A Council Member’s Perspective on Owner Occupancy

The following is a guest contribution from CP District 2 Councilman Robert Catlin. We encourage all members of the community to either send in material for us to publish or comment on individual posts. Here it is:

Two issues seem to emerge with some regularity about why College Park is not moving more swiftly to becoming the College Park people want to see.

One issue we are told is that the University and the City are not working together on development issues.  As an insider, I do not see that to be a significant issue at this time.  I am not aware of any revitalization opportunities which have been missed because of City-University discord.  While the City and the University have some differences, as one would expect they would, various University committees have City staff members and University staff take part in many of the City’s planning activities.

The City–University Partnership, established about 1999, meets regularly to discuss common concerns, discusses development proposals and looks to formulate positions that both parties can support.  I have been a member of this committee for the past four years, as a University appointee!  The Mayor and various City residents are also voting members of the Partnership, along with high level University officials. Various City and University planning staff also take part in the meetings. The City’s attorney and a banker are also on the Partnership. For a brief time we had a high level representative from the County on the Partnership Board.  In recent years the Partnership has developed Guiding Principals for Redevelopment of the Knox Boxes and Guiding Principals for Redevelopment of the Northgate Area.  Recently the Partnership lost John Porcari, Peter Shapiro (a former County Councilmember from Hyattsville) and had Jim Rosapepe elected to the State Senate, so some changes will need to be made in the organization.

A second issue which has surfaced more recently is that development is being hindered in a major way by modest owner occupancy requirements for condominium projects and conditions designed to ensure that luxury apartment projects do not evolve to be student dominated.  No developer has ever expressed a serious concern with our attempts to achieve some standards here.  So far developers have told us that our conditions are legal and will not impact their ability to finance their projects.  Since these conditions do not cost the developers any money, while the myriad of other conditions requested by the City and required by the County (and often County Council members) do have a significant cost, it is curious why some think that such conditions are hindering development.   The force behind obtaining these conditions is primarily residents.  The various projects would not get community support without some assurance that the projects will house the groups the developers say that they are primarily meant for.  Without these assurances, the projects would be fiercely opposed and not be built (JPI and the City Hall proposal, for example), so it is with great irony that some claim they impede development.

When the developer of The Mosaic at Turtle Creek, situated south of the Knox Box area, was asked why a condominium project called intergenerational housing had no place for students, we quickly learned from the developer and the University that the project would not proceed if the City did not halt such talk!

The luxury housing, both apartments and condominiums, proposed for the area, I don’t believe will attract significant student interest, because the price points for such housing are far above what most students are paying.  Many of my council colleagues and residents do not agree with me on this point.  Owner occupancy requirements (75 percent minimum requirement for owner occupied units) for condominiums have a necessary place, if only to assure potential buyers, that spending $400,000 to $700,000 for a condominium will not turn out to be a bad investment, because otherwise investors may target the development as a way to get rich from student renters.  Sometimes it is claimed that parents will buy up the units for their children to live in and therefore comply with ownership requirements.  Surely that will happen on occasion.  Not having ownership requirements do nothing to stop if from happening either.  The only way to avoid it from occurring would not to build any more housing that was not 100 percent for students.  I could say a lot more, but I will retain some thoughts for my response to the neigh sayers out there.

11 thoughts on “A Council Member’s Perspective on Owner Occupancy”

  1. Mr. Catlin writes that “owner occupancy requirements … for condominiums have a necessary place, if only to assure potential buyers, that spending $400,000 to $700,000 for a condominium will not turn out to be a bad investment, because otherwise investors may target the development as a way to get rich from student renters.”

    However, if investors target a development as a way to get rich from student renters, doesn’t that make the project ipso facto a good investment? The ability to turn a property into a rental makes it an income-generating asset, which is certainly a better investment that a property that cannot by law generate income.

    Surely the high housing prices supported by the tremendous housing demand from students would more than offset any negative factors, such as a low rate of owner-occupancy, that lower property values.

  2. Some very interesting points. Frankly I have a hard to time understanding why residents would be opposed to another university view-like tower if it ensured fewer keg parties in their neighborhood. If residents don’t see the tremendous benefit that a project like university view brings (actually a net reduction in traffic!) then I’m not sure what they are thinking.

    As far as developers, I was specifically told at the housing forum by a CP developer that owner occupancy requirements make financing more difficult. As I’m sure Mr. Catlin knows, more money = good investment = easier financing. Since the condo market is notoriously fickle, developers (and banks) like to have flexibility. The market may be good one year, but after they jump through all the planning hoops (some of them worthwhile) and years later when the developer begins to outfit the interiors of these units they make a decision as to who to market the units to. This flexibility is lost when units aren’t conducive to renters at all.

    Also, we shouldn’t forget that “normal people” also rent. East Campus will be almost all rental units for non-students. Another example in addition to Mosaic that shows students shouldn’t look to the university for housing relief.

