At Lincoln House March 2017

Helping communities harness investment

The Lincoln Institute of Land Policy has established the Center for Community Investment, a leadership development, research and capacity building initiative to help communities mobilize capital to achieve their economic, social and environmental priorities.

Robin Hacke will direct the new center, building on work she incubated over the past three years as a senior fellow with The Kresge Foundation.

“The center will take on challenges that have long frustrated efforts to effectively fund work in underserved places,” Hacke said. “Too often, communities and social investors must work around existing financial systems. We want to reboot community investment to deliver capital where communities have identified the most urgent needs, at a scale large enough to make a difference.”

Hacke brings more than two decades of investment experience to the job, having served as director of capital innovation for Living Cities, as a venture capitalist and strategy consultant in the technology industry and as a public finance banker.

Based in Cambridge, Massachusetts and Washington, D.C., the Center for Community Investment will work in partnership with the Initiative for Responsible Investment at the Hauser Institute for Civil Society at Harvard Kennedy School. The Kresge Foundation will serve as lead funder and continue to provide support.

The center will build on the success of pilot initiatives in regions such as Los Angeles, the San Francisco Bay Area and Denver, where Hacke and her colleagues supported diverse groups of stakeholders from the public, private and civic sectors. In the Bay Area, Hacke and her team worked with members of the Great Communities Collaborative, including Bay Area Rapid Transit (BART), the metropolitan planning organization and affordable housing developers and advocates to launch planning for thousands of units of affordable housing on publicly owned land. By helping leaders ask tough questions and identify opportunities to open bottlenecks, the work increased the pace and scale of development.

“The Center for Community Investment not only will build the capacity of places to absorb capital, but it will promote better use of one of their most valuable and scarce resources – land,” said George W. “Mac” McCarthy, president and CEO of the Lincoln Institute of Land Policy. “Land policies can play a central role in attracting or generating the investment needed to tackle vacancies and blight produced by dysfunctional land markets or to address the disparate impact of pollution and climate change on poor and disadvantaged families. The center will equip communities to access the tools they need to take on these complex challenges.”

The center will also focus on expanding the network of people who typically work on community investment projects, bringing together a wide range of perspectives from nonprofit and civic organizations, businesses, hospitals, cities and towns, universities, financial institutions and economic development and transit agencies.

The center will pursue three core strategies, with an initial focus on climate change and population health:    

  • Local Systems Change: The center will provide direct support for cross-sector collaboration in selected sites across the United States, designing curricula and providing intensive technical assistance to support systems change efforts on the ground.
  • Leadership Development: The center will select cohorts of 12 fellows for a 15-month skill development and coaching program, after which fellows can apply their learning to projects in their communities and build a national community of practice.
  • Field Research & Development: The center will study the outcomes of community investment efforts, develop tools and case studies and share ideas with funders, policy makers and practitioner networks through publications and online resources.

For more information visit centerforcommunityinvestment.org.

Value capture at Hudson Yards

Less than a mile west of Times Square along the shore of the Hudson River, workers are transforming Manhattan’s last frontier of developable land into millions of square feet of office, residential, and commercial space — one of the largest private real estate projects in U.S. history.

At Hudson Yards, a massive, 37,000-ton platform will cover dozens of acres of live train tracks. The development, 45 square blocks of rail yard and industrial land between 30th to 42nd streets, will surely be studied for its planning, design, and engineering, but one of the most innovative aspects of the project is its financing.

New York City is redeveloping Hudson Yards with the understanding that public actions such as regulatory changes or infrastructure investment can generate large increases in the value of land. Large private development has been made possible by the rezoning of the area, beginning in 2005, from mostly industrial to mixed use. The city also funded the first addition to the New York subway system in 26 years, an extension of the number 7 line to the new 34th Street–Hudson Yards Station, which opened in fall 2015.

These two actions alone are projected to generate billions of dollars in increased land value. Through a policy approach known as land value capture, the city will recover some of the new land value and use it for public benefit — for the subway extension itself, as well as the reconstruction of a street, the development of affordable housing, and the provision of green space.

Much of the up-front capital to pay for the public investments will come from $3 billion in bonds sold to investors. The bonds will be repaid through revenues tied to the increase in land value, and other sources. One of the largest revenue sources to repay the bonds will be property taxes distributed through a mechanism similar to tax increment financing. The city established boundaries around the Hudson Yards district, inside of which property taxes from new or newly renovated buildings are set aside for infrastructure within the district.

Additional revenues will come from bonuses paid by developers for the right to build at greater density than would otherwise be allowed, and from the sale of development rights to builders of commercial buildings along a planned boulevard and park. Some developers can also become eligible to build more square footage by building a portion of the boulevard and park. Finally, residential developers that purchase bonuses are required to set aside a portion of their projects for affordable units, or pay fees for the construction of affordable housing elsewhere in the neighborhood.

All of this is coordinated through a complex legal and financial framework that includes two independent development corporations established by the city, which work in collaboration with the Metropolitan Transit Authority and other public agencies.

The project has not been free from criticism. The property tax revenues are partly limited by tax breaks given to entice office developers, who make payments in lieu of taxes (PILOTs), discounted up to 40 percent, for 19 years. The city also had to spend more than expected from its general fund during the project’s early years to help pay interest on the bonds, compensating for a slower than expected pace of development, and thus slower growth of land-based revenues. Still the project is instructive for cities looking to capitalize on the land value generated by public actions, which often escapes completely as private windfalls.

This item originally appeared at the American Planning Association blog, as part of a series published in the run-up to the APA’s National Planning Conference in New York City. It was authored by Lourdes German, director of international and institute-wide initiatives for the Lincoln Institute, who previously worked with the City of New York on the Hudson Yards project while at Edwards Wildman (now Locke Lord, LLP) and Fidelity Investments. She will lead a session, Financing NYC's Hudson Yards, at the 2017 National Planning Conference, part of a track organized by the Lincoln Institute on Fiscal Analysis, Municipal Finance, and the Economy.

Odds & Ends

We’re gearing up for another workshop in Washington DC next month on the impact of housing markets on municipal finance, with the Urban Institute and other partners … The use of land – why planners cannot go it alone, from our partners at OECD … We brought together more than 30 Latin American journalists in Buenos Aires for three days of conversation about land policy and media coverage of cities with our partners FOPEA (Argentinian Journalism Forum) … From the publishers of Governing magazine, more coverage of our Atlas of Urban Expansion initiative … We talked accessory dwelling units, water, and manufactured homes at the Rocky Mountain Land Use Institute in Denver earlier this month … Hartford eyes a land value tax to spur redevelopment of vacant lots, as Cambridge seeks to curb sit-and-wait speculation too … This month’s highlighted Working Paper: Towards Property Tax Compliance: A Case Study of Attitudes Toward Paying Property Taxes in Jamaica, by Tina M. F. Beale, Rochelle A. Channer Miller, Amani Ishemo, and Cadien A. Murray-Stuart.

— ANTHONY FLINT & WILL JASON, Lincoln Institute of Land Policy

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