With few exceptions, most developers will say that
mixed-use projects are more challenging than single-use
So it’s no surprise that combining mixed-use
and mixed-income elements into one project creates double
the challenges. Yet, there are hundreds of projects under
development across the United States that prove you can
successfully bring together a mix of uses.
In fact, many developers have found that including
affordable housing in a mixed-use project is the only way
to obtain approvals, while others contend that affordable
housing projects are more successful when office or retail
space is added.
Sweetening the deal
While mixed-use projects are the hottest trend, many
municipalities only have single-use zoning, and getting a
mixed-use project approved requires some fancy footwork on
the part of developers.
Including affordable housing in a mixed-use project
often persuades political leaders and city and county
officials to give zoning approvals, said Jay Doherty,
president of Cabot, Cabot & Forbes (CC&F), a
Boston-based development firm that is developing Westwood
Station, a 4.5-million- square-foot mixed-use development
in Westwood, Mass., that includes Class A office space,
retail space, 1,000 residential units, two hotels, and
landscaped public parks.
Of the 1,000 residential units, 12 percent will be
classified as affordable housing, and another 5 percent
will be classified as moderate-income housing, Doherty
said. “Massachusetts law requires that all towns
and cities have 10 percent of their housing stock in
affordable housing, so most have responded by forcing the
inclusion of 10 percent affordable housing in most
residential projects,” he noted, adding that
CC&F agreed to include a higher percentage of
affordable and moderate-income units in Westwood Station to
“ensure goodwill from the town.”
Even with the low- and moderateincome housing to sweeten
the deal, CC&F and its partners, Commonfund Realty,
Inc., and New England Development, worked for three years
with Westwood’s Economic Development Steering
Committee to develop a master plan and went through more
than 20 hearings to obtain approvals.
“In cities, you clearly get vigorous political
support for a project with affordable housing,”
Doherty said. “In the suburbs, citizens push back
on affordable housing, and having other uses makes it
easier for neighborhoods to accept those projects as
The first phase of Westwood Station, which includes
about 90 retail shops and restaurants, a
125,000-square-foot office building and 500 residential
units, is expected to open in the fall of 2009.
Affordable housing required
Like CC&F, Fort Worth, Texas-based Museum Place
Development Group (MPDG) agreed to include affordable
housing in Museum Place, its mixed-use project near Fort
Worth’s Cultural District, not only to get city
approval but also to gain access to financial
Museum Place is the redevelopment of several existing
central city blocks that were once home to a thriving
commercial and residential neighborhood. It encompasses 11
acres, and when completed in 2009, the project will offer
173,000 square feet of retail and dining, 130,000 square
feet of Class A office space, 550,000 square feet of
residential development totaling roughly 500 units, and an
upscale boutique hotel.
MPDG, which is a joint venture between Fort Worth-based
JaGee Holdings, LLP, and TLCurban, set aside 15 percent of
its residential units for affordable housing, said Reece
Pettigrew, chief financial officer of JaGee Holdings,
adding that units will be restricted to families that earn
between 65 percent and 80 percent of the area median income
500 units, and an upscale boutique hotel. Pettigrew said
Fort Worth is focused on promoting central-city
redevelopment and prefers mixed-use projects. Museum Place
will serve as a model for the city’s commercial
corridors plan, urban village program, and mixed-use zoning
As part of the city’s economic development
agreement for Museum Place, the city and MPDG will
participate in a tax-sharing program in exchange for
affordable housing. The agreement is one of the first in
Fort Worth to include a quality affordable housing
provision, Pettigrew said.
“I am not sure we would have thought of
including affordable housing without the city bringing it
to our attention,” Pettigrew admitted.
“Working with the planning department and getting
the city involved early was critical because they pointed
us in the right direction for grants and
Offsetting the cost
While many developers might prefer to build affordable
housing projects exclusively, they’re realizing
that those projects are sometimes more financially feasible
when they include commercial uses. Retail and office space,
along with hotels, can offset the financial loss caused by
the affordable housing component, said Ed Walters, founder
and partner of The Walters Group, a Barnegat, N.J.-based
The Walters Group is developing a 370-acre mixed-use,
mixed-income project in Stafford Township, N.J. The
project, dubbed Stafford Park, features a village center
theme with 565 age-restricted homes and 112 affordable
apartments, as well as a retail complex. The project will
also include an ice skating rink and 25,000 square feet of
Walters said Stafford Township required Stafford Park to
include affordable housing. “We knew a project of
this size would require affordable housing to get
approvals,” he noted. Residents at Stafford
Township will pay between $650 and $850 per month for
affordable housing units.
To help with the cost of the project, which has a price
tag of more than $140 million, The Walters Group has
applied for lowincome housing tax credits (LIHTCs), Walters
said, adding that the process is very competitive.
“It’s not that easy,” he said.
“The critical mass of other uses in the project
will generate enough revenue to pick up the shortfall for
the affordable piece. Other uses go a long way to making a
project with affordable housing work
Portland, Ore.-based Guardian Management made a similar
decision for the Crane Building. Several developers had
unsuccessfully approached the development as a single-use
project until Guardian took the project on, transforming
the historic six-story masonry brick tower alongside a
one-story warehouse and loading dock in Portland’s
Pearl District into a mixed-use project.
Guardian uses two floors of the Crane Building as its
corporate headquarters. A large restaurant and fish market
is housed in the warehouse/loading dock, and retail space
is located on the ground floor. Affordable loft apartments
occupy three floors, and two penthouse suites are situated
on a newly constructed rooftop, according to Tom Brenneke,
president of Guardian Management.
“We decided to lease space to a restaurant and
a retail store because we needed healthy rents, and the
only way to get that rent was through retail,”
Brenneke said, adding that Guardian used many capital
sources to fund the $24 million redevelopment cost,
including historic tax credits, a construction loan, loans
from the local urban renewal agency, equity raised through
a private-placement memorandum, and energy tax credits.
Fighting for tax credits
Combining commercial space and affordable housing makes
it more difficult to obtain LIHTCs, according to Jim Sari,
CEO of The Landmark Group, a Winston- Salem, N.C.-based
developer that specializes in urban revitalization.
Recently, Sari had to lobby the North Carolina Housing
Finance Agency to allocate LIHTCs for his redevelopment of
downtown Weldon, N.C., including the renovation of five
one- and two-story buildings dating from 1885. The
buildings were transformed into 24 affordable units and
three street-level commercial spaces.
Three of the units are available for families that make
up to 40 percent of the AMI, while eight units are set
aside for those earning up to 50 percent, and 13 units for
those with incomes up to 60 percent of the AMI.
Sari said he had to come into the LIHTC scoring process
with “every bell and whistle” to obtain
financing. And, even then, he had to take advantage of
state and federal historic tax credits, various loans,
grants, and operating subsidies from the city to make the
project work financially.
The city even had to provide water, sewer, and trash for
30 years for no cost and cap the property taxes to get the
project to break even. Otherwise, the rents in
Landmark’s Weldon buildings are so low—
$250 to $400 per month—expenses would have
exceeded revenues, Sari said.
“Mixed-use projects and downtown redevelopments
are not affordable products they’re used to
doing,” Sari said. “Most state programs
are most comfortable with vanilla projects, and projects
like Weldon aren’t vanilla. They’re just
harder to finance because they’re unique.