    I wonder if Mr. Catlin could take this time to explain the council’s position on Otis Warren’s new 12-story condo project just north of the View…

  3. Thanks for the questions and comments. There is a lot going on that I hope to share with you and your audience in the coming weeks. Since I am not making any money from the development there is no need for us to be another Loudoun County.

    Mr Fidler’s comments assume that investors would be interested in the condos for student housing. As I indicated in my posting I don’t see it as a viable investment for student housing. In the short run it may be viable if only because of the shortage of student housing near campus. If the market were brought into better balance I would expect lower cost housing would soften student demand for the units.

    Two bedroom/two bath condo units at Parkside sell on the market for about $260,000 and have a low monthly condo fee. The proposed selling price ($400 sq ft) of proposed luxury condos would mean rents would need to be more than 60 percent higher than Parkside rents for an investor to eek out even a small profit. Students could rent a house and have far more space and privacy for their money, as an alternative.

    With respect Mr. Daddio’s comments, residents are not opposed to another University View. We love how University View houses students, because it frustrates the landlords who are the bane of the City and it reduces traffic. We want additional housing for non students too, because it gives us hope that neighborhood retail will develop in the Route 1 corridor that will be more varied than you find in downtown College Park now.

    Our Planning Staff hates University View and wants much smaller apartment buildings in the future. In addition, it appears that the FAA has now determined that the height max in the Northgate area should be 12 stories in the future, hence the proposal for a 12-story condo building next to University View (8400 Baltimore Ave).

    With respect to condo financing we had a condo expert come in and advise us that 75 percent owner occupancy was a viable level for developers to agreed to. Remember condo developers have been badly burned by not being wary of investors. Many investors look to flip their contracts at a profit without going to settlement. So developers find that they are trying to sell units in direct competition with investors who have no desire to take possession of the unit. Consequently developers and financiers want to limit speculation in unbuilt condo units.

    Given that the City is working with Capstone on a condo project for the City Hall site, we will look foolish if we fail to abide by the conditions that we request of others. It is not our intention to look foolish.

    I think the flexibility issue is more along the line of building without a clear intent beforehand of whether the product will be marketed as condos or leased as apartments by the builder.

    I will comment on Otis Warren’s new proposal (8400 Baltimore Ave.) later. We don’t have a formal City position as his project yet, but have relayed some concerns to him, but have not had a response yet.

    Mark Vogel has sold the property for Northgate Condominiums to Monument Realty for $4.2 million, hence the signs which recently appeared on the property adjscent to Taco Bell. I don’t expect to see anything happen on the site this year though.

  4. Bob, does the City-University Partnership do any public work or have public meetings? Although it may be a good conduit for high level cooperation, it seems to have little impact or visability beyond a small group of participants.

  5. The Partnership doesn’t have public meetings, but I will explore how we might be able to work with you. Our next meeting is the week of February 12th, in the afternoon. What if I got you and/or David on the Agenda to give a presentation to the group on what you are about? I will see if the February agenda can give you 15 minutes or so if you give me an OK. The Partnership typically tries to meet every two months for about two hours.

  6. Does the City-University partnership do anything other than meeting ever two months? What happened to its website, who is the director and who is on the board of directors?

  7. The Partnership has a budget of $100,000. One-half comes from the University, one-half from the City. It generally has had one or two part time employees who carry out the Board’s instructions, with support from City/University staff as required. The Board has recently been chaired by the team of Jim Rosapepe and John Porcari. The Partnership’s manager is Amy Neugebauer, who was Peter Shapiro’s assistant, until his recent resignation. Ms. Neuberger was until recently, the Economic Development Manager for the City of Hyattsville. She recently began working for a nonprofit company for her fulltime job, though she has flexibility to perform her functions with the Partnership.

  8. My question is, what’s to prevent a developer from building a condo building with the “owner occupant intent” and turning around and creating a subsidiary which buys all the units and in turn rents them out as student apartments?

  9. There are many reasons, Scott. First, why would a developer want to do that? If he wants to build student housing he should just tell us! We are concerned that more student housing needs to be constructed. Every year since the fall 1999 semester (or perhaps fall 2000), a new project has become available, starting with University Courtyards. We may have a project coming on line for fall 2007. University House in Lakeland was to be renovated (132 units) and additional apartments (about 72 units) were to have been built for 2007. Work just began last week at University House. The Mazza project (about 230 units) was approved last spring, but is being held up by the County Councilman (Dernoga), and may never get built. It could have come on line for fall 2008 (though it was targeted to house grad students, with undergrads filling any units not reserved by grad students).

    Back to your question. Condos could not be financed without the developer showing significant presale interest from the public. Additionally, our conditions (when necessary) run with the land. So that what ever the developer agrees to do, binds all future owners to abide by the agreements, too.

  10. “The Mazza project (about 230 units) was approved last spring, but is being held up by the County Councilman (Dernoga), and may never get built.”

    What exactly is this opposition stemming from?

  11. Good question. I don’t really know, exactly. It is the kind of question you need an answer from by Mr. Dernoga or the project applicant.

Comments are closed.