Should GoTriangle and the developer Hoffman & Associates be allowed to pay $1.5 million into Raleigh’s affordable housing fund instead of including affordable units in the high-rise apartment complex they’re building next to Union Station, as they originally offered?
Last week, a majority of the members of the Raleigh Planning Commission said yes.
Although the planning commission’s 4-2 vote in the developers’ favor is only a recommendation (the city council gets the final say), it illustrates the tension between the City of Raleigh’s stated housing goals and the political and financial realities affecting its ability to realize them.
In 2019, the city approved GoTriangle and Hoffman’s request to rezone 1.74 acres of GoTriangle-owned land at 200 South West Street for high-rise, mixed-use development. This was prime real estate in Raleigh’s up-and-coming Warehouse District; Union Station had just opened next door and the city was already in a housing crunch.
At the time, the partners planned to build two towers containing retail space, a hotel, and hundreds of apartments. Embedded in the rezoning was a condition that 10 percent of the apartments be priced affordably for households earning 80 percent of area median income or less.
Over the subsequent six years, the pandemic hit, construction costs spiked, and the site sat empty. GoTriangle and Hoffman revised their development plans down to a single, 23-story tower with retail and 385 apartments. Then, last week, they asked the planning commission to amend the property’s zoning conditions to allow them to contribute to the city’s affordable housing fund rather than include any affordable units in the development. Specifically, they offered to pay $40,000 times 10 percent of the total housing units in the building—about $1.5 million—to the city in lieu of including 39 affordable units as planned.
Ordinarily, a developer in Raleigh is not obligated to build any affordable housing or pay any amount of money into the city’s affordable housing fund. But since GoTriangle and Hoffman voluntarily added the affordable housing condition to their rezoning request, the city has leverage to hold them to that commitment—or not.
During last week’s planning commission meeting, Hoffman representative John Florian argued that high-rise construction costs have gone up and rents have dropped since 2019, creating unfavorable conditions for development that make it impossible to include affordable housing in this building.
“It is an extremely, extremely challenging financial environment right now,” Florian told the commissioners. “We don’t see any point in the future where you can get enough rent on the non-affordable units to cover that deficit in the affordable units to make that financially feasible.”
“Maintaining the current conditions … would render the project unviable,” Florian elaborated in an email to the INDY. “If the rezoning request is not approved, the site would likely remain undeveloped for an extended period or be limited to a less financially challenging, lower-density use that does not align with the city’s growth and housing needs.”
(GoTriangle deferred to Florian and Hoffman & Associates after INDY sent the agency a request for comment.)
The two planning commissioners who voted against GoTriangle and Hoffman’s request questioned whether a $40,000 payment in lieu of each affordable unit was sufficient.
Commissioner Reeves Peeler said the amount was “not adequate for a downtown high-rise given the housing inequality, homelessness and general unaffordability of Raleigh.”
Commissioner Tolulope Omokaiye called the payment-in-lieu proposal an “escape route” for the developers and questioned whether an extra $1.5 million would meaningfully impact housing production elsewhere in the city.
Commissioner Dwight Otwell, who ultimately supported the request, said he was “conflicted” about his vote because GoTriangle is a public entity and the development is next to a transit station—factors that potentially increase the city’s responsibility to deliver affordable housing.
Florian’s response: “The public-private nature of the project does not exempt it from fundamental financial realities.”
Florian presented the planning commissioners with a binary choice between accepting the $1.5 million payment-in-lieu or saying goodbye to this downtown development opportunity. He framed the first option as fair and data-driven. But is it?
According to Florian, GoTriangle and Hoffman landed on $40,000 per-unit payment based on “past city guidance on affordability contributions, intended to reflect the cost of replacing a market-rate unit with an affordable unit elsewhere.”
Matthew Klem, a senior planner for the city, told INDY via email that Raleigh “does not have a policy that encourages or specifies a monetary contribution for affordable housing production.” If a developer volunteers to make a contribution, Klem wrote, the money goes into “a discretionary fund that the Council can use to support a wide range of affordable housing programs or projects.”
Like Raleigh, most cities in North Carolina have not created policies for payments-in-lieu of affordable housing. Even the ones who have policies on paper, like Chapel Hill, have struggled to successfully implement them.
Further afield, in places where mandatory inclusionary zoning is unambiguously legal, cities like Portland, Oregon and Minneapolis would likely require a significantly larger contribution from the developers.
In Portland, developers can choose to build a certain amount of affordable housing onsite or pay a fee of $27 per residential square foot. Constructing 385 market-rate apartments with footprints of, say, 700 square feet (which is below the average for a one-bedroom in Raleigh) would trigger a $7.8 million payment to the city.
In Minneapolis, where the payment-in-lieu fee is $22 per residential square foot, the city could charge the developers about $5.9 million.
Raleigh isn’t Portland or Minneapolis. It can’t enact a mandatory inclusionary zoning policy without running afoul of the General Assembly. But in this rare instance, city leaders get to decide whether GoTriangle and Hoffman’s proposal represents a fair trade-off.
The day after the planning commission made its decision, Raleigh mayor Janet Cowell gave her first State of the City address. In it, she spelled out her vision for increasing the city’s housing stock.
“We need mixed-income, mixed-use housing integrated with transit,” she said.
The 200 South West Street development is a test case for that vision. When the city council hears GoTriangle and Hoffman’s request in the coming weeks, it can opt to accept the $1.5 million payment-in-lieu, double down on the original zoning condition, or, if it doesn’t like either choice, try to negotiate with the developer.
Chloe Courtney Bohl is a corps member for Report for America. Reach her at chloe@indyweek.com. Comment on this story at backtalk@indyweek.com.