Boise goal: In five years, 1,000 new Downtown homes

Some say city is ripe for residential projects, but can they compete with office and retail?

sberg@idahostatesman.comJune 8, 2014 


    Sven covers Boise city government and commercial development for the Statesman. His first job ever was mowing lawns in North Idaho for $3 to $5. His first daily job was mucking out horse stalls at a stud farm for $3 an hour.

Mike Brown owns real estate across the West, but he doesn't own a home.

The 35-year-old co-founder of Los Angeles firm LocalConstruct rents. He lives in apartments in Boise, Denver and Los Angeles, renting the Colorado and Idaho places from companies he controls.

Though Brown has more beds than your average millennial, his choice of housing resembles theirs. Across the country, people born after 1980 tend to avoid America's traditional family life in a free-standing house. That trend is the reason Brown and his partner, Casey Lynch, teamed with Boise developer Clay Carley to include 36 apartments in a renovation of Downtown Boise's historic Owyhee building - formerly a hotel.

One-bedroom apartments will rent for between $1,000 and $1,240. Studios go for between $700 and $856. On Monday, people had paid holding fees for nine apartments in the building; by Friday, that had risen to 15 apartments.

Brown and Lynch believe that there's demand for more apartments Downtown. Partly, that's due to market fundamentals. According to their own analysis, Downtown Boise has 11 times as many jobs as residents. Portland, by comparison, has a ratio of about 4-to-1, and Denver's is less than 9-to-1.

According to Boise's Mountain States Appraisal and Consulting, there are about 2,500 apartments within a mile of Boise's Downtown core. Since 2010, vacancies in those apartments have fallen sharply, from 10.8 percent to 1.8 percent.

There's a broader reason, too, that Brown believes Boise is ready for more urban housing: Americans, increasingly, want to live in cities. Recent analyses by Orlando, Fla., real estate strategist RCLCO concluded that large segments of the baby boomer and subsequent generations prefer living in communities where the services they need are within walking distance. A majority of homeowners wanted to live close to or in a city, and 79 percent said commute time was their top priority in choosing where they'd live. More than three-quarters of millenials said they plan to live in an urban core.

David Leland, an urban planner, said lifestyle values are changing, and not just among young people. Empty-nesters aren't as attracted as they once were to a home with a big backyard. They want to live close to restaurants, bars, coffee shops and other places where they can spend their time. Those shops, Leland said, "become a form of living room, if you will."

"Frankly, I think the emotional part of that decision is much stronger than the practical side of it," Leland said. "People are looking for a different quality of life. They want some freedom from the lawn mower."

On April 15, Leland told a crowd at the Downtown Boise Association's annual State of Downtown breakfast that the time might be right for developers to shift their focus away from office developments and toward more residential projects, especially rental units. New office space in the Eighth & Main building, Banner Bank building and other developments might be pushing office inventory toward full capacity, Leland said.

1,000 HOMES BY 2019

This summer, the City Council will consider a proposal to award grant money and loan guarantees for rented apartments and for-sale condominiums, Planning and Development Services Director Derick O'Neill said. As much as $150,000 for these projects would be available next year from federal grants and a Boise account that accumulates money by leasing city-owned railroads to Union Pacific.

Around City Hall, people believe it's time Downtown had more housing. They want to encourage private developers to build 1,000 homes - a round number they say would begin to fill demand. The proposal for grants and loan guarantees is one component of that push. Besides the economic boost, the city stands to benefit because new development in Downtown doesn't need much in the way of new sidewalks, streetscapes or sewer, water and power lines. People who live in downtowns also drive less, meaning less pollution.

City Councilwoman Lauren McLean, also a board member for the city's urban renewal agency, said she wants a variety of product types and prices available so that new developments don't attract just one type of resident.

"More people living (Downtown) means more people on the streets, which means business is doing better and potential entrepreneurs running into each other and having conversations about the next great idea," McLean said.

Leland and Brown are high on apartments as opposed to condominiums. They said millennials, especially, would rather rent than own because they don't trust long-term commitments. Brown believes that's a product of the economy that young adults know.

Many can work from home - or anywhere with an Internet connection - and they put a premium on mobility and flexibility. Marriage, a mortgage and kids are more liability than asset.

"It used to be, even 20, 30 years ago - with our parents - you had a reasonable expectation that if you either went to college or learned a trade, you could get hired on someplace and, barring a really bad recession or something, if you wanted to, you could probably work at the same place your whole career," Brown said. "Why not sign up for a mortgage, and why not get married to somebody and settle down and have a family? But if you think your whole industry could disappear… maybe (you) want to see how this is going to play out before (you) sign up with anything with a 30-year tail on it."


