Politics Steinbrueck’s New Math
City Council Member Peter Steinbrueck has an alternative proposal to Mayor Nickels’s downtown heights plan. Steinbrueck wants developers to put more money toward low-income housing ($20 per square foot Vs. Nickels’s $10 per square foot) & he wants higher “Green building” standards than Nickels.
However, a study that Steinbrueck commissioned to analyze the competing proposals—which was presented at a council briefing earlier this week—appeared to backfire on Steinbrueck when it showed that under Steinbrueck’s plan, the percentage change in land value was a 23 percent decrease, while under Nickels’s plan, land value increased 36 percent.
Steinbrueck’s colleagues—even lefty Nickels antagonists like Richard Conlin and Nick Licata—seemed shocked at the numbers, and Steinbrueck’s plan seemed doomed.
It turns out, however, that the consultants weren’t comparing apples to apples when calculating the square footage of the buildings under both proposals. Steinbrueck quickly asked the consultants to redo the analysis. With the correct numbers, they found that land value increases 24 percent under Steinbrueck’s plan while land value increases 33 percent under Nickels’s plan.
More important, the new numbers showed that the competing plans are about the same when it comes to the real bottom line for developers, which is something called Internal Rate of Return. Under Nickels’s proposal, the Internal Rate of Return for developers would be 27.6%, and under Steinbrueck’s plan, it would be 26.3%. The industry standard for Internal Rate of Return is 20%. (Under the initial flawed study, Steinbrueck’s plan had appeared to just squeak in at 20.1 percent.)
Steinbrueck's plan is total BS. Housing affordability is about supply and demand, period. Increasing the cost of housing will reduce the amount of housing that will be created, reducing supply and increasing prices. Increasing the cost of NEW housing downtown will raise the cost of ALL housing downtown (as in a rising tide floating all boats). The amount of additional affordable housing created with Steinbrueck's increased fund will be drowned by the ACROSS-THE-BOARD increases in downtown housing costs as the market equalizes. Now take that money and spend it on public amenities, schools and transportation improvements that will benefit all downtown residents (and therefore the entire region with increased economic vitality), and now that's a reason to support increased impact fees… On another note, Steinbrueck's agitating for increased fees at least has a rational underpinning (although flawed), but what the hell's up with gerrymandering the zone boundaries?