE: I call the central areas “office zones”. I don’t care if new construction in these places is residential or commercial, and you’re free to assume what you like, though my expectation is that new residential construction will not change the primarily commercial orientation of these places.

Comments

  1. Steve D says:

    Well, obviously in Brookland you would set the tax at such a high level that nothing would ever get built, preserving the valued dearth of amenities and sparing neighborhood email lists the current bounty of messages they enjoy today.

  2. Alex B. says:

    Question – you call one of the areas the ‘office zone,’ but would you presume office uses in those areas? Obviously, office would play a large part in it, but there’s also a market for residential in these areas. The first phase of the CityCenter project is substantially residential.

  3. ryan says:

    Alex — answer in a post update above.

  4. John says:

    Yep, unless we get real on building size, we may as well change the sity motto to “DC, Tyson’s is our CBD! Open your business there.”

    Unfortunately, the DC “haves” (Feds, Lawyers & Lobbyists, Politicos) like their semi-sleepy southern town, and could give a frack if the rest of the folks see their only job options in the Tysons-Herndon-Reston tech ghetto, so the heights law will stand.

  5. Greg Sanders says:

    I’d probably default to equal. Since the tax starts at the current regulated height, there’s already a neighborhood specific adjustment.

    If I were going to split it, I might set a base rate for the tax and reduce it proportional to the extent that the zone’s rents were above that of comparable cities and update the rate once a year. That could be both a market mechanism and a framing device, whenever the tax was defended the rental rate discrepancy would be there as a justification.

  6. tom veil says:

    Allow me to propose something much simpler, but with the same goals in mind:

    1) Leave the U.S. Congress’s Heights of Buildings Act of 1910 as-is.
    2) Eliminate all of the D.C. government’s zoning density restrictions for buildings within 1/3 mile (6 minutes’ walk) of a Metro or streetcar station.

    This way, there’s no need to tinker with property taxes — the more voluminous structures near transit stations will be assessed at higher values, drawing in more tax money, even while the apartments and offices in these more voluminous structures become cheaper on a per-unit basis as supply catches up with demand. Traditional downtown DC might not grow, but the mid-city neighborhoods should take off like gangbusters.

  7. Keith says:

    100% tax on the yearly rental value of the land in all parcels, CBD or otherwise.

    0% tax on ANY improvements.

  8. Crispin says:

    I am wholly sympathetic to proposals for taller buildings, at least in some parts of DC. But I think your argument for doing so is flawed in an important respect. The central business district is not static. It has expanded over time, displacing residences, and I see no reason to assume that process would stop. Moreover, the long-standing safety valves for a lack of space downtown are the edge cities, one of which, Crystal City, is about to have a lot of vacant space — and almost all of which have plenty of room for additional development. So it seems to me that this is mostly a question about two things: The kind of urban fabric we want (taller and more diverse; or stumpy and homogeneous), and DC’s tax base.

    For those reasons, I’d suggest a per-floor fee in the business district set to make development here (given the higher rents) just slightly more profitable than building in Rosslyn.

  9. ChiTownGuy81 says:

    Why not DC just enact a La Defense method to their urban building? Let a certain area of the city (say this new CityCenter) have a height limit that is triple or quadruple but instead of a per floor increase on the height above 13 stories, initiate a per square foot Impact Fee that will help cover the cost that these new buildings will incur on the infrastructure surrounding it. Study the view planes of the area to ensure the absolute best views are preserved and then let the free market build as high as they can in that area (of course FAA regulations, military restrictions, etc. would come into play on this land as well). I think DC could be a prime candidate for a high rise city center just off the historic urban core without jeopardizing the historic intent of the city. keep it contained in land area but let the density rise to relieve the economic pressures of demand on both office and residential in the area.

  10. IMGoph says:

    i wouldn’t say that the central core is tapped out. there is still a lot of land on the eastern edge of downtown that is either vacant, or holds shorter buildings that would quickly be purchased and torn down when development pressure downtown truly hits capacity.

    map.

  11. Alex B. says:

    @IMGoph

    Of course that land on the fringe of the core can and will be developed – but it is a poor substitute for land in the core.

  12. IMGoph says:

    one man’s fringe is another man’s central location.

    all that land is very close to the capitol. that’s pretty central.

  13. Alex B. says:

    Of course – like I said, it will get developed one way or another.

    However, the point of an exercise like this is that you have a large demand for more downtown space. Almost-downtown space is good for many similar-but-still-different reasons, but it’s still not a substitute for downtown space.

  14. JS says:

    @IMGoph: A large chuck of your map is already spoken for/being actively developoed – the Walmart site and the 395 deck/air rights development.

  15. Roger says:

    “So downtown, a developer could tear down a 13-floor building and replace it with a 20-floor building…”

    Just out of curiosity, is that an economical proposition even in the absence of a height tax, to demolish a 13-story building for a 20-story one? Many of the buildings of that height in the business district are only 10-20 years old and in excellent condition. And if it’s economical in an individual case, is it wise from a city-wide standpoint to allocate scarce construction capital in that manner, where the 20-story building adds the least amount of new floor space?

    Possibly the case in which it would be profitable would be if the existing building were highly depreciated and the rents low — but if the goal is to stabilize or lower DC rents, how would that help?

  16. Alex B. says:

    Just out of curiosity, is that an economical proposition even in the absence of a height tax, to demolish a 13-story building for a 20-story one?

    Depends on the condition and use of the current building, as well as the proposed use for the new one.

    In DC, I think it’s been more common to see complete gutting of existing buildings instead of teardowns because of the general soundness of the structures themselves, even if the interiors aren’t up to the class A specs.

    There have been some teardowns even without bonus height. The corner of Connecticut and K, for example, had a perfectly good building that was torn down for a newer office building with more amenities and the ability to attract higher rents.

    Sometimes, you get a building where you can’t change certain elements as a part of a renovation (for example – floor-ceiling heights).

    However, if we’re talking about replacing 13 story buildings with 20 story ones, I doubt the existing structure of those buildings could handle an additional 7 floors (though there are plenty examples downtown of much smaller pop-ups on existing buildings), therefore teardowns would make more sense.