Brown believes that wariness will drive Boiseans and people moving here to seek housing in the Treasure Valley's urban core, which Leland said is "very high up on the list of American cities in terms of an attractive downtown."

Retailers hope so. Though the supply of office space has jumped in recent years, shop owners in Downtown Boise say things could be better.

The best way to improve the retail environment, economic and real estate experts agree, is to get more people living Downtown. Today, business dies down on most weeknights. That will change when more people live, play and work Downtown, said Jade Riley, Mayor Dave Bieter's chief of staff.

"It's a natural maturing of any downtown to be a 24-7 place," Riley said. "It's a sustainable way to grow."

That's one factor behind the city's push to increase the Downtown housing supply. O'Neill said a healthy supply of apartments and condos would help Boise attract businesses, especially the technology firms that are something of a specialty here. Those companies tend to hire younger people who are less reliant on cars and prefer urban living to suburbs.


Like Leland and McLean, David Wali, one of Boise's top real estate dealmakers, wants to see more people living Downtown. The hard part is finding a residential project - and a developer to execute it - that can compete with the profitability of other commercial projects. Businesses leased most of the space in Eighth & Main a year before it was finished. Apartments don't usually generate that kind of buzz.

"If we think more people living Downtown is a good idea, then we've got to figure out ways to make it easier, more cost-effective to build Downtown," Wali said. "Because what we're competing against is someone believing they can build another 20-story office building."

Wali said the fee Boise charges for Downtown development permits and expected impacts on utilities, streets and other services was set up with office and retail uses in mind. Besides grants and loans, he said, the city should think about reducing those fees, arranging favorable zoning conditions and helping developers get tax credits on residential projects. Capital City Development Corporation, the urban renewal agency, can help pay for water and sewer lines, sidewalks and streetscape improvements.

A more drastic measure would be to buy a piece of land, then sell it at a discount through a bidding process.

One thing Wali doesn't doubt: demand.

"They had strong demand, even in the downturn, for Downtown housing, especially on a rental basis," he said. "The question is, could you produce the Downtown housing on a rental basis at a rent people could afford? You could fill the entire Downtown if you could hit the $600- to $700-a-month range."


Demand alone isn't enough. Supply is the factor that troubles Leland, Brown and Wali, though for different reasons.

Leland said the sinking housing market in the Great Recession drove lots of residential developers - some of them apartment specialists - out of the industry. Now that the housing market is returning, new developers lack experience putting together plans for and building apartments.

Brown said developers in the easy-money days of the early 2000s got hooked on condominiums, which he called the "crack cocaine" of residential development. Condo projects quickly turned huge profits in the days when loans fell out of trees. But the sale of too many speculative condominiums and other homes caused the financial meltdown that froze credit markets and mired the country's economy.

Lenders are still reluctant to back condominium projects. They're much more eager to finance apartments. But some developers want the quick turnaround rather than waiting for the longer, surer payout that comes from apartments.

Wali has personal experience trying to build affordable Downtown housing. In 2011, he and a group of partners bought the C.C. Anderson Building on 10th and Idaho streets. They wanted to remake the building with dozens of affordable apartments in the upper floors and retail or entertainment space on the first floor. They couldn't quite make it work. Even with federal subsidies, Wali said, they would have had to charge more than the people eligible under the guidelines of those subsidies wanted to pay. The group put the building back on the market.


Another concern is whether Boise's culture and its famous love for outdoor activities would discourage a large-scale migration to Downtown. Boats, ATVs, fishing rods, guns and dogs are difficult to fit in 700-square-foot apartments with no garages.

Brown said he's taken that phenomenon into account.

"We believe that Boise as a market would skew toward single-family homeownership because single-family homes are inexpensive there and maybe … people who self-select to live in Boise are more likely to want to live in a big house with a yard and stuff," he said. "But you would expect that to maybe give you a single-digit fluctuation as far as homeownership rate versus the national average."

Wali takes roughly the same view. He recognizes Boise's cultural skew and its potential to affect multifamily housing demand, but he agrees that there are plenty of people who want urban living. The biggest challenge, he said, is increasing how much money people make. Without that, he said, it is harder for developers to put together apartment projects with rents high enough to turn a profit.

"You can only subsidize things so much," Wali said. "In reality, you need some upward movement on wages in order to be able to afford things."

Sven Berg: 377-6275

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