Housing Democrats

Why Democratic mayors must build America's cities by establishing an urban real estate cartel

As I listened to forlorn Democrats express their pain and resentment at the Commonwealth Club, it just so happened that a potential answer to their troubles was erecting a department store 2 1/2 blocks away. Forest City Enterprises Inc. of Cleveland, Ohio -- developer of the new Bloomingdale's-anchored urban mall between Market and Mission streets and a project that will turn the old Public Health Service hospital in the Presidio into apartments -- is leading a national business trend in which niche developers are building closely bunched apartments, stores, and offices in American cities -- and making a healthy profit in so doing.

But it's up to America's Democratic mayors to exploit these companies' opportunistic energies in a way that truly benefits cities, and, indirectly, the Democratic Party. There are a lot of cities that have underdeveloped urban space and are run by Democratic mayors. More than a few of them are in Ohio, Colorado, Nevada, and New Mexico, where a tiny demographic shift in the direction of urbanity could move whole states into the Democratic electoral column.

When it comes to the demographic, political, and business trends I'm addressing, Cleveland is emblematic of America's past (its neighborhoods' populations shrank between 20 and 60 percent from 1970 to 1990), its present (Ohio voters just decided America's political course for the coming four years), and its future (Cleveland is the corporate headquarters of Forest City Enterprises Inc., whose business plan imagines reurbanizing America).

This $5 billion real estate company has bet its stock on urban projects, many of them mixed-use infill developments designed to bring population back into old cities, a strategy "where the opportunity for growth extends far into the future," according to an analyst quoted recently in Forbes.

A company subsidiary plans to develop a $2 billion urban-infill project in Brooklyn. Forest City is developing America's largest urban-infill project on the 4,700-acre site of a former airport in Denver. It's creating a mixed-use development on 55 acres in Kansas City. And it's building a $290 million apartment project in Oakland that will house 2,500 residents in nearly 1,000 apartments, which the company ultimately hopes to expand to 2,000 units.

But as with other firms focusing on urban redevelopment, Forest City has achieved financial success by putting urban taxpayers in a headlock. The company's Brooklyn proposal includes a government-subsidized stadium; its Oakland project, an estimated $61 million in city subsidies.

In its hometown of Cleveland, Forest City spent 14 years attempting to lure the city into a deal by which taxpayers would build a $400 million convention center on Forest City land in exchange for a project that would erect 2,400 homes on vacant land the company owns near downtown. The deal fell through this year after potential costs to taxpayers proved overwhelming. In retaliation, Forest City has indicated it will sit on its fallow land indefinitely.

This is where the Democratic city real estate cartel comes in. If Democratic mayors were to join into such a cartel -- whether formally or otherwise -- America's dense, blue-hued counties could bargain with infill developers from a far better negotiating position.

Since the 1970s, American city fathers have doled out an astonishing number of taxpayer sops to development firms, whether in the form of stadiums, tax breaks, or near-free land, in the apparent belief that such corporate welfare is necessary to lure people back into cities.

This largess is based partly in reality: Building in old cities can be difficult and expensive, thanks to political delays stemming from anti-development battles with neighbors and the costs of removing industrial residues. On the vast stretches of abandoned or underused waterfront land in Cleveland and other northern Ohio cities, for example, "it takes around $200,000 to get the lot going," says Ron Schwachenwald, community relations director for the Building Industry Association of Northern Ohio, when I spoke with him last week.

On the other hand, it costs just $15,000 to prepare and permit an acre of suburban sprawl on rural land in Ohio.

But some cities have overcome the hurdles to urban development without inappropriate subsidies, pointing to similar economic potential nationwide.

Between 1996 and 2001, Vancouver grew its downtown by 155,000 residents, assembling swaths of underused industrial land into a series of large deals with developers of high-rise condominium towers. That population shift represents enough urban-values voters to tip nearly three U.S. elections.

Once land in downtown Vancouver sold out, Canadian high-rise developers descended upon San Diego. And after attempting to lure developers downtown for decades, city leaders struck gold by turning the city's central area into a redevelopment zone. Since 1992, downtown San Diego has grown by 12,500 people, with another 60,000 expected during the next 20 years. Repeat a similar urban population increase in Albuquerque, Denver, and Las Vegas, and you've elected John Kerry three times.

Portland, San Francisco, and Seattle are also undergoing a boom in demand for midtown apartments. This trend could be spread to cities such as Cleveland, which has square miles of available waterfront land but intransigent developers, if big-city mayors were to join together with national Democratic leaders, creating new ways of cooperating to grow America's cities without getting shafted by developers.

Given the vagaries of local, state, and federal law, the extent to which Democratic mayors could horse-trade development rights from one city to the next is unclear. But there's certainly room for better coordination when a single developer can screw over a Democratic city such as Cleveland by holding a potential downtown housing development hostage, yet also cut sweetheart deals with Democrat-controlled cities such as Kansas City, Denver, Oakland, and San Francisco -- without anyone in the national Democratic Party seeming to notice.

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