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.